The Internet of Money

by Andreas M. Antonopoulos

Bitcoin is digital money, but it’s so much more than that. Saying bitcoin is digital money is like saying the internet is a fancy telephone. It’s like saying that the internet is all about email. Money is just the first application. Bitcoin is a technology, it is a currency, and it is an international network of payments and exchange that is completely decentralized. It doesn’t rely on banks. It doesn’t rely on governments.

Six and a half billion people on this planet have no connection to the world of money.

Bitcoin creates a completely flat and decentralized network where every node is equal, where the protocol is neutral to the transactions, and it pushes innovations to the edge of the network, allowing exactly the same phenomenon we saw on the internet: innovation without permission.

When I was on the internet back in 1991, it was a den of thieves, pornographers, pirates, and criminals. But it didn’t matter then, and it doesn’t matter now. It doesn’t matter because the same powerful technology that can be used by a criminal to promote their criminal activities can also be used by all of the rest of us to do good, to do incredible things all across the world. And there are more of us than there are of them.

Bitcoin is the first network-centric, protocol-based form of money. That means it exists without reference to an institutional or platform context.

We have an expression in the United States, which is “possession is nine-tenths of the law.” In bitcoin, possession is ten-tenths of the law. If you control the bitcoin keys, it’s your bitcoin.

Bitcoin represents a fundamental transformation of money. An invention that changes the oldest technology we have in civilization. That changes it radically and disruptively by changing the fundamental architecture into one where every participant is equal. Where transaction has no state or context other than obeying the consensus rules of the network that no one controls. Where your money is yours. You control it absolutely through the application of digital signatures, and no one can censor it, no one can seize it, no one can freeze it. No one can tell you what to do or what not to do with your money. It is a system of money that is simultaneously, absolutely transnational and borderless. We’ve never had a system of money like that. It’s a system of money that transmits at the speed of light, one that anyone in the world can participate in with a device as simple as a text-messaging phone. This represents a technological innovation that is terrifying to a lot of people because it is such a fundamental transformation of money. What they will tell you is that they’re worried. They’re very worried. They’re worried that criminals will use bitcoin. But the truth is that they’re far more terrified that all of the rest of us will. Thank you.

We live in a world where every individual transaction you do through the financial system is cataloged, analyzed, and transmitted to intelligence services all around the world that collaborate, and yet we have no idea what our governments do with money. The financial systems of the powerful are completely opaque. Our transactions are completely visible through this system of surveillance. This world is upside down. Bitcoin rights it.

Bitcoin isn’t currency. That’s a really important thing to realize. Currency is an app that runs on the bitcoin network. Bitcoin is the internet of money, and currency is just the first application. Today, there are a thousand companies writing the next app. Those companies are hiring tens of thousands of people in one of the most vibrant industries we have seen in the last two decades. In 2014, bitcoin startups will receive more than $250 million of investment. What’s remarkable about that is that it’s faster than the rate of investment in the internet in 1995. We are ahead of the curve. Bitcoin is growing faster than Twitter did in the first three years. Bitcoin is growing faster than Facebook grew in the first few years. The reason for that is because every misfit, weirdo, freak, or programmer from anywhere in the world can now connect to bitcoin without asking anyone’s permission and take their weirdo misfit idea and build a new financial service. A new banking application. A new shopping application. A new escrow application. And that’s exactly what people are doing. They are building things that are innovative, new, and brilliant. Things that we’ve never seen in banking before. Things that wouldn’t get past the first planning meeting in your average bank because they’d get shot down.

Bitcoin is a currency. Bitcoin is a network. Bitcoin is a technology. And you can’t separate these things. A consensus network that bases its value on currency does not work without the currency. You can’t just do the blockchain without a valuable currency behind it, and the currency doesn’t work without the network. Bitcoin is both. It is the convergence of a participatory consensus network and a global, borderless currency that is fungible, fast, and secure.

Bitcoin is simply a dumb network, and that is one of its strongest and most important features. When you design networks, when you architect network systems, one of the most fundamental choices is this: do you make a dumb network that supports smart devices, or do you make a smart network that supports dumb devices?

There is one small disadvantage with smart networks. They have to be upgraded from the center out. And that means innovation occurs at the center, by one player, and requires permission. As a result of smart network design, innovation only happens when a feature is needed by all of the subscribers of the network, when it is compelling enough to disrupt the function of the entire network to upgrade it.

If you push intelligence to the edge of the network, an application that only has five users can be implemented so long as those five users upgrade their devices to implement that application.

Bitcoin is a dumb network supporting really smart devices, and that is an incredibly powerful concept because bitcoin pushes all of the intelligence to the edge.

The power of pushing intelligence to the edge, of not making decisions in the center, moves the innovation into the hands of its end users and gives those end users the ability to build applications that are so niche that only a handful of people around the world need them. And they can build those applications without asking for anyone’s permission.

Often, new technology must first use the infrastructure of the technology it will eventually replace. In the beginning, automobiles had to use roads designed for horses. Eventually, we started paving roads. Then, something really interesting happened.

That’s an infrastructure inversion. You start with the new technology living on the old infrastructure and then, it flips. You build infrastructure and then the old infrastructure rides on top, on the infrastructure designed for the new technology.

In a world where your currency is a monopolistic nation-state artifact that is constrained by geography, it’s a zero-sum game.

Let’s take one simple example: personhood. Personhood is required for financial ownership. In order to own money, in order to control funds, in order to have a bank account, to receive a bill, to pay someone, you must be a person.

Bitcoin does not require personhood. A software agent can own money. A piece of software can be autonomously controlling money without any human intervention. This is completely unheard of in the history of man. We have never seen what happens next.

Today, the average person knows exactly the difference between an @ sign and a www, even though it’s a horrible design. Society learned the language of the internet because it was valuable enough to learn the language of the internet.

Money is a content type, and we just wrenched it free from the medium. The medium has been a series of interconnected networks that segregate money by size and recipient. We have payment networks for small money. We have payment networks for large money. We have payment networks for fast money. We have payment networks for slow money. Payment networks for businesses to pay businesses. Payment networks for governments to pay governments. Payment networks for consumers to pay businesses. Payment networks for consumers to pay consumers. Oh wait, we don’t really have those. We don’t have payment networks for consumers to pay consumers. We don’t have payment networks to do small payments because the traditional medium does not allow that range of expression. I cannot send you 20 cents across the world, from one individual to another individual, because the medium constrains the message. The cost of production does not allow me to express that range of transactional expression.

What you see on the surface — the transactions — are just constructs. They’re a specific way of mashing up the elements that creates something that kind of looks like a bank. Which is great because if you’re new to bitcoin and someone tells you, "Well, there is an account, a sender, and a receiver,” you think, Okay, I understand this. Then you learn that you have a wallet, but your wallet doesn’t have coins, it has keys, and those keys could be copied, and now you’re thinking, You’re losing me. This doesn’t quite match my experience. Things get complicated because bitcoin isn’t what you think it is. It’s a platform. It’s not a payment network. It’s not a currency. It’s not a banking system. It’s a platform that guarantees certain trust functions. If you happen to have a platform that guarantees certain trust functions, one very useful application for that is to build a currency and a payment network, but you can build more things.