With Cobden Centre contributor Dominic Frisby’s book on Bitcoin now a number 1 bestseller on Amazon in Online Trading and Investing, and certainly the best book on the market for those looking for an outline on how Bitcoin works and how it may just radically change the financial system, we asked him a few questions on how he thinks the technology will develop.
What first attracted you to crypto-currencies?
I first heard about Bitcoin in 2010. If only I’d listened.
The major theme of my first book, Life After The State, is that governments couldn’t do the things they’ve done over the past 100 years without control of money. So the solution to too much government is to use money over which they have no control – independent money in other words. Bitcoin was the logical next book to write. And I knew I’d be able to write a better book on it than anyone else.
Had you read about the theoretical foundations for private money previously, for instance Hayek’s work in this area from the ’70s?
Yes. Cryptos are a modern manifestation of all that stuff.
Bitcoin has attracted a huge range of aficionados from computer coders and techies, to drug dealers, to economists, to anarchists, to libertarians. I suppose I came at it from a kind of libertarian economist viewpoint. In the course of writing the book, my eyes were opened in a way that I didn’t expect. Because what is so amazing about this, in a technological sense– What is so amazing about this technology is that in solving the problem of digital cash. Let me just explain quickly what that problem was. If I’m standing next to you in a room, I can give you– I can hand you cash, and there’s no middle man. Whereas if I want to spend any kind of digital money, whether it’s supermarket reward points or dollars or air miles. Whatever kind of digital money it is, you’re always going through a middle man. For years, people have been trying to technologically replicate or digitally replicate that process of handing cash directly from one person to another. Nobody has been able to do it. That was the genius of Bitcoin. All sorts of digital cash have been before, but they all involve the middle-man. And suddenly thanks to this tech at the centre of Bitcoin known as Blockchain, this problem of digital cash was solved, and suddenly the process of handing one thing direct to somebody else with no middle-man was able to be done online. Obviously the implications of a new form of money for Government and banks and all the rest of it is incredibly exciting, but this technology– the Bitcoin developers are looking at this technology and thinking, “Right, we’ve successfully cut out governments and banks from the creation and transfer of money, what other middle-man can we cut out?” And this whole movement is known as disintermediation. So we’ve disintermediated Governments and banks from money, what else can we disintermediate? And the implications of disintermediation are simply immense.
How do you see the technology developing in the future?
The technology behind bitcoin effectively removes middle men. It’s known as disintermediation. In the coming years, you’re not only going to see governments and banks cut out of the money creation and transfer process, but you’re going to see the likes of gmail and yahoo disintermediated from emails, Twitter cut out of tweeting, Facebook cut out of social networking, brokers cut out of the transfer of financial assets, stock markets disintermediated, even health and education services just completely bypassed. The tech is so mind-boggling disruptive. And hardly anybody can see what’s coming.
When the Blockchain is downloaded, (it can be downloaded by all the users)… I just downloaded it some time ago and I think it was about 50 gigabytes. Obviously if something like YouTube was a Blockchain it would be exabytes or whatever you get to after that. So how would that work in terms of just the sheer number of– the sheer amount of memory required for that kind of thing?
I’m not entirely sure, and it’s still very very theoretical at this stage, but the whole way the internet works– I mean the internet is just basically one huge middle-man. Just a melange of middlemen. Amazon is a middleman, YouTube is a middleman, Facebook is a middleman, they’re all different kinds of middlemen, and this– through this kind of watershed tech – which is the Blockchain – which basically disintermediates everything. And I’m not like one of these people who’s out to destroy the middleman, because middlemen play an incredibly useful role, and I have an agent who represents me for work and I’m sure everyone who wants to hire me would rather not have to go through the agent, the agent does a very god job for me and I’m happy to give him 15% of everything I earn, because of the job that he does do for me. But the– It’s incredibly subversive and disruptive basically, and all those– The wonderfully exciting thing, if you like subversion, about the internet is that all the old monopolies, whether it the newspapers or television or music industries, they were all subverted and disrupted and they either had to adapt or die, and then all these new, groovy businesses came along. But suddenly 10 years on, 15 years on, they’ve all got these vast monopolies, so I think it’s– They probably don’t even realise it yet, but the monopoly that is Google or Facebook or YouTube, or whatever it is, could well be disrupted and subverted within ten years or something.
What threat do governments and regulatory bodies pose to crypto-currencies?
About as much as they did to the internet in 1991, to steam-power in the 18th century or fossil-fueled locomotion in the 19th – or the wheel whenever that was invented. They’ll be like a snail reacting to a speeding car whizzing past.
I guess another interesting question on this, on the down side perhaps, is the ability for enabling crime. If you’re a libertarian then presumably you should be more or less in favour of drug legalisation or whatever. That side of things isn’t so bad if it’s not hurting other people, but with some of the assassinations and so on…
You’re opening up so many cans of worms, but there are so many laws that in my view are just– shouldn’t be the law. The law is doing more damage than those who break the law are, with people’s lives. Then if some kind of new technology comes along and subverts that then that is a good thing in my opinion. But yes, that’s a moral argument. And like you say, Bitcoin enables crime. It enables money laundering, money transfer. All sorts of horrible things get sold on the Darknet. They’re horrible, quite frankly. Bitcoin facilitates takes that, but so did the internet when it came along. It’s exactly the same dynamics. Black markets are much faster. They’re much more flexible than other types of markets. They’re very quick to embrace new technologies and make them work on a practical day-to-day basis, because black markets can’t gobble up loads of venture capital and survive on that kind of backing. They need to turn a profit pretty quickly. They’ve embraced Bitcoin. If you want to take the kind of, “Bitcoin should be illegal because it facilitates illegal activity,” I get that argument. I think it’s a puritanical small-minded argument.
What about Satoshi himself…?
Again, when I started writing this book – and everyone who’s new to Bitcoin I think goes through this as part of the journey – they decide they want to know who Satoshi Nakamoto is, the guy who invented it. It became slightly obsessive for me. The more I found out, the more I realized I didn’t know. I put a lot of sleeping hours in trying to work out who he was, probably more than anyone else. There might be one guy in America, a blogger who’s done more hours than me trying to figure out who he is, but I think I’ve got the answer right, and now that I’ve got the answer right I say it– I write about it. But I’m not sure not we actually need to know anymore. There is a certain amount of importance in knowing, but in the– he controls about probably 10% of all the Bitcoins there is, and therefore what he does can have great– in the same way you’d want to know what Steve Jobs is doing with his Apple shares or something. So there is some importance from that point of view, but the guy is a genius, and I don’t use that word lightly. And to come along– the sheer depth and specificity of knowledge required. Bitcoin isn’t something you just come along a just suddenly code on a whim like this if you’re 22-years old and you’re a genius with code. You need huge experience of– huge knowledge of money, you need knowledge of data bases, computer coding, economic history, how to maintain your anonymity on the Internet. There was just so many different skills that this guy brought into play at an extremely high level and his achievement is nothing short of monumental.
Like I say, I think I’ve worked out who it is and I do write about it at great length in the book, but there’s a certain amount of apology and regret in saying what I’ve said once I’ve said it. But once I did it, I could not say it. Because I’ve actually been in extensive contact with the guy who I think is Satoshi and we seem to have quite a good relationship. He denies it’s him, but then he wouldn’t say anything else and I sent him a copy of the book and I hope he likes it.
Do you see crypto-currencies as part of a wider shift online towards “digital anarchy”?
Yup. Already you have things like Bitmessage which is an ability to send an email from A to B without having to go through Gmail or Yahoo or whoever it is. There are all sorts of implications for privacy as well. You have Twister, which is like Twitter but with no central body organizing all the tweets. It’s a much more effective way to, say, organise an Arab Spring or indulge in a bit too much free speech. The stock markets can be put on the Blockchain. Financial assets can be traded directly with no middle man. That has huge implications for stock markets, share registrars, brokers, the whole financial industry. We could register car ownership. You can even put the land registry on the Blockchain. The land registry badly needs a boot up its backside. Something like 50% of land in the UK is still unregistered according to a book about 10 years ago by a guy called Kevin Cahill. And even things like YouTube put on a Blockchain, and that has huge implications for the movie industry, copyright, television.
What are your thoughts on the boarder philosophical themes surrounding cryptocurrencies, ranging from libertarianism to cypherpunk philosophy?
Bring it on, baby.
Dominic Frisby is the author of Bitcoin: the Future of Money? The audiobook is available here.