The future of money | Neha Narula


I want to tell youabout the future of money.

Let's start with a storyabout this culture that lived in Micronesiain the early 1900s, called the Yap.

Now, I want to tell you about the Yap because their form of moneyis really interesting.

They use these limestone discscalled Rai stones.

Now, the Yap don't actuallymove these Rai stones around or exchange them the waywe do with our coins, because Rai stones can getto be pretty massive.

The largest is about four tonsand 12 feet across.

So the Yap just keep trackof who owns part of what stone.

There's a story about these sailors that were transporting a stoneacross the ocean when they ran into some troubleand the stone actually fell in.

The sailors got back to the main island and they told everyone what had happened.

And everyone decided that, actually, yes, the sailors had the stoneand — why not? — it still counted.

Even though it wasat the bottom of the ocean, it was still part of the Yap economy.

You might think that thiswas just a small culture a hundred years ago.

But things like this happenin the Western world as well, and the Yap actually still usea form of these stones.

In 1932, the Bank of Franceasked the United States to convert their holdingsfrom dollars into gold.

But it was too inconvenientto think about actually shipping all of that gold over to Europe.

So instead, someone went to wherethat gold was being stored and they just labeled itas belonging to France now.

And everyone agreedthat France owned the gold.

It's just like those Rai stones.

The point I want to makewith these two examples is that there's nothinginherently valuable about a dollar or a stone or a coin.

The only reason these thingshave any value is because we've all decided they should.

And because we've decided that, they do.

Money is about the exchangesand the transactions that we have with each other.

Money isn't anything objective.

It's about a collective storythat we tell each other about value.

A collective fiction.

And that's a really powerful concept.

In the past two decades, we've begun to use digital money.

So I get paid via direct deposit, I pay my rent via bank transfer, I pay my taxes online.

And every month, a small amount of moneyis deducted from my paycheck and invested in mutual fundsin my retirement account.

All of these interactions are literally just changing1's and 0's on computers.

There's not even anything physical,like a stone or a coin.

Digital money makes itso that I can pay someone around the world in seconds.

Now when this works, it's because there are large institutionsunderwriting every 1 or 0 that changes on a computer.

And when it doesn't, it's often the faultof those large institutions.

Or at least, it's up to themto fix the problem.

And a lot of times, they don't.

There's a lot of friction in the system.

How long did it takethe US credit card companies to implement chip and pin? Half my credit cardsstill don't work in Europe.

That's friction.

Transferring money across bordersand across currencies is really expensive: friction.

An entrepreneur in Indiacan set up an online business in minutes, but it's hard for herto get loans and to get paid: friction.

Our access to digital moneyand our ability to freely transact is being held captiveby these gatekeepers.

And there's a lot of impedimentsin the system slowing things down.

That's because digital moneyisn't really mine, it's entries in databasesthat belong to my bank, my credit card companyor my investment firm.

And these companieshave the right to say "no.

" If I'm a PayPal merchant and PayPal wrongly flags me for fraud, that's it.

My account gets frozen,and I can't get paid.

These institutions are standingin the way of innovation.

How many of you useFacebook photos, Google Photos, Instagram? My photos are everywhere.

They are on my phone,they're on my laptop, they're on my old phone,they're in Dropbox.

They're on all these differentwebsites and services.

And most of these servicesdon't work together.

They don't inter-operate.

And as a result, my photo library is a mess.

The same thing happens when institutions controlthe money supply.

A lot of these servicesdon't inter-operate, and as a result, this blockswhat we can do with payment.

And it makes transaction costs go up.

So far, we've been throughtwo phases of money.

In an analog world, we hadto deal with these physical objects, and money moved at a certain speed –the speed of humans.

In a digital world, money can reachmuch farther and is much faster, but we're at the mercyof these gatekeeper institutions.

Money only moves at the speed of banks.

We're about to enter a new phase of money.

The future of money is programmable.

When we combine software and currency, money becomes morethan just a static unit of value, and we don't have to relyon institutions for security.

In a programmable world, we remove humansand institutions from the loop.

And when this happens, we won't even feel likewe're transacting anymore.

Money will be directed by software, and it will just safely and securely flow.

Cryptocurrencies are the first stepof this evolution.

Cryptocurrencies are digital money that isn't run by any government or bank.

It's money designed to workin a world without intermediaries.

Bitcoin is the most ubiquitouscryptocurrency, but there are hundreds of them.

There's Ethereum, Litecoin,Stellar, Dogecoin, and those are just a fewof the more popular ones.

And these things are real money.

The sushi restaurant down my street takes Bitcoin.

I have an app on my phonethat I can use to buy sashimi.

But it's not just for small transactions.

In March, there was a transactionthat moved around 100,000 bitcoins.

That's the equivalentof 40 million US dollars.

Cryptocurrencies are based ona special field of mathematics called cryptography.

Cryptography is the studyof how to secure communication, and it's about tworeally important things: masking information so it canbe hidden in plain sight, and verifying a pieceof information's source.

Cryptography underpinsso many of the systems around us.

And it's so powerful that at times the US government has actuallyclassified it as a weapon.

During World War II,breaking cryptosystems like Enigma was critical to decodingenemy transmissions and turning the tide of the war.

Today, anyone with a modernweb browser is running a pretty sophisticated cryptosystem.

It's what we use to secureour interactions on the Internet.

It's what makes it safe for usto type our passwords in and to send financialinformation to websites.

So what the banks used to give us — trustworthy digital money transfer — we can now get with a cleverapplication of cryptography.

And this means that we don'thave to rely on the banks anymore to secure our transactions.

We can do it ourselves.

Bitcoin is based on the very sameidea that the Yap used, this collective globalknowledge of transfers.

In Bitcoin, I spendby transferring Bitcoin, and I get paid when someonetransfers Bitcoin to me.

Imagine that we had this magic paper.

So the way that this paper worksis I can give you a sheet of it and if you write something on it, it will magically appearon my piece as well.

Let's say we just give everyone this paper and everyone writes downthe transfers that they're doing in the Bitcoin system.

All of these transfers get copiedaround to everyone else's pieces of paper.

And I can look at mine and I'll have a list of allof the transfers that are happening in the entire Bitcoin economy.

This is actually what's happeningwith the Bitcoin blockchain, which is a list of allof the transactions in Bitcoin.

Except, it's not done through paper.

It's done through computer code, running on thousandsof networked computers around the world.

All of these computersare collectively confirming who owns what Bitcoin.

So the Bitcoin blockchainis core to how Bitcoin works.

But where do bitcoins actually come from? Well, the code is designedto create new Bitcoin according to a schedule.

And the way that it worksis that to get those Bitcoin, I have to solve a puzzle –a random cryptographic puzzle.

Imagine that we had 15 dice, and we were throwing these diceover and over again.

Whenever the dice come up all sixes, we say that we win.

This is very close to what these computersare all actually doing.

They're trying over and over againto land on the right number.

And when they do, we say that they've solved the puzzle.

The computer that solves the puzzle publishes its solutionto the rest of the network and collects its reward: new bitcoins.

And in the act of solving this puzzle, these computers are actuallyhelping to secure the Bitcoin blockchain and add to the list of transactions.

There are actually peopleall over the world running this software, and we call them Bitcoin miners.

Anyone can become a Bitcoin miner.

You can go download the software right now and run it in your computerand try to collect some bitcoins.

I can't say that I would recommend it, because right now, the puzzle is so hardand the network is so powerful, that if I tried to mineBitcoin on my laptop, I probably wouldn't see anyfor about two million years.

The miners, professional miners,use this special hardware that's designed to solvethe puzzle really fast.

Now, the Bitcoin networkand all of this special hardware, there are estimatesthat the amount of energy it uses is equivalent to that of a small country.

So, the first set of cryptocurrencies are a little bit slowand a little bit cumbersome.

But the next generation is goingto be so much better and so much faster.

Cryptocurrencies are the first step to a world with a globalprogrammable money.

And in a world with programmable money, I can pay anyone else securely without having to sign upor ask permission, or do a conversion or worryabout my money getting stuck.

And I can send money around the world.

This is a really amazing thing.

It's the idea of permission-less innovation.

The Internet causedan explosion of innovation, because it was built uponan open architecture.

And just like the Internetchanged the way we communicate, programmable money is goingto change the way we pay, allocate and decide on value.

So what kind of worlddoes programmable money create? Imagine a world where I canrent out my healthcare data to a pharmaceutical company.

They can run large-scale data analysis and provide me with a cryptographic proof that shows they're only using my datain a way that we agreed.

And they can pay mefor what they find out.

Instead of signing upfor streaming services and getting a cable bill, what if my television analyzedmy watching habits and recommended well-priced contentthat fit within my budget that I would enjoy? Imagine an Internet without ads, because instead of payingwith our attention when we view content, we just pay.

Interestingly, things like micro-payments are actually going to changethe way security works in our world, because once we're better ableto allocate value, people will use their moneyand their energies for more constructive things.

If it cost a fraction of a centto send an email, would we still have spam? We're not at this world yet, but it's coming.

Right now, it's like we're in a worldthat is seeing the first automobile.

The first cryptocurrency,like the first car, is slow and hard to understandand hard to use.

Digital money,like the horse and carriage, works pretty well, and the whole world economyis built on it.

If you were the first person on your block to get a car with an internalcombustion engine, your neighbors would probablythink you were crazy: "Why would you wantthis large, clunky machine that breaks down all the time,that lights on fire, and is still slower than a horse?" But we all know how that story turns out.

We're entering a new eraof programmable money.

And it's very exciting,but it's also a little bit scary.

Cryptocurrencies can be usedfor illegal transactions, just like cash is used for crimein the world today.

When all of our transactions are online, what does that mean for surveillance –who can see what we do? Who's advantagedin this new world and who isn't? Will I have to start to pay for thingsthat I didn't have to pay for before? Will we all become slavesto algorithms and utility functions? All new technology comes with trade-offs.

The Internet brought usa lot of ways to waste time.

But it also greatlyincreased productivity.

Mobile phones are annoying because they make me feellike I have to stay connected to work all the time.

But they also help me stay connectedto friends and family.

The new sharing economyis going to eliminate some jobs.

But it's also going to createnew, flexible forms of employment.

With programmable money, we decouple the needfor large, trusted institutions from the architecture of the network.

And this pushes innovation in moneyout to the edges, where it belongs.

Programmable money democratizes money.

And because of this,things are going to change and unfold in ways that we can't even predict.

Thank you.


Source: Youtube

The future of money | Neha Narula

What happens when the way we buy, sell and pay for things changes, perhaps even removing the need for banks or currency exchange bureaus? That's the radical promise of a world powered by cryptocurrencies like Bitcoin and Ethereum. We're not there yet, but in this sparky talk, digital currency researcher Neha Narula describes the collective fiction of money — and paints a picture of a very different looking future.

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