Global finance is arriving on the blockchain: can we win the world, and keep our soul?

Transcript

[Music] all right good evening once again every on um we'll be having our next speaker Vin GTA he'll be speaking on global finances and arriving on blockchain um all right let's welcome Vin Gupta with with an Applause please

[Applause] [Music] anyone else coming in is this it oh let's do this thing okay and I got my clicker and we

we are good to go okay so uh let's talk about what it means that Global finances arriving on the Chain right this is the end of the old world without any shadow of a doubt right um where Did We Begin so for me the old world started in the 1990s uh I was a cryptographer cryptographic applications developer working in the of late 90s mid 90s my first year being paid 100% in Anonymous digital cash was 1999 uh I worked for government uh a couple of times and I joined the ethereum foundation 2014 to run the launch

um so where where I worked was basically trying to figure out how to get Mass adoption for ethereum and I figured out that that was going to mean convincing the lawyers that smart contract were legal contract and if we could do that then we could figure out how to integrate into the whole global system that project uh is materium and that's what I actually do for a living so I'm I'm working on that integration problem as part of a strategy towards ethereum Mass adoption um but we're in a new game now because the big guys have arrived and by the big gu big guys I mean Black Rock Black Rock has 10 trillion dollars of assets under management it's one of the largest companies in finance globally

and it has an enormous reach and enormous power and impact um Black Rock arriving on the Chain changes everything whether or not we think of them as being you know adopting ethereum per se whether they're just going to take the technology and Fork it whatever they do when you have the most powerful person in finance say that they're going to tokenize all of the world's Financial assets that's from 10 years from the first time anybody heard the concept of a token right we went from coins to tokens to the most powerful person Finance says we're going to tokenize all the Assets in the world within 10 years this is staggering right I mean I remember when

the ethereum foundation was like 35 people and we went from there to this in 10 years that gives you a sense of how ready these ideas are and how powerfully they impact the real world um you know something like Linux successfully took over the world but it did not take 10 years to closer to 30 years so the model that comes along with the TR five folks arriving is the roll out of the conventional model kyc AML CTF you get the shutdown of projects like tornado cache you get a compression of the kind of anarchic Freedom that was originally envisaged on the blockchain into a much much much narrower range of activity and that come oh I lost

mic hello okay right and that that compression is extremely destructive to the opportunity for freedom because as we get more and more and more of these kind of trfi people coming on board you get more and more and more trfi style thinking and as a result you kind of get trapped in this position that we're in so what I'm going to suggest is that by the time BlackRock arrives and says we're going to kyc everything we've lost our way and what we need to do is we need to go back to the start and figure out what the true Direction was from our original first principles and for the first principles

I'd like to point to the 1994 crypto Anarchist Manifesto has anybody heard of this good few hands excellent so the crypto Anarchist Manifesto was a kind of real examination in an almost science fiction sense of the impact of tokenization the impact of private Communications the impact of digital cach written before any of these things really existed in a widescale widespread usable form and it's extreme stuff right it basically suggests you're going to get World Peace by starving governments of Revenue to the point where they can no longer collect taxes to then fight Wars right 1994 they were making that argument

right and they were not messing around right the tax starvation argument was the core now you know you guys are mostly ethereum crowd right you if you've talked to bitcoin Maxis who are just like but you don't understand you're corrupting the vision you know if we can't star starve the governments of taxes the world will fall this is what they mean in this era they really thought of tax starvation as being a way of getting the governments to stop fighting Wars it was a huge huge agenda item so what actually happened from that wave of 90s cryptography is basically nothing and I want to stress basically nothing other than trillions of dollars got generated and the trillions of dollars came because we took this Cipher

Punk technology for link encryption so a secure connection between two people with no eavesdropping and we tied it directly to the commercial system in a way that generated what you would Now call e-commerce and that system the e-commerce system goes on to run the entire world from that point out in terms of retail transactions that is all that became of Cipher Punk to all intents and purposes it died either in the late '90s or shortly after 911 the whole kind of thing got shut down and we got a very very thinned down stripped out version of the future so this is kind of the bridge that we are at relative to ethereum and Wall

Street right the risk is that the 1990s Cipher prank Revolution basically winds up as e-commerce and what will happen to our Cypher prank Revolution is that we're going to wind up as another branch of Wall Street we're just going to wind up becoming the system and that might make a lot of people very rich but it's not going to change the world never mind save it um this right comes along and is kind of the midlife kicker right Bitcoin 2008 everybody gets interested in electronic cash again this could be a thing but electronic cash doesn't stand alone right it doesn't solve the fundamental problems as a single thing you have to

pair it to the rest of systems you need things like like identity you need the ability to handle non-cash assets you need the ability to buy and sell you need marketplaces so what happens with Bitcoin is Bitcoin works but then you have to build a whole bunch of extensions around Bitcoin to make bitcoin useful and those then become the points at which you get uh intercession interdiction the exchanges wind up with problems with kyc you wind up with hugely intrusive monitoring schemes on the Chain itself right you know it's it's a step towards something but without for example ZK star Technologies it's hard to argue that bitoin provides the kind of privacy that you expect it to even though there are limitations on

what Bitcoin offers you still wind up in a position where the most powerful man in the world officially is talking about the tax starvation argument in 2016 so Tim May who is some random dude off the internet who I think worked for Intel makes the tax starvation argument the crypto Anarchist Manifesto 22 years later that's being answered by the most powerful man in the world does that sound like we're making progress towards something right but this is clearly not a fight that we can win right so we have to start thinking a little more strategically and a little more carefully about what are the fights that we can win and what are the fights that we have to avoid because we cannot

get into a direct confrontation with the nation state about a lot of this cooperational capability because if if we do we're going to get squashed like bugs and I want to point to the tornado cash thing as an example of that what we need is a third way we need a strategy which is not direct confrontation with the state and not capitulation to the nation state but it allows us a a zone of Freedom where we can continue to operate and we continue to grow in a way that gets us most of what we want from the deal without having to try and get into a direct Showdown with the fence because nobody survives a direct Showdown with the fence so as an example of this right the most recent situation with uh Biden you know

everybody's expecting the ETFs are going to go the ETFs are going to go it's going to be great it's going to be fantastic everything's going to be fine turns out the ETFs are not going to go huge huge huge problems so what I want to suggest here is that we do not have to be in a position where we're fighting the power directly the American government have a very confrontational attitude to this stuff that is not true for the rest of the world so I want to go back here to a set of slides that I delivered in Prague in 2014 that illustrates a different approach uh the slides in red are the 2014 slides yeah shiny right shiny those were the days so what we proposed in 20 18 was that there was a thing called a

FIA asset and the FIA assets were created by the state in the same way that crypto assets were created by cryptography this model has borne out really well right feia assets controlled with with Fiat Keys Fiat identity that's just like house title crypto assets controlled with Native Keys ethereum Bitcoin tokens crypto assets controlled with FIA identity that's ETFs custodial wallets Banks custody and crypto and uh FIA assets controlled with cryptoads that is tokenized real world assets right the model holds up Fe assets and crypto assets are different things but you can Bridge them um similarly we argued the blockchain was inevitable turn out we're not the only people that

think though this argument was made from physics this guy is the most senior Judy in the UK for commercial law he's the person that decides civil dispute stuff at the highest level there is in the Brit in Britain blockchain technology is Unstoppable now right you know will be adopted will become ubiquitous in all major industrial and financial sectors because it allows for the immutable recording of data reducing friction in commercial on consumer transactions and obliterating the school for dispute as to what has occurred now does that sound like somebody that is hostile to the blockchain I would say no not hostile to the blockchain so why are we getting such a different attitude from the

American government and from the British Judiciary right well the answer is it solves a problem that they have which is evidence Management in cases so if it solves a problem they have they're interested in it um similarly this guy leads a project called the UK jurisdiction task force they make a thing called the digital dispute resolution rules it's a set of rules for arbitrating disputes involving crypto assets and it's about a 15-page legal document that really does a great job of figuring out what you need to do if you're going to be working with crypto Assets in legal disputes it's fantastic materium consulted on the creation of that document were the first company in the world to use it so in the UK there's a really strong base of support for doing stuff on the chain

right it's not that we're locked into a single way that things can be the political landscape that governs the block governs the blockchain is a complex thing with a lot of moving Parts corporations the state and the people it varies from place to place it varies from jurisdiction to jurisdiction so this whole notion that real world assets were the future of the chain in 2018 this was fantasy but by the time you've got the legal Machinery that's being set up in a whole bunch of different countries in a whole bunch of different jurisdictions but legal Machinery begins to tie together the possibility of actually solving these problems right it's gone from way off in the future to right here right now so for example we

speculated in the future you could take all of this world trade stuff and move it on chain the enabling legislation called the European uh sorry the um UK electronic trade documentation act etda just passed this year right so this stuff is incred incredibly powerful UK government says $280 billion a year of efficiency savings from using electronic trade documents this stuff is mindblowing Right similarly um you know Lord mayor of London head of the UK Financial Center shared ledgers right digitization of assets and contracts right so in the UK they've taken a completely different approach to

the American approach European Union Micah a lot people are afraid of Micah do not be afraid of Micah Micah levels the playing field so there'll be a standard set of rules for crypto and the fact that there's a lot of fighting in America about what the rules of crypto ought to be and it's become politicized Democrat versus Republican has nothing to do with what's going to happen with global crypto adoption if the Americans continue to make a mess of that if anything it's going to accelerate crypto adoption in the EU and the EU is still the largest economy in the world so what I want to suggest here is that we are not fighting government on all fronts there is continuous haggling with the American government the American government have always had a hard time with crypto going back 30

years we should not expect them to change now on the other hand London is the largest financial center in the world the EU is the world's largest economy both of those jurisdictions are doing just fine with crypto thank you very much no problems there so final section of this aligning Global Systems so in the 19 1950s and 1960s there was an incredibly powerful wave of globalization largely driven by new technology in the form of things like te uh sort of um data Communications in its very earli stages wire you know telefony it was all driven by this very early Revolution Communications technology I think maybe in the First Communication satellit Visa

founded in 1958 the idea was you had a single card that you could take anywhere in the world when you flew and you could do trans action at the time this was thought of as being like a revolution in global Finance because it meant that you had one kind of money that could be used anywhere on Earth it was mindblowing incredibly powerful right similarly gold the oldest of Technologies right and gold there's no single country that produces it there's no single country that consumes it gold is everywhere for everybody for everything and always has been these are the global decentralized networks already exist and these are our natural allies so there is a sweet spot between

ethereum contract law under the 1958 conventions that's standard international arbitration and the globalized assets right globalized assets is things like gold that do not have a single country of control so if you think of like a US company that is an asset that only exists in America but if you think of real estate real estate is everywhere literally right anybody in the world that has real estate could then tokenize that real estate and potentially sell that real estate this is a very very powerful realization because it means that we're not relying on the laws inside of anyone jurisdiction about whether or not you can tokenize stuff if you can tokenize it anywhere you can sell it everywhere because not all of

the assets are contained inside of a simple local nation state economy we're not playing on a single playing field we've got the entire world to pick from so so I want to conclude very quickly here right this is not just Theory right I had you know more than a decade working at the highest levels in government in a variety of roles in the UK and the US on things like cyber security and I came to the ethereum project with all of that knowledge and all of the kind of understanding of the long-term landscape that we're looking at that came from having moved through that world and contributed in that world so when I took off in 2017 to start materium it was explicitly as a longterm political project to try and make sure

that we could get Mass adoption we wouldn't get stuck in the same way that we gotten stuck in the 1990s um we know that you can generate trillions of dollars of wealth from cryptography it's been done already that was the e-commerce Revolution no little https padl no e-commerce no e-commerce no Amazon no Facebook no apple this stuff is the core driver um what ethereum well what e-commerce did for retail ethereum could do for Real Estate if there's one thing I want you to remember it's this there is no Global electronic exchange for Real Estate right and the fact that there is no Global electronic exchange for Real Estate is bizarre because there are Global electronic exchanges for

everything else but real estate is the world's largest asset class so if we get one thing right and that's Global electronic exchanges for Real Estate run on top of ethereum we are set for the next 50 years that's pretty much the definition of victory real estate is the last truly epic asset class which has no electronic exchanges um the other thing is gold right it is possible to dollarize the ethereum ecosystem at which point the US government becomes 90% less annoyed with us right what they don't want is dollars bouncing off ZK snarks and then bouncing back into the FIA ecosystem because they lose control of the dollar and nothing makes the American government more Angry

than losing control control of its assets so if we simply dollarize and we get rid of the dollars in the ethereum ecosystem so that you just don't have USD anything tokens in that system dramatically less friction with the Americans you will get an attitude which is a bit more l a fair because at the end of the day we're not sanding on their shoes um we've done a bunch of work on gold for years specifically to try and create the opportunity to get away from the dollar ecosystem and you've got to remember the gold ecosystem is globalized right it's Dubai it's Hong Kong it's Singapore it's South Africa it's Canada right all of these Global centers for gold have their own law

their own regulation their own jurisdiction their own governance their own rules and any one of those jurisdictions could provide the necessary physical storage for enough gold to Anchor as much stable coin as you wanted to issue same thing can potentially do as real estate the difference is it's very easy to value gold it's very easy to audit gold we do not need to be dependent on the dollar economy for stability in crypto assets um so this model right this long-term alignment on Global Systems we've been working on that for years because it's only by aligning with the existing Global Systems that are already decentralized or partially decentralized that we get any kind of long-term

Prospect Victory what we want to do is we want to get all of the components of a decentralized World working together contract law Global assets and ethereum final thing is um just as a kind of gag it's not just this world so we've just announced a partnership with an outfit called project moonut project moonot has probably the best shot right now of getting human habitation on the moon and it's a very very technically conservative project they're not doing anything particularly new with technology they're taking the same basic structures you use in the international space station but they're building them on the moon right they've already got an enormous partner Network towards that

goal including groups like locked Martin and what we're doing for those guys is getting involved in the whole process of managing the IP cross- licensing agreements between hundreds of commercial entities that are necessary to get this project done but also to help manage the IP stream that comes out of that settlement right and this is exactly the kind of high-profile stuff that if you pull off one or two of these on the blockchain it's much much much less likely that anybody's going to give the technology a hard time just for existing um so uh that was it thank you very much for your attention and uh I'll be around after this if anyone has questions thank [Applause] you all right great do we do questions

now I don't think we do do we I don't know yeah sure and uh sorry I didn't realize we were doing questions now okay yeah uh I wanted to ask you because we are building uh a startup that is uh it's called token estate it's about tokenizing real estate and uh we are right now working on POC but one of the it's more like a moral dilemma is if this really catches on and to the part that you said and we create a digitalized real estate market M wouldn't it uh really hinder the opportunity for people to buy real estate in different areas because for

example if you do that in Czech Republic and somebody wants to buy that nobody is nobody from I don't know India is going to buy real estate in Czech Republic or like not most of the people because it's really expensive here but if you create that project in India for Czech investor friends us or whatever richer investors it's going to be a really cheap property so it will flood the market with like new money so the people who live in India will have like really hard time of buying real estate because the prices will Sky record Sky record based on that so how do we deal with that issue like from a morality standpoint that our money will hinder the

opportunities uh in countries that have less money it's harder for them to for Real Estate if the European and the US markets flood the money there I mean in most poorer countries the real estate Supply is not limited in the way that it is here so here you've got enormously Strong building codes that prevent you just building more housing hence the real estate is kept artificially expensive um most poor countries if you want to build housing It's relatively easy to get the permits and the logistics and everything arranged so that you can't build housing so if you do wind up with a bunch of foreign direct Investments going into countries like India to buy existing real estate what will happen is that those folks will take the money that they're taking from selling their real estate and they'll turn it around and they will

build more real estate almost certainly but wouldn't it wouldn't it uh affect the rent because if you buy I just will make up numbers but if you buy a normally house in India for $10,000 but right now because of the bigger money from us and Europe the houses will go to 20 $30,000 because it's the new money you cannot charge the same rent sure but what they'll do is they'll then build a pile more housing and it will then cause the rents to come back down again the rents will be defined largely by the ability of the locals to pay and they'll simply build more housing until it balances out in the places where they're allowed to build the big problem that you have in most of Europe is it's

almost impossible to get permits to build new housing and as a result you wind up with an artificially restricted Supply which of course causes the price to Skyrocket it's all about you know the only cure for High house prices is build more housing and I actually worked on housing stuff for years I have a project called hexa which is about Ultra lowcost housing and the problem anywhere you want to build those houses is really the building codes yeah it's a good question and come and talk to us because we've got I mean a lot of the materium technology is very good for Real Estate projects you know we we did a real the first real estate listing almost three years ago and it's we're ready to go to Power other people's real EST estate protocols okay any other questions what do you have

oh yeah this is slightly tangential to your talk but if anybody's going to say something about it it would be you um you were talking about all of these assets and you know Black Rock and that s uh side of things and then uh on Thursday we heard a talk where somebody was talking about how usdt is what is the biggest asset in our industry and at the same time we are already in a dollarization situation so like how does that influence I don't know whatever you want to say about that I'm super interested people don't want to talk about dollarization yeah so I mean at the end of the day if you're using dollar you're standing on American soil and the

American government doesn't like crypto and never has so inevitably they're going to be able to want to identify the ultimate owner of every single Dollar in the world in the same way that they want to be able to identify the ultimate owner of every square mile of us land or every share in a US Corporation you know they feel like it's their duty of care to the American population to be able to track that stuff so when you start talking about things like ZK snarks if you put ZK snarks and USD anything in the same conversation the American government is going to have a problem and you're going to wind up with things like tornado cach it's just the nature of the Beast okay uh are there any more

questions we oh we got one more like how exactly do you envision this dollarization to happen so in an ideal world what would happen is that people would go from using USD uh paired with things like Bitcoin to using gold paired to things like Bitcoin so gold up until 1970 is all of the world's currencies were backed by gold so gold was the absolute stable unit for all of the world's governments and then things like a dollar would be worth so much gold and the amount of gold that you would get per dollar was fixed so in the UK we didn't use gold for this purpose we used

silver and a pound was one pound of silver so one pound is I don't know whatever it is 550 grams or something and that was the amount of silver that the government would give you in exchange if you burned you know one pound you took it to the bank and you said here's my pound note they would physically give you the silver so my suggestion is that what we should do is we should use gold rather than dollars as the stable unit of account for crypto and you wind up with a two asset portfolio which is gold for the stable asset and Bitcoin or ether or some other crypto asset for the volatile asset and that pairing gets you all the benefits without having the entanglement in a fe economy right gold is not issued by government and there are a number of

governments that have very strong gold plays it becomes a different kind of relationship because you're no longer working with a country that has a 30-year hostility to crypto you're working with Singapore or Hong Kong or Dubai who jurisdictions I don't care but isn't it easier to denominate my Assets in something that I can relate with like I can buy coffee in dollars but I cannot buy coffee in Gold so it's easier for me to reason about the or have an understanding of my portfolio well I mean going from gold to dollars if you want to keep track in dollars is very easy right the gold exchange rate is very easy to find it's very well established it's very stable right so

people can still look at their balances and see the how much money they have in dollars but the underlying storage of wealth is either going to be an asset that's inside of the federal system or it's going to be outside of the federal system so my suggestion is that people should try and move their assets outside of the American system because at the end of the day when all is said and done the American government is not going to permit Anonymous money right and it's not likely that people will casually permit anonymous gold but it will be a very different kind of negotiation with relatively small countries about exactly what the rules are for ducking people when they've got large Holdings of things like gold it's just not the same kind of incentive for massive transparency every

level there's a little more room for financial privacy in for example Switzerland so if you w up with your wealth held in the Swiss system as gold stored in a vault in Switzerland you get Swiss banking privacy protection which is a completely different thing from and that's what we really doing is if you use gold you get to jurisdiction shop for the kind of banking privacy regulations that manages your stable assets that's what get gold gets you it gives you the abilities to shop for the right kind of banking Privacy Law we have one last question I'll keep it brief but um so so

you told about nfts basically to kind of um invest in gold bars right why would I invest in an nft gold bar instead of just buying Theta gold isn't Theta gold is much easier to basically it's much more flexible and fluid yes the so the issue with gold is partial ownership of bars is very legally messy so if you've got five people that all loan 20% of the same gold bar if there's some kind of problem like the entity that owns the gold bar goes bankrupt or they discover that there's some kind of fraud it becomes very legally difficult to figure

out exactly who owns what parts of what gold bars and the real problem with this is very technical but it's to do with bankruptcy preference so sorry bankruptcy precedence so if you I have basically an IOU that says I ow you 200 gram of gold and I go bankrupt your IOU goes into a list with all the other IUS and you may only get a fraction of the gold that you're owed depending on what debts the bankrupt entity has if on the other hand you have a certificate that says I own bar 1234 and you are paying the storage for bar 1234 in the event of a bankruptcy the uh Auditors that are going over this thing the receivers will see very

clearly that that bar happens to be in my custody but the entity that goes bankrupt is not the entity that owns that bar it's owned by one of their customers so at that point there's a very strong probability that you'll get the entirety of your value back and that's kind of a technical point and there are in some jurisdictions other ways of handling that point but in general for Simplicity and ease and Clarity of audit you really want a simple relationship of one barer an nft and the storage fees should be paid by The Entity that owns the nft it's a little inconvenient but it's much much safer I understand and if I theoretically would burn the nft I could get the bar of gold sent to me exactly and we've already done that we did a

test batch of bars about 3 years ago and everybody involved burned their nfts and got physical delivery of the bars and it was much harder than expected because we hadn't accounted for some of the problems with customs and stuff like that but we did eventually get every single person their value or their bar okay awesome thank you that's welcome thank you very much let's give a big Applause to V Gupta [Applause] and we have a small five minutes break till next speaker and the last one will come thank you [Music]