A Film by Manuel Stagars
THE BLOCKCHAIN AND US
In 1903, the Wright brothers invented the airplane.
It was hard to imagine then that today, there would be
over 500,000 people travelling in the air at any point in time.
In 2008, Satoshi Nakamoto invented bitcoin and the blockchain.
For the first time in history his invention made it possible
to send money around the globe without banks,
governments, or any other intermediaries.
Satoshi is a mystery character and just like the Wright brothers
he solved an unsolvable problem.
Whenever this happens, it inspires incredible innovation.
The concept of the blockchain isn’t very intuitive
but still, many people believe it is a gamechanger.
Despite its mysterious beginnings,
the blockchain may be the airplane of our time.
Chapter 1: First Contact With The Blockchain
I found out about blockchain first
as most people around that time were through bitcoin.
Personally, at first I thought bitcoin was a terrible idea.
I was teaching at Stanford back in 2010
and a teaching assistant for the class sent me an article.
She said “There’s this really cool thing, it’s open source money.”
I remember thinking “Open source money, isn’t that cool
but it will probably never work.”
I did what most people do the first moment
they are exposed to bitcoin. I discounted it.
I thought this was silly Internet money
you could mine it, it’s like a golden goose.
It took me about a year to really re-explore the technology.
By 2012 I did what I tell most people to do today:
Turn off your phone, lock your door, and study this technology for a day.
It’s the best advice I could give.
I was on a sabbatical from work.
I decided I take a year off, live off some savings
and figure out what I want to do.
It was there that I discovered this little orange icon with a B in the middle
and said “What is this strange thing.”
I started looking… Bitcoin… interesting.
That was about 2012/2013
and I haven’t left this space since.
I continued further down the blockchain rabbit hole if you will
and I’ve been pleasantly surprised
and had no reason to crawl my way back out
and find another technology.
There’s a point at which you almost can’t stop.
It just gets so interesting and you’re so fascinated by it
and you just want to learn more and more.
Even to this day, there are new developments
and new ways of solving problems, new approaches
and it’s very exciting to be in this world.
It feels really exciting to be involved in blockchain.
It feels like we’re at the forefront of something
that has at least the potential to transform
our interactions between each other
between corporations, the underlying infrastructure
of both the private sector but also of government.
For me part of the fascination is that
we don’t yet know exactly what this thing is
and yet, there are still lots of people gathering around it.
I thought of it as a space rock that crashed on earth.
You’d have a bunch of people that gather around
and they’re all pointing and asking “What is this thing?”
You don’t really know but it’s still very interesting.
Chapter 2: Blockchain Technology
For me, the blockchain has two main technical ingredients.
One ingredient is cryptography.
When I say cryptography, I really mean asymmetric cryptography.
The other ingredient is so-called distributed systems.
These are the two main things.
If you understand them you understand all the
technical details of blockchain or bitcoin.
You have the ability to create records that are indelible.
You have the ability to transfer value
by making updates to those records.
And you have the ability to automate updates to the records
through these things called smart contracts.
That means potentially that you could transform
the structure of financial services.
Today there are all sorts of institutions
that exist to maintain sets of records.
To be “trusted third party” in industry parlance.
That role is potentially fundamentally reshaped.
Blockchains are networks.
Networks that we see today
Alibaba, AirBnB, Uber…
those are interesting networks but they are centralized.
Here, you’re going to have networks that are decentralized
that are working more as a cooperative.
I think some of the challenges will be
what are the economics of those networks,
what are the economics of certain blockchains
versus today’s discussion which is all about the technology.
I think tomorrow’s discussion will be about
how do you build network effects off of these new railroads.
What’s especially interesting for me is that
it was a grassroots movement from the technology sector.
Not a movement of established businesses
trying to find a new selling point.
It’s really a bottom-up movement from us geeks.
It’s one of the most amazing things in science
that happened in the last 100 years
that this thing is actually possible.
You can digitally sign transactions or other kinds of information
so that you can prove that you actually signed this.
It’s much more secure than these
curvy, wriggly signatures that we use every day.
It will probably replace those things soon enough.
Chapter 3: Influence Of The Blockchain
We spent two years trying to understand this space
and what it really meant.
We found that it meant a lot more than just
another digital currency.
As the blockchain became more influential in our thinking
we began to realize that it was a profound shift
in how the Internet could be used
to create new forms of value
and how it could be used to enfranchise
and include people in global finance.
We’ve had the Internet for years now
and on the Internet, still nobody knows
whether you’re a dog or not.
Identity fraud is completely out of control.
So the area where we need some new thinking
is in the identity space.
Maybe the technology brings something new into that space.
And we need it fairly quickly because
we haven’t fixed the identity problem for people
but we’re about to put ten billion, trillion, gazillion
things on the Internet.
We can have a trust relationship
without really having ever met each other
or having done business at all with each other.
I think that’s fundamental.
Security is another.
Blockchains are military grade cryptology
and they’ve never been cracked.
When you hear about hackers stealing bitcoin
they’re not stealing from the blockchain itself.
They are stealing at the point of entry
at the wallet or browser level
where they intercept messages.
But the blockchain itself is very secure.
The Internet of Things will probably be
the best test case for a lot of blockchain technology.
Because if we’re going to have millions or billions or trillions
of Internet-enabled devices doing everything
from driving us around to managing our affairs
to monitoring our health, they need a way to
move and store and manage value and
data that has value in a way that is secure and private.
Right now we don’t have that.
I’m concerned about the ubiquity of data and how
it flows in and through Internet-connected devices.
I think with a value platform like blockchain
we can at least address some of these problems and
maybe even create new opportunities.
Chapter 4: New Business Opportunities
We cannot sit in our office and study
of course we do that as well
but we need to go out and participate
in this whole blockchain community.
Honestly, what’s very new to me
especially regarding younger persons in my team
is how enthusiastic they are about that.
If there is a hackathon, for example
they never come to me and ask if
they can go there and get some money for that
they just go. They’re so interested.
They just go and participate and share
what they learned, and we have further discussions.
This is really a new way, also for us
to deal with new technology.
We’re in the middle of it, nobody tells us what to do.
It’s really we together shaping what we stand for
in the end for blockchain.
We need to be much more technological.
We need to have an awareness of
how something is programmed
so we can check if the programming is correct.
This might be a capability that we have
but not in the way it’s needed in the future.
In the future, you always need to have
a technological link to things so you can understand them.
Otherwise you always need your IT guy sitting next to you
helping you in the understanding of the problem.
This is not something that’s going to impact one of two industries
it’s going to affect every industry
in the same way the internal combustion engine
affected almost every industry
or the Internet affected almost every industry
or the steam engine created new industries.
This is one of those big generational technology shifts
that requires a concerted and focused response.
Otherwise, you will miss the boat.
We are all, also in the financial services industry
trying to recognize that we don’t have to be defensive
but we rather have to embrace not just this technology
but this enabler it brings us to access
a vastly underutilized or undiscovered market
that we have to do business with on an eye-to-eye level.
We talk to all sorts of senior executives in financial services
and often the say “We looked at bitcoin,
we had smart people come in and explain
how the blockchain works
but I still just really don’t understand
what it means for my business.”
I think that makes sense in a way because
if you think about an iPhone, for example:
What’s really important, when a new iPhone comes out?
Is it the new chipset or some new way of
I’m not an engineer and don’t know how any of that works.
What matters to people is what they can do with the technology.
Of course, success is in now way guaranteed.
One day we may look back on this and say
“Oh, wasn’t that great…” But:
If you ask me, there is undoubtedly
a huge amount of progress that has been made.
There’s something here.
I find it hard to believe that I’m going to look back
in ten or twenty years and say
“None of this ended up happending.”
Because we’re really seeing a new way
of transacting value on the Internet.
Chapter 5: The Blockchain And Banks
I know how big financial institutions work.
They’re not going to do something reckless with technology.
This is people’s money and livelihood they’re working with.
These are slow upgrade processes.
These systems, once they get implemented,
will run in parallel with the old systems for a while
before you have a switch over to the new one.
That’s standard in technology upgrade.
I knew this was going to take time.
But there are antagonists, players who are threatened.
It’s the AT&T/Verizon/Kodak analogy again.
Their business model is threatend by this
and they’re going to do things to slow down
and water down the transformational networks.
There is a game theory approach to how the technology
is being rolled out in the markets, for sure.
We made different roundtables here in Zug
after the start of our bitcoin experiment.
For example, we invited banks and bankers from Zug
and tried to connect them with people
of the “Zug cryptovalley”.
They were talking, but the bankers were not so happy.
They said there were different things with the law
and “It’s not so easy for us.”
But it’s also a question of attitude.
It’s the same as for our city, for our administration:
banks have to get ready.
I know that in a way they are defensive
but on the other hand have research and teams
that face these questions.
Maybe they are waiting a little bit now
but they can’t deny it, I’m sure.
I think there’s going to be a lot of disruption
a lot of revolution with respect to blockchain-based technologies.
That’s going to drive not necessarily
banks worrying about other banks being competitors.
What banks worry about is the “bank of one”
the next generation of a banking network that’s
resident on a phone, that’s decentralized, distributed
and that’s based on a digital token, a digital asset
that’s not issued by a bank or government.
It creates all these different permutations and opportunities
not only for enterprises and governments
but also for society.
We see a lot of example of banks and consulting companies
and other Big Four audit firms talking about
how they can strip cost out of the business
of—I don’t know—trading in public markets
or whatever it might be.
But if you take the example of public markets:
How can you cut cost out of a market that doesn’t exist in the future?
What if the trading of securities happens peer-to-peer
in the marketplace that doesn’t have traditional intermediaries
of exchanges, brokers, agents, escrow agents, clearing houses
and all the other parties we rely on?
That’s the cost you’re cutting out but
what if the market can function without them?
The important thing for leaders of big companies
is not just to think about cost
but also to think strategically.
What can this technology enable me to do
that I wasn’t able to do in the past?
I think it’s going to take a long time
for it to weave its way into the system.
It may take a normal tech upgrade cycle for it
to fully weave its way into the system.
I have said publicly I think within twenty years
financial services will be just software
and the smart contracts technology in particular
is going to automate a lot of the things
that institutions and people handle today.
Chapter 6: The Blockchain And Financial Inclusion
Seventy-four percent of the world’s population
according to the World Bank
does not have access to basic financial services.
In my home country, in the United States of America,
which is one of the wealthiest countries in the world,
about fifty percent of the population
does not have access to basic financial services
including bank accounts.
There’s a huge amount of people around the world
that don’t get to experience and be a part of the global economy
because they don’t have access to the financial system
for a variety of reasons.
I do think this technology will lift
a lot of people out of poverty
but will also be an inclusive technology
that allows more people to engage in global commerce.
I don’t like to think that we’re creating
so much prosperity for the less than one percent.
I like to think of purpose-led businesses.
By the way, that’s the trick I think
for large corporations: to understand
that the cost efficiencies of embracing this new technology
will potentially widen their accessible markets
at a cost that’s reasonable.
That in itself will create prosperity in different areas.
Something that we should think about.
Pretty soon, when smartphones can be had for
less than five dollars each, which is right around the corner
nearly every person living in poverty on earth
will have access to a smartphone
and be connected to a network.
That is game changing in and of itself.
When you have digital wallets on these phones
and the ability to trade assets
we’re going to answer the question
“What happens when everybody has money?”
Capitalism itself has thrived in some areas
by the natural exclusion of others from markets.
It actually uses that scarcity principle
as its driving basis.
So what happens when money is not scarce?
We will look at people and say:
“What are the things that I cannot do
and where we can join forces?”
Much more than today, where we say
“How big is your car and how much money
do you have on your bank account?”
So, I believe the future will be even more
human, or humane—no… human
than the last hundred years we have seen.
Chapter 7: The Real Revolution
I don’t think blockchain is a revolution.
It has been done forever, for forty years,
which is really forever in computer science.
Both ingredients of the blockchain—security and distributed systems
have been around since the early seventies.
This is not the revolution.
The revolution, or the evolution is that
jobs will change.
That’s something I believe in.
Jobs will be digitized in some sense.
Computers will do a lot of the manual labor
that we still see in service domains today.
It’s called the “fourth technological revolution”
and I think we are at the beginning
of such a revolution just now.
That’s why we don’t close our eyes.
Some people say “There will be much trouble
people will lose their work,” and so on.
I’m sure it will happen
but it’s better we face it than deny it.
Offshore working, automation, robots
are they threatening our work?
It’s a real-life question when your own son
who is prepared to go get an advanced education
asks you that question.
I concluded I do have a genuine answer:
It’s not threatening.
It is forcing us to think a little bit different
but if we do it smart, we actually give
the next generation a great new opportunity
to reinvent why they get up every morning
and why they go to work
and make sure they really make best use of
the degree they studied for
and the things they really want to do in life.
I want to make the world better.
Whatever my measure of better is, or yours
is what might be valued by society.
The other thing is this wonderful opportunity
to create a little bit of prosperity.
Because what prosperity offers you is independence.
We don’t have to have people who are living in squalor
simply fighting for a handful of rice every day.
There is too much in the world
to live like that anymore.
I think certain countries and even corporations
are beginning to understand that.
Certainly this movement, this blockchain movement
is the technology underpinning
the technology part of that mindset
which exists offline as well.
The idea is out.
If it’s not being realized here it may be realized there
or even in the Internet, uncontrollably.
Bitcoin is here, it is here to stay
and will become bigger and bigger.
As the blockchain, as cryptocurrencies
as the possibilities connected to the blockchain and cryptocurrencies.
That’s out of the box.
And the whole system does not need any government.
It exists. It works.
It’s like a computer network surrounding the world.
You can say “We don’t want to be part of it.”
So be it.
It’s here. And it won’t go away.
Chapter 8: The Blockchain And Us
I feel like this is a generational opportunity
for entrepreneurs and investors.
Quite frankly, I have not seen something
as exciting in my entire investment career.
Let’s try to build a new system
that has better trade-offs and features
and less downsides.
And let’s make it work.
Now the pendulum is going to swing back.
What that’s going to do is frankly
make confidence in capital markets higher.
Blockchain has enormous potential implications
outside of financial services.
We might even see the full-scale implementation
of some of those more real-world applications
leapfrog financial services.
This invention, when it came up in the seventies
is really one of the groundbreaking ideas.
It will change society for sure in many domains.
It already has changed society in a sense that
the Internet is a secure place
that you can make transactions on the Internet.
The potential for creating trust
or even permissionless trust
within the Internet
that’s something that we haven’t had before.
Its impact on society, on business, on government
could be profound.
Blockchain is to be fair nearly ten years old.
I think it has another ten years to run before
we really see what its long-term impact is.
I think it’s going to be a long, much more steady journey
we go down and you’re going to see
multiple technologies inspired by this thing.
Blockchain technology is not the solution to
all the problems under the sun.
As it matures we will begin to see its potential benefits
but also its limitations.
You can deny it or you can face it.
We always said we have to face it
because these things are coming
if we want or not.
I have seen long-standing partners
when they saw the opportunity, to change
and say “I don’t understand everything
but I understand there is something behind this
so we need to go forward.” That’s really great.
People often say necessity is the mother of invention
but I like to say necessity is also the mother of adoption.
If there is a real use case
that people need a technology for
they start using it.
I started with Commodore, we had Atari, Apple
but at some point in time, Windows came.
Everybody just started to use Windows
without asking “What is the code behind it?
What is the code behind moving the mouse?”
We have a whole lot of possibilities.
Everything will change.
In my opinion, the possibilities are endless.
It reminds me of the situation where all of a sudden
we have two or three huge inventions
happening in one moment.
We are living in a very interesting window of opportunity.
I’m surely very excited to fully embrace that.
Even one little step can be a great step for mankind.
I think we are exiting the industrial age
and are entering an age we still have to name.
Where that will take us is very hard tell.
My suspicion is it means a sort of
resurgence of the notion of community.
It absolutely feels like a whole new paradigm
for changing the world.
We’re at a crossroads here.
We have the wherewithal now to create technology
that would help the entire human race.
The question is: Will we do it?
But we can do it now.
There is so much innovation
that blockchain technology has spurred
all throughout the world.
I have absolutely no doubt in my mind
that this technology is going to affect everybody.
I would say in ten to twenty years
there won’t be a human being
whose life is not impacted by this technology.