The New York Public Library



Bitcoin:

Gavin Andresen | Nathaniel Popper | Andrew Ross Sorkin | Fred Wilson

May 19, 2015

LIVE from the New York Public Library

live

Celeste Auditorium

PAUL HOLDENGRÄBER: Good evening. Good evening. My name is Paul Holdengräber. I’m the Director of Public Programs here at the New York Public Library, known as LIVE from the New York Public Library. As all of you know, my goal here at the library is to make the lions roar, to make a heavy institution dance, and when successful to make it levitate.

Tonight—I simply don’t know what Bitcoin is. (laughter) So I was having dinner at my home and I had some friends over and they were starting to talk about Bitcoin and I had no idea. So I’m doing this for my benefit tonight (laughter) so that I understand a little bit what is Bitcoin? I approach all my subjects with the euphoria of ignorance, so I hope that tonight I will be enlightened.

Nathaniel Popper is the author of Digital Gold: Bitcoin and the Inside Story of the Misfits and Millionaires Trying—I love the word “trying”—Trying to Reinvent Money. After the event, which will last about as long as a psychoanalytical session if your shrink is generous, (laughter) Nathaniel Popper will sign books.

I would like to thank our sponsor this year, the Ford Foundation, for their fantastic support of LIVE from the New York Public Library tenth anniversary, as well as their support of many cultural institutions across New York City. I also want to thank our Spring 2015 season media sponsor, the Financial Times. Thanks finally to the continuing generosity of Celeste Bartos—this is now named the Celeste Bartos—and Mahnaz and Adam Bartos.

I encourage all of you to come tomorrow on a standby line, if you’d like, to hear Matthew Weiner and A. M. Homes. And at the end of the season, on the 16th of June, I will have the pleasure of speaking with Werner Herzog. Also sold out, but you always can risk it and come and hear what Werner Herzog has to say about his love for Greek literature. We will be speaking about the relationship between his love for Greek literature and the consolation it offers him.

Finally, many of you know that over the last seven or eight years, I’ve been asking my guests for a biography of themselves in seven words. A haiku of sorts or if you’re very modern, as I’m sure all of you are, a tweet. Our instigator, Andrew Ross Sorkin, submitted these seven words to me: “Curious, animated by ideas, storyteller, persistent, dad.” Fred Wilson didn’t submit seven words. He told me that he likes to be very brief. “I am VC.” (laughter) I didn’t immediately know what it meant, but now I do. (laughter) Gavin Andresen submitted these seven words to me: “Husband, father, skeptic, geek, not Satoshi.” (laughter) And finally Nathaniel Popper submitted seven words to me that are very dear to me because I was asked what my seven words were, and what I came up with was what my mother told me when I was eleven years old, she said to me, “Paulie, we have two ears and one mouth,” probably because I wasn’t listening. Nathaniel Popper’s seven words, which I don’t know if his mother told him, are “Curious guy tries to listen.” Please welcome them to the stage.

(applause)

ANDREW ROSS SORKIN: Thank you. Thank you very much and thank you for coming to what I hope is going to be a terrific conversation about Bitcoin and the future of money and what all of this means and we have a great group of people. We didn’t get to all hear the seven words, from back there you couldn’t hear through the door, but—I kind of gathered.

That was the best part.

ANDREW ROSS SORKIN: I think that was the best part. Hopefully that won’t be just the best part because we have an hour to go. Where I want to start this conversation in part because I imagine everybody in this room is coming at this issue from a different place. There are going to be beginners in this room, there are going to be experts in this room, and I imagine there will be people in between. But where I really want to start it is at the very, very beginner level, and we will accelerate from there. But I thought I would just start by asking this: The most misunderstood thing from each of you about Bitcoin is what?

NATHANIEL POPPER: You’re going to start with me?

ANDREW ROSS SORKIN: I’m going to start with you. You wrote the book.

NATHANIEL POPPER: I think that the whole thing, the whole thing. What people’s miscomprehensions about Bitcoin I mean start from the ground level of “where’s the coin?” And part of this is a branding issue that Satoshi gave Bitcoin, which is using terms that are almost intentionally misleading as to the nature of what this thing is. It’s not a coin, it doesn’t exist in the physical realm. So you start from there and then you go through each layer of how this thing works and it’s sort of amazing how contrary to people’s understanding of money this whole system functions. So I’ll start there but—

GAVIN ANDRESEN: The misunderstanding I hear a lot is that Bitcoin is a company, that there’s some CEO of Bitcoin, that maybe I’m the CEO of Bitcoin, and it doesn’t work that way. It’s this weird, decentralized Internet thing. And I think if people were geeks like me and understood like how the Internet worked, there is no Internet company, there are lots of companies that do stuff on the Internet, but the Internet’s a very decentralized entity and the way the Internet works is this really weird process if you look under the covers. And Bitcoin is a creature of the Internet and Bitcoin is like that too. I think a lot of people don’t understand that.

FRED WILSON: When I try to explain how this whole thing works to people the thing that most people have a hard time understanding and it could just be that I don’t explain it very well is how the transactions are cleared in the blockchain and how the hashing happens and how that’s really all that mining is, and that whole piece of the way the system works, where miners are basically doing hashing to clear transactions in the blockchain, I just get glazed eyes from people when I explain this.

ANDREW ROSS SORKIN: Okay, you just went from zero to sixty very quickly. I want to just take a step back still and just try to have everybody, if they could, explain if you were a complete novice, a child if you will, Bitcoin is what? When we had the seven words, I though that there was introduction when they came out. I apologize. You don’t know who the hell we are, (laughter) well, that makes this even that much more complicated.

NATHANIEL POPPER: It’s going to be a lot more interesting.

ANDREW ROSS SORKIN: Hopefully. I’m Andrew Ross Sorkin, I’m a writer at the New York Times, and if you wake up early enough in the morning, I host a show called Squawk Box and I have written a book and do some other things. This is Nathaniel Popper. He wrote this book called Digital Gold, which hopefully many of you will buy and get signed and all of those things. He is an expert on this topic and about a year and a half ago we spent some time together I remember in a little tiny office discussing whether you should write this book or not.

NATHANIEL POPPER: Believe it or not, I was against, and he was for, and here we are.

ANDREW ROSS SORKIN: So hopefully this was the right decision. This is Gavin Andresen, chief scientist for the Bitcoin Foundation. He may actually know Satoshi, who started this whole thing, but he claims he doesn’t or at least is pretending that he doesn’t. Fred Wilson all the way on the end, Union Square Ventures, one of the biggest, most important venture capitalists in the country, has some huge investments in Bitcoin, not in Bitcoin the currency, but in some of the platforms around it, something called Coinbase, is that a decent—

FRED WILSON: Yeah, and a few others.

ANDREW ROSS SORKIN: And a few others, but that’s the biggest most famous. So I apologize. I thought because we were on the other side of the door that we had been introduced, but clearly we had not been introduced, so here we are again. So, pretend we’re all three-year-olds, Nathaniel. What the hell is this thing?

NATHANIEL POPPER: Here are the three metaphors I’ve found most useful for the layers of this because there are different things going on in Bitcoin. I think the top layer, and this isn’t just promoting my book, is the idea of digital gold. This is the token that is worth something, that people pay something for, and it’s a scarce commodity like gold, but instead of a physical substance, it’s a digital substance. So that’s one part of it. The next metaphor that I’ve found useful is that it is e-mail for money. It is a way that you can send money just as you can send information with email to someone anywhere in the world as long as you have their address, you don’t need to go through their company, you don’t need to go to your bank or to the post office to send something, it’s a sort of protocol that allows you to send things—send money around like e-mail. And the third part of it and this is where it gets more complicated, but it is essentially just a big spreadsheet in the sky, in which all of these little digital tokens are recorded, and it’s that spreadsheet that allows for some of the more complicated uses of Bitcoin, and that gets people thinking in really futuristic terms. But those are the kind of simple images that I use to capture these different elements of it, which even in themselves, those metaphors get kind of confusing.

ANDREW ROSS SORKIN: So you’re at the Bitcoin Foundation.

GAVIN ANDRESEN: Yes.

ANDREW ROSS SORKIN: But the Bitcoin Foundation doesn’t run Bitcoin. In fact nobody does.

GAVIN ANDRESEN: No, and everybody does. Everybody who chooses to participate, everybody who chooses to run some software, to try to maybe create some Bitcoins by buying some hardware and doing what’s called Bitcoin mining.

ANDREW ROSS SORKIN: Explain how this—how can I get a Bitcoin?

GAVIN ANDRESEN: I can send one to you. You can get a digital wallet. You can get a wallet on your cell phone is probably the easiest way. There are a bunch of different Bitcoin wallets, and then, you know, you find somebody who has some and you buy them, or you do what I did, you know, you get a job that pays you in Bitcoin, and then, you know, get your salary sent to you in Bitcoin every month, just as instead of into your bank account, it goes into your digital wallet. So it’s really no different than any other currency, right? How do I get euros if I need some euros for something? Well, I either earn them because I’m French and I’m you know working for euros, or I buy them at a, you know, at some exchange if I’m going to Europe and happen to have some dollars. Bitcoins are the same. The goal of the Bitcoin project, if you read Satoshi's paper, really was to be the world’s first successful digital cash, to be a successful currency like euros or dollars. We’re not there yet, who knows if Bitcoin will ever get there.

ANDREW ROSS SORKIN: Not issued by a government or controlled by any one individual.

GAVIN ANDRESEN: That’s right. That’s right. No, issued by everybody who wants to participate in the network and validated by everybody who’s participating, so this spreadsheet in the sky, everybody sees, everybody makes sure that all of the rules are followed. And assuming that the rules were followed, then you have a valid Bitcoin transaction, so if I were to send you some Bitcoins, that transaction would get sent to this giant spreadsheet in the sky. These people who are creating Bitcoins will validate it, put it together with a bunch of other transactions, create a block in the blockchain, and then that’s kind of the permanent record that yes, I in fact gave some Bitcoins to you and now you have them and you can in turn give them to somebody else.

ANDREW ROSS SORKIN: Fred, this sounds effing crazy. You put money into this? (laughter) Why?

FRED WILSON: Well, you know, I actually don’t think that the spreadsheet analogy is exactly right. I like to think of the blockchain as a peer-to-peer database, and so we know what databases are, Oracle, SciBase, MySQL, we’ve had, you know, databases in computer science for fifty years now and they run almost every system in the world has a database underneath it, and the problem with those databases are those databases are fragile, because if they crash you could lose information on it, but the thing that’s really cool about the blockchain is that it is a database that is peer to peer and massively replicated and massively distributed, so if one node goes down nothing is lost. So think of it, you know when they designed the Internet, they designed the Internet to be a network that you couldn’t take down, because it was massively distributed, and if you took out a piece of the Internet the packets would just flow through some other way, and I like to think of the blockchain as the same thing for databases.

ANDREW ROSS SORKIN: When did you realize? You got involved in this very, very early on.

GAVIN ANDRESEN: In 2010, yeah.

ANDREW ROSS SORKIN: When did you realize, or what was it that attracted you to this?

GAVIN ANDRESEN: So, well, I’m a geek, and I’m interested in technology.

FRED WILSON: It says it right there.

GAVIN ANDRESEN: It’s on the shirt. So the technology interested me, it’s very interesting kind of cutting-edge computer science in there that solves this problem that nobody figured out how to solve before, how do you create a digital asset that’s scarce, right? The digital—pictures you have on your iPhone, you can copy willy-nilly, they’re not scarce. How do you create a digital asset that’s scarce? And that’s this distributed massive global database idea that Satoshi figured out. I’m also interested in a kind of armchair interest in economics and kind of how money works, that attracted me to the system, and I’ve been very interested in peer-to-peer systems, you know, systems where there is no central point of failure or central point of control. I really like—I think that’s the story of the Internet is, you know, giving people voice when they never had a voice before. Unless you’re a publisher of a newspaper, how would you get your ideas out there? Well now you can post on Facebook, you can have a blog, and bringing that to money really appeals to me. I think there will be all sorts of effects that we can’t even begin to imagine.

ANDREW ROSS SORKIN: How much of this—I don’t know if this microphone is working—how much of this—you just sort of indicated something about sort of money and the way you think about it sort of separated potentially from government. How much do you think that Bitcoin is political?

GAVIN ANDRESEN: That’s a good question. I mean, how much is any technology political, right? I mean, it certainly has political implications, but I don’t think kind of the technology itself is what it is and I think of it as being very apolitical. I think it appeals to people with certain political bents, right? If you’re suspicious of your government or if you live a country that’s screwing up your currency, then you’re going to be a lot more interested in Bitcoin.

NATHANIEL POPPER: I’ll jump in here and note that Bitcoin, like any money, needs people to use it and needs people to want it. It is as successful as the number of people who are willing to put their faith in it, and I frankly think that the politics of Bitcoin—and you can read that narrowly as, you know, libertarian politics but I think you can also read it much more broadly, have been incredibly important in making people willing to take this leap and say, “Okay, I’m going to start doing something with this, I’m going to start dedicating some time to you.” And not to put you on the spot, but you had these common politics Gavin, with a lot of the other people at that time. I mean, I don’t think you were as sort of avidly, actively libertarian as a lot of other people.

GAVIN ANDRESEN: I call myself “Mostly libertarian.”

NATHANIEL POPPER: Mostly libertarian, okay, so that’s a nice wishy-washy way to (laughter)—but I think that a lot of people early on, I don’t think Bitcoin would have made it through its first three, four years if people hadn’t cared passionately about it, and Gavin’s one of the people who cared passionately about it. And it would have just died a quiet death and it could have died a quiet death many different times, and it was the people who cared about it and I mean, that was really what got me animated about this story was realizing how deeply people did care about this software that doesn’t even exist in the real world, and that was kind of what I needed to understand, but I think also to get back to your question, that level of passion does go back at some level to politics. It’s not necessarily just as crude as, you know, “libertarians liked it,” but it appealed to people, this idea of a money that could do this new thing and, you know, right now, money is something that governments issue, so there was kinda going to have to be some politics in there somewhere.

FRED WILSON: There’s another political force I think that we need to focus on a little bit, too, which Gavin mentioned earlier, which is people who believe in the Internet and I’m one of those people. I believe that the architecture of the Internet is at the core of its power, this network that nobody controls, that anybody can attach a server to and become a participant in the network and that nobody can revoke that permission. Now, governments have tried to change that over time but mostly have been unsuccessful, and Bitcoin is the exact same architecture in the sense that it is a highly distributed, open-source system that no one entity has any control over and there’s a set of politics around that are not libertarian; they sound libertarian but it’s just people who are technologists and entrepreneurs and developers understand how important a system like that is and there really hasn’t been systems like that before. If you wanted to build a cable channel, you had to go pay John Malone 30 percent of your company in equity just to get him to put your cable channel on his network. If you wanted to print a newspaper, you had to be able to afford a printing press, so, you know, the stakes to play the game until were so high and now the Internet and Bitcoin and hopefully many other technologies which will follow which will use this architecture are, you know, they’re permissionless and they’re open and they’re the greatest platform for innovation that has ever existed, so that politics is not, you know, traditional kind of politics, it’s technopolitics.

ANDREW ROSS SORKIN: That’s the virtue—the virtue of it is the distributed nature of it, the governless approach if you will.

FRED WILSON: It is governed. The thing that’s interesting about Bitcoin is that if 51 percent of the nodes on the network decide that they want to adopt a new version, then that version becomes the new version.

GAVIN ANDRESEN: Kinda sorta.

FRED WILSON: Correct me on this because I want to get it right.

GAVIN ANDRESEN: It’s complicated because, I mean, if you create some Bitcoin that, you know, not everybody agrees are valid Bitcoin, it really is important like who agrees that those are valid Bitcoin, right? If you’re trying to spend them at a store and the store says, “ne-eh, that’s an invalid transaction,” it doesn’t matter if you’ve got 51 percent of the network if none of the merchants will accept it or if none of the Bitcoin exchanges will exchange it for dollars, and so there really is kind of this interwoven ecosystem of the people who are mining, of the people who are exchanging Bitcoins.

NATHANIEL POPPER: People operating the nodes.

GAVIN ANDRESEN: People who are operating the nodes.

ANDREW ROSS SORKIN: Can we go backwards one second? How is it possible that I could have the equivalent of what might be described as fake Bitcoin, if I go to a store—how is it possible that one store is going to accept my Bitcoin, my one version of Bitcoin, are there more than one version of Bitcoin?

GAVIN ANDRESEN: There are actually several hundred altcoins, well, which you can think of as like people who say, “I don’t like Bitcoin, I’m going to create my own blockchain, I’m going to take the source code, and I’m going to change it in an incompatible way, and I’m going to create Gavincoin, I actually haven’t created Gavincoin, it would be a terrible idea. And you know most of these aren’t worth anything because they have no community behind them, but I mean, yeah, that’s how you get another digital currency.

NATHANIEL POPPER: There is though there are many altcoins but there is one Bitcoin. There is a test, essentially a test network Bitcoin that is essentially Gavincoin where you can kind of play with it if you don’t want to—

GAVIN ANDRESEN: It’s a sandbox designed to be worthless.

NATHANIEL POPPER: I don’t know if it might be helpful to sort of think about that look on your face, I feel like we need a—but this notion of a Bitcoin and people sort of being behind something and 51 percent, we may have skipped a few steps ahead, and maybe taking it back to one particular moment that I think is interesting which is this thing called “the hard fork,” could happen anytime in Bitcoin, which is you have everybody going along, running their software, doing transactions, making new Bitcoins and everybody has their version of this spreadsheet that I mentioned, they have it on their computers and everybody’s sort of more or less checking across, “Okay, yeah, we all have the same version of the spreadsheet, we all know you have this much, you have this much, we’re all in agreement,” and at one point in 2013—people had sort of feared that this would happen—suddenly a group of people was over here saying, “Okay, we’re creating these new coins and they’re assigned to this person and there were a bunch of computers saying, “Oh, we’re creating new coins and they’re assigned to somebody else,” and so there was a disagreement and so in that moment these Bitcoin forked, and there were essentially two versions of Bitcoin and what you had in that moment was this question of, “Okay, who’s in charge here? You know, is it the guys over here who are making the coins and assigning them to them or is it the guys over here who are making them and assigning them to them?” and it was actually quite a dramatic moment if I may say so myself.

GAVIN ANDRESEN: I was very impressed at your description in the book.

NATHANIEL POPPER: Well, thank you, Gavin.

GAVIN ANDRESEN: Because it was very accurate.

NATHANIEL POPPER: And hopefully comprehensible even to people who wouldn’t necessarily understand it but one of the interesting things—I’ll wrap this up—one of the interesting things that happened there was that Gavin is the sort of lead programmer is that Gavin made a suggestion that you know what, let’s all do this and all download this software, and he’s in charge, right? But actually the people who were running the network said, “No, we don’t want to do that, we’re going to all do this,” and they basically developed a consensus and said, “We’re going to go this way and this is going to be the official Bitcoin and we’re just going to leave this runt over here to die.” And they moved on. And it was this kind of fascinating moment and who’s in charge and can there be more than one Bitcoin? And so there for ten hours there were sort of two Bitcoins and everybody was kind of watching and panicking and thinking this is the end of it because if there’s two of them the whole thing’s kind of not worth very much and, you know, again you know it goes back to this question who was in charge? It was the people who were running the computers that day.

ANDREW ROSS SORKIN: I just want to go one step one more time if you could, just to indulge me, just to explain to the audience how you mine—you’ve written some great stuff about this too and it’s in the book as well. How you mine a Bitcoin—mean I mean how I actually could create. Everybody in this room could technically create a Bitcoin if they wanted to.

GAVIN ANDRESEN: Well, if Twenty-one has their way, everybody will.

NATHANIEL POPPER: Yeah, that’s a very inside joke, yeah. (laughter) That so I mean do you want the simple metaphor that I generally use is it’s just a lottery, you plug your computer in and you try to do— you plug a bunch of stuff into a complicated equation and you hope that the thing that comes out the other end of that complicated equation is your winning lottery ticket, and the stuff that you’re plugging in is all of the transactions that are coming in, so you’re basically an accountant and you plug all the data—all the things that are happening out there in Bitcoin, they’re sending money to this person over here and while you keep track of it you’re sort of playing the lottery, and you get a new lottery ticket each time you sort of keep track again, get a new accounting of what’s happening, and if you win the lottery you get a bunch of new Bitcoins. And that’s what Bitcoin mining is—people who were doing that process are the people who were making the decision on that day when it forked and they had to say okay, who are we going with?

ANDREW ROSS SORKIN: But in the beginning it was people at home effectively with a computer or two that were effectively solving these math equations.

NATHANIEL POPPER: In the beginning it was effectively two people who were literally on that first day had their computers plugged in, one of them was Satoshi Nakamoto, who we’ve kind of alluded to but is the person who created this software and had their computers running the first day and creating, generating all these first Bitcoins and a guy named Hal Finney who lived in Santa Barbara, who also plugged in and was doing the same thing and so there for the first few days their computers were kind of racking up the Bitcoins.

ANDREW ROSS SORKIN: But now it’s completely professionalized, now it’s not, I can’t do it at home, really.

NATHANIEL POPPER: It would take you I don’t know how many, I’m sure it’s been figured out, forty years—

GAVIN ANDRESEN: You need specialized hardware, you need to buy some specialized ASIC chips.

ANDREW ROSS SORKIN: Because I’m competing with so many other people, it’s like a big game.

GAVIN ANDRESEN: Bitcoin is scarce because the network adjusts itself so that there’s a very predictable schedule for how many Bitcoins are created over time.

FRED WILSON: But Andrew the important thing to try to wrap your head around which is the thing I was alluding to earlier, this is where everyone’s eyes glaze over when I try to explain it to them. Not only are you making new coins when you’re doing this, you’re also clearing transactions. Right? What the mining infrastructure really is is it’s a distributed transaction processing CPU, right? Every single computer that’s out there on the Bitcoin network that’s mining is collectively providing the transaction processing horsepower to clear all these transactions on the network, that’s what’s so clever about this thing. But it’s hard to understand. I even don’t truly understand it, to be honest, but I believe in it. (laughter) It’s like, you know, religion, you know.

ANDREW ROSS SORKIN: What is it that you believe, then, but what is it, you’ve invested a lot of money.

FRED WILSON: Not that much, but yes.

ANDREW ROSS SORKIN: In a couple of companies, not in the currency itself. And I want to talk about the value of the currency and how important that is in a moment. What is it you see three, four, five, ten years from now as an investment?

FRED WILSON: Well, what I see is a transaction-processing system with an underlying peer-to-peer database that is architected identically, well, not identically, but in all important ways the way the Internet is architected. And therefore it seems to me that this will inevitably become the missing piece of the Internet architecture for transaction processing, distributed databases, and financial transactions.

ANDREW ROSS SORKIN: Does that mean that I won’t use an American Express card or Visa card or MasterCard when I go to Amazon?

FRED WILSON: I think that eventually these big financial services companies will move away from their proprietary transaction processing networks and databases and start using the blockchain because it will be cheaper for them to do that. That doesn’t mean that they won’t continue to try to run their proprietary offerings, and have you continue to use an American Express card, but for the transaction processing systems and the clearing and all that, they’re going to use the blockchain to do that because it’s going to be more efficient.

ANDREW ROSS SORKIN: Your day job is covering banks. Should banks be scared of Bitcoin?

NATHANIEL POPPER: I think that there is a sense that there’s something to be lost here. I mean, look, I’m talking to the guys at Goldman and the guys at J. P. Morgan about this technology and I think mostly there is the same kind of interest in these banks that you find here. I think that there’s certainly large segments of the banks, generally the compliance segments of these banks that don’t really like this and aren’t eager to get far enough into it to see where it might provide something new. But these are people whose day jobs is dealing with money, and money is usually pretty boring and this suddenly has made money kind of interesting, and it seems like it might provide a cheaper way for them to operate. So, you know, J. P. Morgan has a twenty-five-person Bitcoin working group that’s meeting once every two weeks or once a month to figure out what they can do and it has people from across the bank working on it. And so I think that there is as much interest in the banks as there is concern about it supplanting their business model.

ANDREW ROSS SORKIN: Is it to you, as one of the originals, is it a currency to you, or is it this issue that Fred is talking about, it’s the blockchain, it’s an infrastructure, it’s an approach to the way we will approach payments in the future?

GAVIN ANDRESEN: I think it’s a lot of things, right? It’s potentially a currency, it’s a commodity, it’s a global ledger that you can put stuff on. I don’t know. I would guess most of the time, you know, we try to pigeonhole technologies into like something that came before, and, you know, we had the horseless carriage because cars were just horseless carriages, but usually they’re very different, right, and they don’t fit into that neat pigeonhole, and I think Bitcoin won’t fit into that neat pigeonhole, and I think because we have the permissionless innovation and all sorts of really smart people looking at it in all sorts of different ways that frankly I don’t know what it will be, I don’t know how we will look at it in ten years, I don’t know if we’ll think of it as a currency, as a ledger, as, you know, something that banks use behind the scenes to process transactions and we never think about it. I don’t know.

ANDREW ROSS SORKIN: How important is the value of the currency that is Bitcoin? In the green room I said, “Are you rolling in Bitcoin?” Because I assume you have a lot of Bitcoin. Early on, you were able to mine some of this stuff before.

GAVIN ANDRESEN: I have some Bitcoin.

(laughter)

ANDREW ROSS SORKIN: He was telling me back then when he first started doing it he was giving away the Bitcoins just willy-nilly left and right to people. They were talking about this other guy who gave away, he traded ten thousand Bitcoins for two pizzas. Not a great trade, now.

NATHANIEL POPPER: He’s actually very happy with it. Interestingly enough, Laszlo. He didn’t just buy one pizza, he did it like six times, So he spent something like eighty thousand Bitcoins for pizzas in the course of two weeks and I think that would be worth, I don’t know, 240 x 70,000.

GAVIN ANDRESEN: Ten million dollars or something like that.

ANDREW ROSS SORKIN: For six pizzas.

NATHANIEL POPPER: For six pizzas. And he still loves the pictures of his little three-year-old daughter eating the pizzas, and that’s what he remembers from that, but also what he remembers. What he wanted to prove with that was that you could use Bitcoin for something. At that point, two years into the project, nobody had used Bitcoin for anything, they’d just been kind of trading them around. Gavin was giving them away, you could go to his faucet and get five Bitcoins for free. And Laszlo wanted to show that these could do something in the real world, and he posted pictures on the forum of his pizzas with all the toppings and everybody was so excited, and he’s still so excited. That’s, you know, Gavin is squarely in this camp of people, well, I don’t know where your regrets lie with this whole project or if you have any, but, you know, the degree to which, the people who were involved in those first four years, they don’t think about it in terms of how much money could I have made if I held on to them, the sort of joy of living through this process of creating something. I mean, there was five hundred people doing this for a couple of years and nobody was paying any attention to them, and I have taken us astray from the question of why are Bitcoin worth anything, but Laszlo’s okay with having bought those pizzas.

ANDREW ROSS SORKIN: How important do you see from a financial perspective, the value of the currency either just maintaining its value, or I mean, there was a point at which it was open $1,200, there was a lot of attention around Bitcoin, people were very excited about it. Now it’s come down again. Does that matter?

FRED WILSON: Well, I think it does matter a little bit because the miners get compensated in Bitcoin and if Bitcoin gets to too low of a price, it may become uneconomic for them to mine, and that would be a very bad thing, so it does matter that Bitcoins are worth something. I think that the other thing that is possible is that if lots of activity starts happening on top of the Bitcoin system, the value of Bitcoins will go way up because there will be a supply/demand imbalance, and that they will be worth a lot more. So in some sense the price of Bitcoin is tied to the amount of value that the transaction-processing system is providing into the market today, but you have to overlay on top of that the hype cycle, right, and so so you can’t just look at the price of Bitcoin and say, the system was providing a lot more value two and a half years ago, a year and a half ago I mean, versus now, but I do think in general as more and more transactions are processed on the Bitcoin blockchain, that the price of Bitcoin should rise in more or less linearly with that.

ANDREW ROSS SORKIN: Help me with this, the thing I don’t get about this is that if this is a currency that fluctuates in value, and look, the dollar fluctuates in value, but even the tiniest fluctuation is a huge ripple, same thing with the euro, we’ve seen what that is. Why would a merchant—

FRED WILSON: They don’t need to. The merchants all basically immediately exchange out into whatever—

ANDREW ROSS SORKIN: Into dollars or euros or whatever, so but then doesn’t that make the whole Bitcoin experience irrelevant?

FRED WILSON: No, because for them they’re using it as an intermediate step, right? They’re just using it to use Bitcoin for pieces of the transaction that they used to use some other system for. If you think about it as technology, it’s just replacing some other mechanism.

ANDREW ROSS SORKIN: When you think about Bitcoin five, ten years out, and we’ve tried to talk about the currency aspect of it, do you see it the way he does in terms of it being some kind of larger infrastructure that we don’t know about yet?

GAVIN ANDRESEN: Maybe, I mean, I think that’s a very possible future for Bitcoin. I think in five or ten years assuming no major crises in Bitcoin, I think every online retailer will accept Bitcoin alongside whatever else they accept for payments. It just makes sense, it’s cheaper for them, it means they can take customers from all over the world. If you’re an online retailer, the existing payment system doesn’t work that well for you. There are all sorts of problems with taking credit cards over the Internet that were kind of papered over over the years, so that’s—I think there’s a clear use case, there’s the question of if you’re an ordinary person, how do you get Bitcoin? Right? I think that’s the biggest problem in the Bitcoin world right now is that unless you have some political reason or some, you know, you’re a technogeek, why would you even bother to get Bitcoin?

ANDREW ROSS SORKIN: And the other piece of it that I think, and maybe, Fred, you understand it better than you’re suggesting. The value of Bitcoin is based on its scarcity to a large degree. What really controls its scarcity if 51 percent of the nodes can vote, effectively, to create more Bitcoin tomorrow?

GAVIN ANDRESEN: They can’t, right? It would take 51 percent of the miners plus all of the exchanges and merchants and you know everybody accepting Bitcoin would have to agree to go along with that change, otherwise you’d create Bitcoin that you couldn’t spend anywhere, and that’s no good, right? The only reason to get Bitcoin is to trade them with somebody who wants to accept them from you.

FRED WILSON: I always like to think of Ben Franklin’s comment, which I don’t know if he really said it.

NATHANIEL POPPER: That’s kind of common.

FRED WILSON: We need to hang together because surely we’ll all hang separately. And that’s, you know, sort of the concept of mutually assured destruction. Bitcoin has that at its core, if we mess this up everybody who’s got an investment in Bitcoin, either in mining rigs or owning Bitcoin or builds a company using the Bitcoin system, all of that investment will have gone to zero. So there is a collective interest in keeping the system thriving and balanced in terms of who has control.

NATHANIEL POPPER: And to go back to that crisis I was mentioning earlier, the fork when you had two versions of Bitcoin, and basically the decision was these people over here on one side of the fork are the people who hadn’t downloaded new software in a while and the people over here were people who had downloaded it relatively recently. And so these people who had downloaded it relatively recently were the people who were kind of on top of it and so they were actually the ones who were kind of making the decision and in the end they made a decision that went contrary to their immediate self-interest. They’re the ones who had actually been generating a lot of Bitcoins, but they said, “We’re actually all going to go over and join them, the other people, against our self-interest, we’re going to lose all these coins we just made because it’s in the best interest of the network, and if the network isn’t worth anything then none of this is worth anything and all of these computers that I bought are worth nothing.” And so it was kind of—that moment, I brought it up twice now, but it was a really fascinating sort of test of when the rubber hit the road.

FRED WILSON: There was another moment when one mining pool started to approach 51 percent of all the mining. What happens is a lot of people mine in pools. Because if you mine in a pool, then you’re buying the lottery tickets together, if you will, right, and so you get more diversification. So a little miner has a very small chance of getting Bitcoin, but if they come together and pit thousands of little miners together in a mining pool, and they collectively share on some sort of pro rata basis, then so a lot of mining happens in these pools and there was one mining pool that got very close to having over 50 percent of all mining on the network, and then everyone started freaking out, oh my God, this is horrible, right, and then all of a sudden people started leaving that mining pool, saying, “we can’t be part of this mining pool anymore,” and just self-regulated.

ANDREW ROSS SORKIN: But how do you know it will always be self-regulating, because I imagine at some point somebody will decide that they want to become the Ben Bernanke of Bitcoin.

FRED WILSON: Well, we’ve also been worried that someone’s going to shoot a nuclear bomb and it hasn’t happened in a long time.

GAVIN ANDRESEN: And I mean it is possible somebody will decide they want to be the Ben Bernanke of Bitcoin but it’s probably more likely that three or four people will decide they want to be the Ben Bernanke of Bitcoin and they kind of fight it out and everything’s fine because, which is what we’ve been seeing in the Bitcoin mining space, right, I mean, we have these huge miners in China that are creating a lot of the Bitcoins, there’s not just one of them, there’s several of them.

ANDREW ROSS SORKIN: And they do it in China because?

GAVIN ANDRESEN: Cheap, subsidized electricity. Bitcoin mining takes a lot of electricity, you have to run these machines twenty-four hours a day churning on these math problems, and so big Bitcoin mining places tend to be in Iceland because it’s cold and they have geothermal power, in Eastern Washington, because there’s a lot of hydropower there, and in China because I believe the government will subsidize electricity prices there.

ANDREW ROSS SORKIN: So explain this. If I am the government, U.S. government or any government, why I am allowing any of this to happen?

NATHANIEL POPPER: You don’t have that much of a choice. I think one of the interesting things to look at is places where the governments have decided that they don’t want this to happen. The reality is that if you have an Internet connection you can plug into this system and, I mean, it’s kind of like the Chinese government has decided that it doesn’t want Twitter to happen, it doesn’t want Facebook to happen. That doesn’t mean that people in that country can’t use Twitter and Facebook. That’s sort of the nature of the Internet is that people can find their way around this. There certainly are—there are places where the government can step in and has stepped in and has impeded the development of Bitcoin and one of the most interesting things in the United States certainly is how willing the government has been to allow this to move forward, and I think that has been significant, but you also see other places like Argentina where the government doesn’t want to see this happening, and yet, you know, where do you stop—where do you step in and cut off the arm of an octopus?

ANDREW ROSS SORKIN: This whole thing started or at least seemed to start being used for illicit purposes. What percentage of the business do you think is still for illicit purposes as opposed to legitimate purposes?

GAVIN ANDRESEN: Still today? We had a nice natural experiment when the Silk Road—the Silk Road was a big online marketplace hidden behind this network called Tor that hides your Internet connection and they use Bitcoins to buy drugs online, mostly. The Silk Road was taken down and so overnight you’d go to Silk Road website and instead of seeing you know the listing of all the drugs it was “This site has been seized by the FBI.” So we have this nice natural experiment where we can look at the Bitcoin transaction volume on that day when the FBI took it over, and see how much transaction volume was going through the Silk Road back then. Was that two years ago, three years ago?

NATHANIEL POPPER: October 2013.

GAVIN ANDRESEN: I think it was about 3 or 4 percent of Bitcoin transactions were this big online website, so we don’t know how many illicit transactions are happening on the Bitcoin network today. I am positive there are some. I would guess it’s in the highest, you know, single-digit percentages, just because we have so many more uses than we had back then. We have a hundred thousand online merchants taking Bitcoin. Back then there were probably a hundred, maybe. So I think, you know, I think it’s a pattern with technology. Technology is often adopted first by kind of illicit markets. The Internet used to be for porn. (laughter) That’s what people said.

ANDREW ROSS SORKIN: Some people say it still is. When you think though about Bitcoin as the anonymous nature of Bitcoin, is that something as an investor that worries you?

FRED WILSON: Well, you know, the funny thing about Bitcoin is it’s not as anonymous as many of the people who use it illegally would wish it to be. Meaning that your transactions are out in the open. Who you are is hidden behind an address, so that gave a lot of people the feeling that they could transact in Bitcoin and not be caught, but the reality is the transactions are out in the open and you start to see, there’s this whole thing called network analysis, which is what our government uses to basically spy on us and bad people too. You can use that same technology on Bitcoin transactions and you can look at certain kinds of transactions and you can say, these transactions look sketchy, and then, you know, the FBI will come in and they’ll start poking around these transactions and they’ll eventually find the Silk Road. And that’s sort of how the Silk Road. That’s not exactly how the Silk Road was found, but I’m pretty sure that some of that was involved in the takedown of the Silk Road.

ANDREW ROSS SORKIN: You’re making faces.

NATHANIEL POPPER: I’m just going to say something that a lot of folks involved in Bitcoin don’t always love to hear and I can be argued out of this, but I think that illegal transactions aren’t necessarily terribly important anymore. I think they were very important in the development of this technology.

FRED WILSON: Well, you can see it with the price. Right, I mean, you know, when Silk Road opened, that’s really where the supply/demand started to move and Bitcoin’s price started to move, so—

NATHANIEL POPPER: And it’s because it was the first time when you could do something with Bitcoin that you couldn’t do before.

GAVIN ANDRESEN: They had no other choice.

NATHANIEL POPPER: You couldn’t buy drugs with PayPal, you couldn’t buy drugs with Visa. No, it—you can do most transactions in the United States electronically. You cannot buy drugs—you could, there were actually ways and that’s a whole other interesting story, but Bitcoin really allowed you to do something new, and that’s where technologies separate themselves, it’s when they allow you to do something that you couldn’t do before. And I do think that illegal transactions were the thing, the first easiest thing where you could do something that you couldn’t do before, and one of the interesting things is that Satoshi Nakamoto knew this. And, you know, they were actually looking for some illicit use, not because they wanted to break the law but because they wanted to find somebody who would have a reason to use this and so, you know, Satoshi wrote about, you know, “I feel like maybe porn users are the ones we should be going after right now, because they’re the ones you know that they don’t want it showing on their credit card that they signed up for this site,” and again it wasn’t that he wanted to break the law, it was because he wanted to find something to do with this money that you couldn’t do before and so, you know, that’s a lot of the development of this technology is people slowly looking for that thing to do with this that you couldn’t do before.

ANDREW ROSS SORKIN: Who is this guy? By the way? I mean, who do we think he really is? You wrote a whole book about him. Do you think that this—

NATHANIEL POPPER: I do not actually think that Gavin is. I think that Gavin probably had as much interaction with Satoshi as anybody, but Satoshi Nakamoto did do a very good job of covering his tracks, so much so that I believe Gavin when he says that he doesn’t know who Satoshi was. I mean, it’s a real testament to the anonymizing technology that’s out there that he, that Satoshi, and we’ll assume that it’s a he for the moment.

ANDREW ROSS SORKIN: You wrote an article this weekend in the Times about another guy—

NATHANIEL POPPER: Pointing a big fat finger at somebody.

ANDREW ROSS SORKIN: That you think is him.

NATHANIEL POPPER: I think the way I tried to position it very delicately is that within the Bitcoin community when people put their money on somebody it’s usually the same person, and that person is a guy named Nick Szabo, who’s been involved in the effort to create virtual currencies for twenty years, over twenty years. And this is not a definitive thing, I wasn’t saying “this is Satoshi,” but we’ve gone through a lot of different guesses of who Satoshi is, a lot of people have looked into it. And we’ve kind of been left with a lot of people assuming that it’s Nick. Now, Nick, I should be very clear, denies it as you would expect Satoshi to do, but as you might also expect Nick to do if he wasn’t Satoshi. (laughter) So you can see the headspace that you quickly occupy as you begin to contemplate this.

ANDREW ROSS SORKIN: So you’ve been emailing with this guy for a long time?

GAVIN ANDRESEN: I did, yeah, from 2010 until he left in March or April of 2011.

ANDREW ROSS SORKIN: Do you think you know who he is?

GAVIN ANDRESEN: I don’t know.

ANDREW ROSS SORKIN: Do you think you’ve met him?

GAVIN ANDRESEN: Probably, I like to think he would have gone to a Bitcoin conference or, you know, hung out with other Bitcoiners.

ANDREW ROSS SORKIN: Does it matter who he is? There’s a fascination, a grand fascination with this character and was that do you think done on purpose?

GAVIN ANDRESEN: I don’t think it was done on purpose. I don’t think Satoshi, like, meant to create some interesting creation myth. Although I actually think it doesn’t hurt Bitcoin that we have this interesting creation myth of, you know, mysterious founder. I think he just doesn’t want public spotlight, public attention.

FRED WILSON: It’s not been helpful to a lot of the alternative digital currencies that the founders of those currencies are known and have amassed very large positions, and I think one of the things that Satoshi in hindsight did well was to not be known and he has a—there’s a large block of Bitcoin that is his but people know it’s his, and it’s sitting there and if were he ever to do something with it, I think that would be a momentous occasion and I think that’s something that everybody’s a little bit you know kind of wondering about how that’s ultimately going to get resolved.

NATHANIEL POPPER: Because we have this spreadsheet in the sky, an Argentinian computer scientist has sort of tracked back by looking at the patterns of the computer processing which coins likely belong to Satoshi and there’s this million or so coins from the first year that likely belong to Satoshi. And there’s essentially constant monitoring of them, and none of them have ever been spent, and so this person is sitting on top of essentially $240 million worth of Bitcoins and essentially none of them have ever been spent, and there is this question as to is that, when you see the first one of those spent, when somebody starts selling those, is that the kind of thing that could cause a crisis in confidence? But on the other hand the fact that Satoshi hasn’t spent those $240 million is sort of an incredible thing onto itself, that somebody is that committed to this system that they’re willing to just leave that sitting there.

ANDREW ROSS SORKIN: Fred, you were telling me earlier before we came on stage that you actually don’t own too much of the currency.

FRED WILSON: That’s right.

ANDREW ROSS SORKIN: Why is that? You made a big investment in the infrastructure around it, but not the currency itself.

FRED WILSON: Because I think the more interesting piece of Bitcoin is the underlying technology and I didn’t want—and if I was going to invest in the underlying technology I wanted to be objective about that and I didn’t want to have a ton of our net worth tied up in the currency because I was worried that would cloud my judgment about investing in it. I just thought like I want to be relatively clean. On the other hand, you have to own some Bitcoin if you want to invest in this, because you need—you know, you need to be able to use it. You need to be able to be in the system and using Bitcoin and all that. So I just feel like, you know, having hundreds but maybe not thousands, maybe, I think Joanne and I probably own I don’t know five hundred to a thousand Bitcoin maximum, maybe less. I don’t think we should own more than that. It’s a good number.

NATHANIEL POPPER: Good number. I like that.

ANDREW ROSS SORKIN: Where do you think—To the extent this takes off if you don’t think it’s taken off yet, there’s been arguments made that this will take off in developing countries before it actually takes off in developed countries.

FRED WILSON: I think so. I feel strongly about that because I think that many of the things that you can use Bitcoin today for are things that work pretty well here in the United States and our currency really is pretty trusted, I would say the most trusted currency anywhere in the world, so I think that there are places in the world where the currency’s not trusted, it’s very difficult to transact, people can’t get access to the financial system, and that this can become a new kind of financial system. In the same way that things like M-Pesa have taken off in Kenya, which is their mobile money, I’m sure most people know what it is. I just think that’s where we’re going to see most of the really innovative stuff happening.

NATHANIEL POPPER: In my travels for this book, and I went to all the places where there’s, you know, significant communities around Bitcoin. Essentially the only place that Bitcoin was regularly being used by ordinary people was Argentina, which is you know the sort of poster child of broken currencies, broken financial system, and again it’s sort of like that situation you had with the drug market, which is that, you know, you’re looking for places where people have enough of an incentive to try out something that’s this crazy, and initially that was, you know, heroin addicts who didn’t want to have to drive down again to some sketchy place, that’s essentially where Argentinians are with their own currency, and they have this situation where they can’t get their money in and out of the country. If they hold their money in the currency, it’s losing basically 40 percent of its value every year, and so you have a bunch of ordinary people there, I mean, it’s not hundreds of thousands of people, it’s maybe thousands of people, but it’s people who don’t care about the politics of this, who don’t understand the technology, and yet the sort of benefit to using this is enough that you can now trade Bitcoins on the street for pesos or for dollars or for euros and there are sort of working-class money changers who will come to your house and change it for you and hotels that are using it. And I feel like that’s really the experiment to look at, because, you know, as Fred said, has often said that Bitcoin took off in the wrong places, it took off in the places that needed it the least and that’s the United States and Europe.

ANDREW ROSS SORKIN: I’ve heard that Vietnam is starting to become a little bit like Argentina. Is that true?

NATHANIEL POPPER: Southeast Asia, Philippines, some of these places where people are sending remittances home from Hong Kong to Philippines, maybe Indonesia, that does seem to be where there are businesses that are actually doing significant numbers of transactions.

ANDREW ROSS SORKIN: What I want to do real briefly is to open it up for questions. Because I imagine you guys are going to have smarter questions than I will about all this stuff. There are some very bright people who know a lot about Bitcoin in this audience as well as those who may still be beginners, and so I thought we’d try to get two or three questions, get your chance on goal and then we’d wrap things up.

Q: (Inaudible.)

ANDREW ROSS SORKIN: Real briefly, I have to repeat the question, because I was told that we don’t have mics and they’re filming us. The question was how does he expect to make some money on this? How do you expect to make your money back?

FRED WILSON: So I’m investing in businesses that are built on top of Bitcoin, I’m not investing in Bitcoin, so the theory is that if, you know, the businesses that we invest in become successful and make hundreds of millions of dollars of revenue and tens of millions of dollars a year in profits that they’re going to be worth something whether they can go public or get sold. So that’s what we’re doing.

ANDREW ROSS SORKIN: Yes.

Q: (Inaudible.)

ANDREW ROSS SORKIN: What can’t you do with Bitcoin?

GAVIN ANDRESEN: I cannot pay my mortgage in Bitcoin. I cannot pay my taxes in Bitcoin, so I have to—until recently my salary was paid in Bitcoin. Actually, I’m working—my salary is paid by MIT now. I haven’t convinced the MIT payroll office to pay me in Bitcoin yet. I may be able to work on that. I actually talked to the—my local. I’m involved in my local town government up in Amherst, Massachusetts, and talked to the director of finance for my town and he was surprisingly open about maybe I’ll be able to pay my property taxes in Bitcoin one of these days because it might be cheaper for the town, right, if they don’t have to pay money to the credit card companies, then maybe, so I’m hopeful that maybe eventually I will be able to pay my mortgage and my taxes in Bitcoin, but those are a couple of things you can’t do yet.

ANDREW ROSS SORKIN: You had a question, yeah.

Q: (Inaudible.)

NATHANIEL POPPER: Yeah. I mean, I think it’s worth noting, I don’t know if there’s a way to calculate this, but I would wager that there are probably more people who have lost money on Bitcoin than have made money on Bitcoin just because more people have come in in moments of speculative frenzy and purchased when the price was high and then watched the price go lower and many of them, you know, sold off at that moment and wanted nothing to do with it. I think that’s been the sort of story of Bitcoin and the fact that there isn’t more confidence, I mean, there are a lot of reasons, but that’s probably the single largest factor in the price not being higher than where it is today, and I think this might be a bone of contention, I’d be curious to hear your points. But I have always said that Mt. Gox, you know this was the biggest collapse, it lost something like half a million dollars worth of Bitcoins that it either lost or had stolen from it, we actually strangely don’t know.

FRED WILSON: Or maybe they embezzled it.

NATHANIEL POPPER: That would be stolen, I guess. But in any case.

FRED WILSON: But not from them, by them.

NATHANIEL POPPER: That’s the third option. The fact that we don’t know is kind of amazing and but I think that people have, you know, people in the Bitcoin community have wanted to say that Mt. Gox was something that was sort of built on top of Bitcoin, and it failed because it was essentially this reversion to the old model of a centralized institution, it was the very opposite of a decentralized institution, it was in fact basically one dude, one French guy who wasn’t a particularly good programmer, and so to a degree its failure is not an indictment of Bitcoin, but I think there is a degree to which, you know, the Bitcoin community has to contend with the fact that the reason that that company existed and was able to exist and was able to hold as many Bitcoins as it did was because there was nobody watching this system to say that it couldn’t. And that’s sometimes, you know, yes, it was self-regulated out of existence in a sense, but I don’t know if that’s the kind of self-regulation that most people want to see or be a part of, because, you know, I’ve met retirees in Argentina who lost their life savings because they had bought Bitcoin thinking it would be better than the peso, and then Mt. Gox happened, and there went his life savings.

ANDREW ROSS SORKIN: That doesn’t scare the hell out of you?

NATHANIEL POPPER: Feel free to jump in on this.

GAVIN ANDRESEN: It does. I’ve been with Bitcoin since almost the beginning, when we started from nothing, when we started with, you know, people deciding to create Bitcoin exchanges, and like exchange Bitcoin for real money using their personal bank accounts and suddenly finding that their personal bank account is, you know, ten million dollars and their bank is shutting it down and now what the heck do I do? That was bad, right? You don’t want anybody to be able to just say, I’m going to accept money from people and you’re just going to trust me with it. But I don’t know how we could have bootstrapped from where Bitcoin started, where Bitcoin was literally worthless to where we are today where you have companies like Goldman Sachs who have, you know, large groups of people looking at Bitcoin and thinking about it. If we could have started with like large companies that know how to handle money and know how to not get embezzled and know how to write code that, you know, is reliable and it’ll process the financial transactions properly. That would have been better, but I don’t know how we could have started there. I don’t think we could have started there. So I think all the chaos and drama we’ve seen over the last few years, fingers crossed, I am hoping it’s getting better as we see more responsible companies, organizations, people get involved.

ANDREW ROSS SORKIN: We have one question here, one question here, and then I’ll take one question from the cheap seats in the back and then we’ve got to I think wind up.

Q: So you talked about how the Bitcoin itself is an incentive for miners or auditors who are sort of making sure that everything is sound within the system. We haven’t talked about the limited amount of Bitcoin that exists and I’m curious what everyone’s answer is what is the incentive to continue the mining or auditing process once the last Bitcoin is mined?

ANDREW ROSS SORKIN: That’s a great question. What’s the incentive once the last Bitcoin is mined, once the game is over?

NATHANIEL POPPER: In the year 2140.

GAVIN ANDRESEN: Yeah, in the year 2140 the last Satoshi will be mined.

ANDREW ROSS SORKIN: So what’s the incentive for all those miners and for this governance system which you’ve—

GAVIN ANDRESEN: So the easy answer which may or may not be correct is that transaction volume will ramp up, we’ll scale the network, and transaction fees will take over. So, you know, miners get transaction fees as another incentive. Right now transaction fees are tiny because there aren’t that many transactions and miners care about getting those new Bitcoins, they don’t really care about the fees. But I think Satoshi’s vision was that we will transition as the block reward goes down, to a world where there are a whole lot more transactions happening. And even if it’s, you know, a penny per transaction, if there’s thousands or millions of transactions happening, then that’s a significant revenue stream that will keep the network secure.

ANDREW ROSS SORKIN: You had a question?

Q: (Inaudible)

ANDREW ROSS SORKIN: So the question is what would you say to the fact that he would argue the banks aren’t really looking at Bitcoin per se, they’re looking at the underlying blockchain technology behind it, and what does that actually say about the future of Bitcoin itself?

FRED WILSON: I think it’s all one and the same at the end of the day because the underlying technology is maintained by this mining infrastructure and the mining infrastructure is compensated in Bitcoins and so that’s, you know, that’s like saying I’m going to buy my database from Oracle and I really don’t care about the financials of Oracle. I think you do if someone’s supplying you a piece of technology, you care about the financial health of the provider, and in the case of Bitcoin, the financial health of Bitcoin is in my opinion measured by the price of Bitcoin.

NATHANIEL POPPER: But I think you’re right that that is what the banks want. There is a desire to essentially, you know, oftentimes it’s sort of in shorthand characterized as small-b bitcoin and big-B Bitcoin, the currency and the sort of network underneath it, and a lot of the banks don’t like the currency and they don’t like the fact that they have to rely on these miners in China whose identities are known to nobody. So they want to figure out a way to use this without using that and really that’s a kind of existential question. Can you use this without using that?

FRED WILSON: They should start mining. What they should do is they make big investments in the infrastructure to compete with the Chinese and build their own mining infrastructure so they’re not reliant on some third party, that’s what the banks should do.

NATHANIEL POPPER: And the alternative that they’ve chosen instead is to essentially develop their own blockchains where they’re supporting the blockchains and again the existential question is is a blockchain any good if you just have five banks backing it up? Is it any good if you don’t have all these essentially these Chinese people who are powering it?

ANDREW ROSS SORKIN: We have a question I believe all the way in the back. We’re going to let you have the final word, sir.

Q: (inaudible)

FRED WILSON: Well, I think that it has a lot to do with the fact that Bitcoin sort of solved all of the problems. If you look at Bitcoin, a lot of what Bitcoin uses is pieces of failed projects in the past. So for example the hashing algorithm is really from Hashcash, right? It’s the exact same algorithm? Right, Hashcash was an early attempt at digital cash, digital currency, and it didn’t work but its contribution to Bitcoin is the hashing algorithm, so Bitcoin was, you know, just, you know, built on top of other failures, and they finally stitched the thing together that made it work. The other thing you can look at is six years in now we’ve had, you know, many, many opportunities for the whole thing to blow up and go to zero and yet it has refused to do it and every time there’s some massive blowup and everybody sort of says this is it and if Bitcoin continues to thrive and just shows its resiliency it makes me feel that it’s going to be the one.

ANDREW ROSS SORKIN: Answer me this if you could and then we will wrap things up. If you go back and look in the New York Times back in say 1993 and you were to look up a sort of a technology back then, a modem, you would find that the New York Times would define it, it would say, “modem, a device that transmits data over a phone line.” Fifty years from now if we all picked up a copy of the New York Times and we saw the word Bitcoin in the newspaper it would stand alone, or it would be followed by a comma and what?

FRED WILSON: I think it stands alone. We don’t define the Internet anymore.

GAVIN ANDRESEN: I think it will stand alone. I think Bitcoin will still be here fifty years from now and it will just be another thing.

NATHANIEL POPPER: I hope I’m not writing for the New York Times when that happens, I guess it still seems like, I will go back to one of the early things I said which is that it is a sort of clumsily named thing. I mean it kind of works, it gives it a brand, an identity. Bitcoin it sounds like something you might be able to understand. But I think as this develops, as it becomes all of these things that we’re talking about, the name becomes a less and less good description of it and so perhaps you get new ways of describing it in the way that, you know, the Internet was what was it Darpanet? The Internet had early names that we don’t use anymore, so if I can weasel out of the question I’ll weasel in that direction.

ANDREW ROSS SORKIN: We will let you weasel out on that note. The book is called Digital Gold. Thank you for the conversation, thank you for the questions.

(applause)

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