The Future of Blockchain with Nick Szabo, Adam Back, & David Chaum at Korea Blockchain Week 2019

[Music] all right panel of titans here thanks Cynthia for doing some good context for where the industry is now too so we can kind of get into some of the history of how we got here but first something we've all been waiting for well the real satoshi please stand up just-just-just good it's good we should've tried Simon Says there well no thank you but but seriously all of you you know we would not be here today without each of you and want to kind of dive into some of kind of your innovations here so start off with the Godfather of it all David can you take us back to 81 82 talk to us how you're thinking about the development of cryptography back then well sure you know I was a grad student at Berkeley and this was a very different kind of time but I identified a fundamental problem which you could say blockchain is sort of the latest answer to when that is how can people who don't trust each other trust a single computation to follow a public algorithm and to communicate the results securely to various users and that problem was the basis for my dissertation and the way I tackled it was essentially with the kind of blockchain and you people have analyzed this only recently because that work was kind of hidden for a long time in law in the library at Berkeley but it it seems that I'd included both the permission that unpermitted it did not include proof of work which is something so it was filed and approved or whatever I got my PhD in 82 and I guess it was a full decade later that Cynthia Dworkin moneena or who incidentally was one of my co-authors on a offline electronic money paper published that the proof-of-work idea I mean I remember clearly them presenting it at a conference that in fact the series of commerce that I created the crypto conferences and their whole big idea for its use was as a way to prevent a spam mm-hmm messaging was kind of a kind of a core part of how you're thinking about this until then right yeah so what that's right one of the I mean to me privacy was a key aspect of the way information technology would unfold and actually so I developed three basic ingredients to let's say meet the informational needs of consumers of society while protecting privacy and so one of them was electronic money the blind signatures I published also in 82 and the second one was the so-called mixing for messaging and that appeared in 79 but also as a tangible 1482 appearance in Journal of computer science I believe it was 83 perhaps and then there was a third component which I called credential mechanisms which is a kind of identity sued anonymous identity authentication scheme that allows the database of information about an individual to be sort of turned inside out with control over that information to the person so you you could prove the the correctness of any answer to any query about the database of information about yourself without revealing any more information so I view that as a comprehensive kind of solution to personal privacy in the information age and I spent a fair amount of effort trying to publicize that and I explained it was the basis for the like Scientific American article and other other work that I did at that time so a lot of these basic ideas have their origin right absolutely at the beginning of the 80s great then let's fast forward 10 years did you cash is coming about the commercialization of the Internet is you know kind of possible at this point also at the same time something interesting is happening kind of around Silicon Valley the cyberpunk movement is starting to form int and coalesce Nick can you take us back to that time you were one of the early people with those in-person meetings you and Tim can you can you take us back to the mindset that you had there and what you're thinking about so there was you could divide it into roughly two camps one of them inspired by David and very interested in privacy and so using encryption public key cryptography using David's technology and involving mixes which eventually became tor for example and digital cache blinded digital cache to but not really interested in in new currencies or reforming the money or that kind of thing the second camp which was the Tim a inspired crypto anarchist camp and a very libertarian influence like Iran's Galt's Gulch concept of a self-sufficient economy that's independent of government mm-hmm and so these were two of the main camps or inspirations it very intersecting and and but not necessarily parallel yeah and then so these are in-person meetings but you know eventually we have mailing lists and people can kind of coalesce online also right Adam when was your kind of introduction to this community and and what camp kind of most interested you when you came in well I think myself and how finian wait I got into it through a group called the extra pians which is like a libertarian futurists group and and Tim a kind of got us interested in in the cypherpunks yeah yeah and I'm sorry yeah yes so I guess I was interested in I knew about in public key encryption and so when the cypherpunks list was created that became a place where people who are interested in these social implications of cryptography for a certain your rights to privacy online I mean you can think think of the online world which was a new thing at that time and policymakers were grappling with what to think about all this new freedom that people had but in a lot of ways you had less rights online because ISPs could record everything so and I was more of the kind of cyberpunk mindset that what we really need edge you know there were people working on anonymous remailers so that you could directly assert your rights to privacy so you know you there would be regulations saying you have some rights to privacy but they wouldn't be worth much so it was better to enforce it directly so I think that was a very kind of direct approach there if you want something just build systems and if people use them then that becomes the new default say just just do things people can figure out permissions or regulators can catch up decades later so that kind of outlook and more interested in sort of hard final electronic cash and I think you know the intersection between the digital gold concept an electronic cash concept came about in the reverse order for me because I wasn't on the extra peon and the other list that Nick mentioned yesterday I was on the safe banks list say I started from the perspective of needing private electronic cash to drive these privacy networks so in order to for them to be self funding to pay for the hosting they were they were run by volunteers largely right say it was it was clear that you would need electronic cash to be meaningfully private online because you'd need to pay for things pay for bandwidth pay for electronic content that kind of things say electronic cash was their kind of holy grail of this environment and people would have been contented for the electronic cash to be denominated in a fiat currency but of course there's a barrier to entry there which is need permission from a bank and I guess digit cash kind of went through that because while they had a demo server they were also trying to work with banks to get an entry to the system so after digit cash kind of wound down as a commercial enterprise the people who would tried the demo server and had the coins were stuck with the coins because a double spend database went away and their thinking was you know that was a great idea but we need a distributed way to G to cheap that so that it would continue to operate for decades into the future as different individuals and companies came and left say I think proof-of-work became a mechanism to do that because you could as Wade I put it with his B money proposal you could have an electronic cash system without an interface to the banking network by mining the coins from scratch and I mean going back to the proof of work thing is it's interesting actually and there's a lot of sort of reinvention of similar ideas thread through decades of things here but the proof of work at the time I proposed Hashcash I hadn't read the talk paper but somebody pointed out to me a few months after I published that and coincidentally they had the same use case except in my case I was operating a remailer and people would spam through it to - I think actually because they were anti privacy and they wanted to annoy system administrators about the spam coming through remailers particularly onto using it which is an expensive because it's broadcast say I thought about this kind of resource twice and normally the way that people combat spam is to try and identify and block the sender but because it's remailer you definitionally don't know that so it caused a sort of rethink to thing what it's was really the problem is that it's free so how can we oppose a cost given that at that time there was no paypal and anyway those things are you know credit cards and PayPal are all very identified this is anonymous system say that's where the kind of hashcash postage stamp came from and it turns out I mean in fact publishing that quote started a conversation about digital scarcity and use in systems that try to build a reusable electronic cash from it and there were at least three of those well one being NYX others that they're called other being weight ice be money both in 98 if I recall and hopefully did another one in 2004 called reusable proof-of-work I want to come back come back to those step back real quick back to digit cash because we would you know foundational kind of innovation at the time also David can you take us back so kind of the founding of that and the kind of purpose for the product of e cash as a part of it sure most people don't really know this it was I've had a Freedom of Information Act process with the Dutch government to get information on this and recently they decided they weren't going to give me any information but the fact is that based on my publication of blind signatures from the 82 I was approached by the Dutch Ministry of infrastructure and transportation to make a highway speed road toll payment system like we have today that would be smart card based and would protect the privacy of the motorists and they really needed this and wanted it because there's only way to manage the overused highway system in the Netherlands and we told them we could do it I told them that if they wanted to us to build an actual proof of it that it could work with us the same type of microcontroller that's used in smart cars was it 1605 and you know it's all the payments are completely in one meter of Road travel so that's only a few milliseconds we would do it and they would have to then like pay us to make a prototype system so I got a bunch of college students to like turn their one of their houses into kind of a lab and we worked 24/7 for about better part of ten days and actually made a physical device and demonstrated it to these consultants that the Ministry had hired who were you know dead said I'm proving that we couldn't possibly do it because they wanted the contract to do it without privacy anyways and we succeeded and so they gave us this contract to build a demonstration system and that was the beginning of the digit cache company and then I was invited to give a keynote at the first world wide web conference in Geneva and I used that opportunity to make the first ecash payment over the Internet and this was something that was widely reported globally at the time and created a tremendous amount of interest and so we built a system that Adam mentioned I wouldn't characterize it as a demo it was it was called cyber box and it was a currency that had a fixed cap on the total amount we would issue and anyone who would build a shop online that we would accept it we would give a hundred of the Starbucks too and if you go to charm calm you can see the little Museum of all the many of the merchants we had online and so this will recommend going there yeah all these right things it's pretty interesting and you see all the press releases so we did that and then we also started working with various commercial banks around the world that wanted to issue a cash and so it was actually issued by Deutsche Bank and Deutsche marks at the time which is largest bank in Europe and also in Australian dollars in US Dollars and so forth and so we helped banks issue it if they wish to and in those days you know there wasn't enough computing power globally at any kind of reasonable cost to even entertain the idea of the kind of block change that we have today so it was really the only what practical way to do it and my final comment on on that episode was that my personal goal was to put electronic money in people's hands that had this blind signature privacy that gave the individual control over their own information and I believed that if you could get people to experience that control in a useful situation that the meme of digital sovereignty would have a place to it's a catch from because you know the digital world was not something that was sort of top of mind of the public in those days the kind of in the way it is today so that was why I I did it and I think with some some success yeah thanks and and brought in Nick into the fold at one point too so Nick you you write about smart contracts for the first time kind of around this timeframe also and then you actually join did you cash can you talk a little about why you why that was where you wanted to work and then kind of things that you saw while there that you thought could be innovated on later on yeah so it's definitely one of the cool things for a stifle Punk to do is just to work for David and do some ecash and so it did have those strengths of privacy that David talked about and have the weakness of the server or the company goes away the the currency goes away and also that the system administrator could print themselves some currency so it was really strong in the privacy regard but it wasn't really necessarily good as a private currency or for monetary reform so kind of taking those lessons and thinking about awhile I formed a list called libtech that had myself and Wade I and Tim May and Hal Finney on it among and Larry Celgene and George white two economists who'd studied a lot of privately issued money history and came away from that with eventually that's where bit gold and be money came out of his at that mailing list in the discussion to be had on there so and then smart contracts is a whole nother separate thread but and then Adam kind of brings up you know hash cash in the mailing list that kind of is the next step and then you know a year or two later you come out with the idea of pickle right so hashcash art existed by the time we did libtech in 1998 and so that certainly was one of our building blocks and inspiration for for a bit gold and be money yeah yeah so Adam maybe want to come back to you here where we kind of interrupted before yeah I mean so I think the you know as somebody who'd spent quite a bit of time reading the academic papers such as neighbor charms and a colleague and friend of miners Stefan brands who was David Toms PhD student he had another electronic cash system and I'd implemented these electronic cash systems in libraries and was quite familiar with the cryptography in the trade-offs say you know obviously we everybody on the site bunks list was aware about the the centralization issue but didn't have a clear solution say now you could say that when bitcoin was released that it took some getting used to for people with a cryptographic background because you're used to a a symmetric security advantage for the defender where you know he would as a defender you could do an operation very quickly but the attacker would have to spend you know thousands of years in implausible calculation to break a single transaction but with the sort of assumption that you should trust the central server which is you know that's a difficult assumption in real world which is what we found so bacon on the other hand there is no asymmetry it's you know one minor against another say you have to get your head around the idea that hopefully over 50% of - will be honest and try to play that for a call to optimize profit in a normal way as opposed to by disrupting the system and rolling back transactions and things like that say you know that that's not ideal but it exists and it works yeah and it is decentralized and it turns out that's the key thing say speaking for myself I I got interested in it from the perspective of well it really doesn't have a lot of cryptographic privacy off cryptographic fungibility well let me try and use my knowledge of the electronic cash protocols to try and improve that and so that's why where I proposed what became known as confidential transactions which was an application of zero knowledge range briefs to basically encrypt some parts of the transaction there and still have it publicly verifiable but get a certain degree of privacy from from doing that so yeah I think that's the the trade-off with Bitcoin the decentralized mining is wait I put it gives you an electronic cash system without banking interface and it's optimized for sort of survivability and decentralization and the other interesting thing is that the blind signature based electronic cash protocols David Rome's different brands and there were others in the literature provide cryptographic fungibility which means that basically somebody can't censor your transaction simply because they can't identify it amongst any others so their only choice would be to shut the system down or let it go right whereas in Bitcoin it's significantly transparent so you can see a trail of transactions going through the system but nevertheless you have defect a fungibility through decentralization in the sense that there are many competing miners and if one miner chooses to not process your transaction chances are in the next block another miner will or another one well and it takes quite a lot of effort and coordination and in order for the miners to collude collectively to block and they'd have to take it really seriously and reach a degree of centralization and probably damage the value ultimately the currency so today that kind of property is largely held at least for Bitcoin and there's some other coins that haven't done so well in that regard yeah and and on that note do want to mention that y'all kind of recently rolled out or announced some of your mining products how do you think about those products in kind of this context of centralization competition I mean so we actually got involved with that because of concerns about the buildup in centralization in particular the side chain concepts which is a kind of connected chain that you might merge mine associated with Bitcoin so - could mine both the main Bitcoin chain and a related chain that doesn't have its own coin it's just a way to move to extend Bitcoin and that has less incentive like a financial incentive to mine it correctly because somebody can mine with Bitcoin or they can really do is try to undo a transaction and use that to cheat somebody whereas in a sidechain potentially - if hostile could take the balance of coins in the chain say you need a higher degree of decentralization to feel comfortable about operating a side chain using mining only which is preferable as it's very decentralized in permissionless saying we got involved in mining because you know that was a couple of years ago when we first started centralization that got kind of out of control in in mining they were or doing the equivalent of selling mining machines are selling money machines if their voting machines and insisting that the buyer would vote for their favorite politician which is not a good way to approach voting machines nor a good way to approach decentralization in bitcoins I would say that you know bitcoins value significantly stems from its permissionless nests and decentralization and sort of you know neutrality so that anybody can participate and that centralization is kept decentralized enough to assure the properties of the system hmm Joe David you might have had a comment there on uh you know I mean it's you know I I think if you had to have kind of been there to experience his decades and decades of developments that brought us to this point and trying to think of what aspects hadn't really been mentioned but that really colored the whole thing and I think to me a key thing was even back in before the web it was clear to some of us I think the people on stage here at least that and people thought about this and I think it's tangentially mentioned that micro payments would be a way to organize all of online resources and that there was a sort of countervailing competing approach which was the sort of advertising based model and in those days it seemed to make the most sense to people that I knew that if you know users would control the development of the system and and and everything by sort of the micro payment based approach but yeah I think we miss judged the ability for people with very deep pockets like push the the data mining advertising based approach aggressively as the internet developed kind of explosively and predominate and that sadly has brought us to the world that we have today which you know I view as a big problem so if we had succeeded maybe get the transaction costs down and decentralize a little more and and get the meme out it could be a very very different online world and unfortunately there's some pretty fundamental limits and they're not computational limits their mental limits on how fine-grain nickeled and dimed these are actions of nickel-and-dime people want to keep track of so yes yeah okay the micropayment vision has the big problem that it's it's more expensive to think about a micro payment than the value of the micro payment but presumably this could be built in in a hidden way and yeah debate at this point but ya know just say that back in the day you know would have been that these type of payments technologies could have created a very different online space than we have today yeah NIC certainly look you're sorry no that was the hope back then yeah yeah I mean I think shouldn't be underestimate the you know as somebody who used digit cashes electronic cash system own dreadful with interest the developments there there was a lot of excitement about this technology and what the company was doing something akin to Bitcoin obviously Bitcoin is kind of exploded much bigger than that but initially it was a similar kind of vibe say for many of us it's return to the excitement of seeing electronic cash deployed finally and I think the one thing that is new and helps Bitcoin adoption is the monetary reform aspect that Nick mentioned say the idea that it is an independent floating value asset that became an investment instrument so people get involved in Bitcoin through many different routes Nick coincidental and buying a cup of coffee and then like read about it and before they get too far into it they get enamored by the ability to control your own money so have sort of financial sovereignty and to do to innovate permissionless lay on top of it in the same way that you can on the Internet so I think the the fact that it's an investable asset actually multiplied the interest because a lot of people get interested originally because oh the numbers going up and they'll buy some but then they read about it and they find it interesting independently of the value so you know depending on how you look at it the fact that it is has a floating value could be you know the direction I came at it was because that was the only way we knew how to do it because they were we we tried to you know make something that you could mine that would have a stable price compared to the US dollar that would have been acceptable but it turned out harder to do that and from Nick's perspective I understand he actually wanted it to be independent so it reformed the monetary supply but in any case that's that's the way it arrived and that turned out to be a sort of multiplier in the adoption I think yeah and it did arrive after Nick and Halfin II kind of had their own innovations on top of hash cash and and David's inventions so it arrives you know to of your sighted in the white paper and then Nick you're mentioned and Satoshi's writings on Bitcoin talk by name and and bit gold is a kind of cited as a progenitor of Bitcoin so we have Bitcoin and it's kind of proven itself over time that it's something that exists and has has value where do we go from here with that how can Bitcoin be improved upon maybe I want to start with with Adam on this and then get Nick and David's thoughts too so I mean I think there's there's two things so one is a kind of computer science thing and Bitcoin is very sort of bottom-up low level very optimized kind of like a UNIX design philosophy so it does one thing does it well has a simple model for claims and you know ultimately if you're talking about a highly valuable asset that members of the public have hundreds of billions of dollars invested in you don't want to move fast and break things that's the opposite of what you want say I think bitcoins doing the right thing by focusing on security first there is an enormous amount of highly skilled to protocol developer and system level programming expertise poured into it because it's where all the action is is you know by volume is probably 90% of the crypto market right if you factor in the actual volume of usage and trading so I mean I think in terms of improving it I would look at it from the point of view of incrementally improving the computer science the technology the cryptography has new techniques become available or as optimizations improve but in terms of you know some people talk about improving on Bitcoin as in making a whole new coin that is going to compete with and displace Bitcoin and I find that argument to be implausible because Bitcoin has an enormous network effect and it would be disadvantageous to crypto as a whole if Bitcoin were to get displaced by one of by it by a competitor but on a practical basis also if there is some better technology there's absolutely no reason that Bitcoin wouldn't and couldn't incorporate it and including something quite novel and different you know that's a completely different story scheme you would just snapshot the Bitcoin state of current ownership and it put it into the new system so you know the fanciful ideas about displacing Bitcoin with something better I think the only way that would make sense is if you had a strong economic argument about you know the disbursement of the funds or how they should be spread out or their ownership ratios or something like that but I think you know bitcoins network effect is such that it's here to stay and if Bitcoin fails it will it all fails so I think we want to you know put our energies into improving Bitcoin and making auxilary systems that are platforms that add their own value and could even be paid for using Bitcoin if bitcoin is a general global electronic cash system you can use it for micro payments using lightning and use it in connected systems like site chains and other other networks yeah maybe I don't know if you could share your thoughts I largely concur with that I would I would say though that although there's certainly network effect Fiats network effect is stronger so there's certainly other things at play here at Bitcoin success in that and one of those I think is that certainly in 2011 I wrote about this it's based on very unpopular opinions such as security and and what they call trust gnosis I call trust minimization are really important core values whereas for almost all the other coins they're emphasizing transactions per second and this and that any other and they compromised security they compromised trust minimization or governance that's a huge compromise on trust minimization a big part of trust minimization is governance minimization you minimize human decision-making and the scope of what that can involve so Bitcoin believes a bunch of very unpopular things that never less contribute to its success it's successful because it's stuck to those unpopular core values and the other many many coins have have been laid by the wayside because they didn't understand those values they they went with a popular values and that caused failure so I think that's a big big part of Bitcoin success now aetherium has some of those values to some extent but they also have a lot of other things like all sorts of utopian projects and governance there's all sorts of creative things but you know 99% of them are bound to fail and the the turing-complete aspect of it is very valuable but on the other hand it comes at a huge cost and as a result there's a lot of problems with gas fees and centralization with a lot of theorems just run on in figure now so there's a lot of vulnerability and fragility with aetherium that you don't have with Bitcoin yeah we did we did get to Bitcoin through you know a series of attempts and failures and so there may be potentially as a world where Bitcoin works and is what it is and then you know things can still be attempted and and maybe something happens in in terms of a breakthrough you know it with another protocol and other projects David you anything to add those comments wise and profound observations however you know I mean the US government I think was planning to close the United States Patent Office and he was 1860's because they felt that anything that was worth having been invented had already been invented so I don't know remains to be seen there may there's I think quantum resistance might be you never know when some nation state could could play that card that it would be I think I mean yeah I think it's it's and you know that there is a battle I mean another aspect I could mention historically in the in this in our the broader field of the use of cryptography publicly was that from the very beginning the US government for instance was against it not only did they not want us to use cryptography except that that was offered by like US companies for us products that it certainly wanted they didn't want us to even think about cryptography really do research in cryptography so in 1982 the US government the head as a head of their National Security Agency started writing letters to the major scientific organizations threatening them with draconian legal repercussions for even having sessions let alone whole conferences on cryptography and some popular ideas again if what so you know I there is a battle on for global dominance in in currencies and I think everyone's aware of that and these digital currencies might be small players in in that scheme of things but some nation-states seem to think that they could use this type of technology to great advantage so I think we're at a point where it's kind of hard to really say how this is all gonna play out but it is probably a lot more important today than it was when we all started with this and if you believe that digital sovereignty is critical then it's only a part of the whole question of how is information technology going to affect life on this planet will it be don't allow domination by a small group of centralized actors whether they be people or machines or some combination of them or will it be in fact somewhat of a democratizing and decentralized kind of approach that no was I mean I hear Nick's perspective and I but that's I think is our like main chance yeah and Nega I think you had some funny comments on Twitter about like Facebook's Lieber and some these other competing but yeah so so the the state-sponsored so-called crypto currencies and Libre and so forth they basically got the the core the unpopular idea the trope that makes Bitcoin successful trust minimization mm-hmm for the sake of supposedly more stability or this or that or the other and so you know calling them crypto currencies kind of like calling a baby a doll it's not really quite the same thing it's missing something important yeah there's no life there hmm Adams you ever yeah I mean I think the that the Internet technology has changed people's opinions so basically it's like like that bitcoin is a case where people have become accustomed to using something and then they would not like to see it removed and so it's you know it's decentralized enough that it's hard for democracies and civilized countries to prevent people from using it say well we'll see how it develops and certainly I think at the moment it's benefiting from being relatively small I mean we might think of 200 billion to 350 billion market cap as being a lot of money but on the scale of governments and national currency is actually very small you know 1% or less I think they even compared to physical gold I think bitcoins current total value is maybe 2 or 3 percent range say we'll see how it develops but I think you know as as its usage grows and more people are holding it becomes more unpopular to start to politically interfere with it so there is some strength in numbers so we'll see how the transition goes from being too small to care about to do to being very large and scary and you see a preview of that in the some government's reactions to Libra with the assumption that because Facebook has on the order of a billion users that it could actually threaten the military policy of a smaller country that would then be using an electronic currency there is a basket of foreign currencies to them and that could be impactful to it to an economy say I think think of Bitcoin more like gold it's like a secondary currency that you can use for the internet and hold as a investment diversification and to hold to have the benefit of as advantages in sort of soft sovereignty and direct ownership yeah all right that was a great run through history and kind of looking back at how important each of you has been to getting us where we are when do a quick lightning round on just one one word one sentence on the thing that you're most excited about about the development of Bitcoin or the ecosystem moving forward Nick what's kind of the most exciting life for you that's that's one of them yeah a second layer for Bitcoin that will enable the retail transactions that a lot of people think cryptocurrencies about and then of course making smart contracts more like contracts more reverse engineering a law that I talked about in the presentation this morning or yesterday all right lightning is more contracts Adam yeah I mean a blood stream we've been working on smart contracting language called simplicity which is designed for Bitcoin and using its low-level efficient but using formal security methods so that you can mathematically prove correctness of simple programs I think like Bitcoin starting bottom-up keeping things with hard provable computer security is the way to go cool dated last word I think the real challenge is to make something that could be an attractive replacement product for consumers compared to WeChat or Facebook or some of the other messaging integrated with payments and many app systems that are dominating consumer use of information technology sovereign data well thank you all so much and thank you for for joining us that's our time here so thanks [Applause] [Music]