Money as a System of Control – Andreas M. Antonopoulos (Video & Transcript)

Below is a video and transcript of one of Andreas Antonopoulos’ most powerful speeches “Money as a System of Control” , unedited, and transcribed in full. This talk took place at the Advanced Digital Innovation Summit on September 12th 2017 in Vancouver, Canada. You can support Andreas at https://antonopoulos.com/

Money as a System of Control -TRANSCRIPT

Andreas: “The topic of today’s talk is an interesting property of money that I want to explore with you, and I’m calling this one inside out. So, who here wants to tell me what the four properties of money are, what the four primary functions of a currency are? Anybody?”

Audience Member: (Inaudible)

Andreas: “Medium of exchange. Yes, that’s one.”

Audience Member: (Inaudible)

Andreas: “Store value, that’s two.”

Audience Member: “Fungibility”

Andreas: “Yeah, that’s not a use case for money, but it’s a property. Two more.”

Audience Member: (inaudible)

Andreas: “Units of account. Very good. What’s the fourth one? System of control. What? I don’t remember reading that. System of control.

It turns out we’ve had money for thousands of years, potentially tens of thousands of years. It’s really hard to tell how far back money goes, but the money we have today is very different from the money we have in the past, because something changed in the last 50 years that has fundamentally altered the course of money, of currency, of this system, of communicating value to other people.

We have the three components: medium of exchange, unit of account, and store of value. Those have been around for millennia. And then something happened. In 1970, Richard Nixon signed the Bank Secrecy Act and turned money into a system of control, the system of control that attempts to use money as a political tool in order to control who is able to send and receive it, who they are able to send money to, and aims ultimately to the complete surveillance of all financial transactions worldwide. Complete, total, totalitarian, financial surveillance.

This change 50 years ago has gradually percolated through every country in the world, every financial service in the world, every bank in the world. In 1970, Richard Nixon deputized the financial services fields to turn them into a branch of law enforcement, law enforcement beyond borders, law enforcement beyond jurisdictions, and most importantly, law enforcement beyond due process, beyond political and democratic control, beyond recourse.

A cop can confiscate your money. A judge can sign a warrant to freeze your accounts. And a bank can do both of those things without any authorization from anyone, and there’s nothing you can do about it. And this applies worldwide.

Money as a system of control supersedes all other functions of money. When money is turned into an enforcement tool, the other functions start getting eroded. It is no longer the best medium of exchange, because its function as a medium of exchange is subordinate to its function as a system of law enforcement, a system of control, and at that point, the system of control aspect starts corrupting everything.

We are now 25 years into the internet revolution. Smartphones, cellphones, dumb phones, data connections have propagated out to more than two and a half billion people who have never had these technologies before.

Where’s finance? Lagging, 15 to 20 years behind. It does not reach. Two and a half billion people completely un-banked, four billion people under-banked. Really, only a billion and a half people have the full, privileged elite form of banking that we enjoy in most western liberal democracies, and even there, there are tiers of access and control.

How many people in this room are accredited investors? What a lovely bunch. That puts you in the one-tenth of one-tenth of one-tenth percentile of the world. There are tiers within the financial system, some people who have better access, some people who have better recourse and some people who have complete immunity.

Some people can commit crimes against millions. Robo foreclosures, libor fraud, rigging the gold markets, and no one will ever go to jail. Why? Because when money becomes a system of control, financial services companies become deputies in this system of enforcement and control, and as deputies they get some perks, and one of the perks is they never go to jail.

Well, with a few exceptions. There are some fundamental rules that always apply to our society. Bernie Madoff went to jail. He made the fundamental mistake of stealing from rich people. Don’t do that. Foreclose on 10 million poor people, no problem. Create three and a half million fake accounts in Wells Fargo. No problem. Lose 143 private records of individuals at Equifax. Let’s see some bets. How many executives are going to jail?

A system of control corrupts the very basis of money until it can no longer function as a medium of exchange, and it breeds economic exclusion. We are now 25 years into the era of the internet and we are reaching fewer people with economic inclusion. We’re actually backtracking historically, because increasingly entire countries are being cut off from the world financial system.

You don’t act in the best interests of the United States, you lose your SWIFT code. You are no longer part of the wire transfer network. You submit to the jurisdiction, the universal jurisdiction of American courts, like Switzerland had to do, or you lose access to international banking. You lose access to the reserve currency. You lose access to the lifeblood.

This devil’s bargain has made financial services unassailable from a point of competition. They are surrounded by a thicket of regulations and these regulations are not about consumer protection. Consumers are most certainly not protected. They are most certainly about the system of control of money. They are about the law enforcement and policy enforcement and sometimes straight up politics enforcement that comes with money. Money does not flow freely.

I have some bad news. Those gold bars surrounding the banks and protecting them from competition are a gilded cage, a cage that keeps them inside a system of regulation that prevents competition from the outside, but also prevents them from acting with innovation in free markets, expanding their business, unless they make all of that subordinate to assist them of political control.

Store of value no longer works. You cannot store value in a currency that can be confiscated at whim, frozen by any banker at any point in time. That is not a stable store of value. You cannot use it as your currency reserve to buy oil with as your foreign exchange reserve if you’re a country, because if you cross the superpowers, they will cut off your access and you will not be able to use oil.

You cannot use money as a medium of exchange if you cannot exchange it freely with whoever you want, and gradually the corruption spreads and spreads and spreads. And now something new arrives on the horizon, a system of money that works on the network that is first and foremost a medium of exchange, a store of value, and one day potentially as unit of account. But will never become a system of control. It refuses to become a system of control.

In fact, its design principle is neutrality, openness, borderless access, censorship resistance, and now the banks can’t play in that space. They’re stuck inside their gilded cage playing cop to the world’s superpowers, offering economic services to a tiny fraction of the human population, sacrificing four billion people on the altar of poverty in order to create a nice, fake, bourgeois sense of security among the middle class by selling them lies.

FDIC: don’t worry. Your money’s insured. Right? How many people here have FDIC or equivalent insurance on their bank accounts? How many Greeks do you think had insurance on their bank accounts? All of them. What happened to that? Poof, in one afternoon. Vanished. 20% haircut. Who’s insurance? Does it insure you or does it insure banks? And what does it insure against? Small failure, not big failure. Big failure, uninsurable.

How many of you have money in banks? None of you have money in banks. I mean, please, you’re lawyers. You understand. Many of you are lawyers here, right? It’s not your money. You have an account which is a legal construct that they give you in exchange for giving them an unsecured loan of your money so that they can finance credit to their customers. You don’t own legally any of the money that’s in your account. You have a legal construct that possibly, maybe, entitles you to withdraw at the pace that they want unless you cross the wrong person, go to the wrong protest, associate with the wrong organization, vote for the wrong party.

Sure. Maybe that’s not happening in Canada, but out of 194 countries, this model of turning money into a system of control has taken off like wildfire, because it’s every dictator’s wet dream, because it ensures that political descent can be snuffed at the bank very effectively.

It is one of the most effective systems of control that exists and now it has to face competition from a system that will not do that, that cannot be made to do that, that will not yield, that will not be co-opted. And what’s the response? Ha, Bitcoin’s a joke. Cryptocurrencies, they’re outside the system. Nobody wants to be outside the system. Guess what? There’s six billion people out there. They don’t want to be outside the system. They’d much rather be inside, but they haven’t been invited and they probably won’t. And many of them can’t do the things that are necessary to be invited into the system.

And guess what? There’s an entire generation that has now discovered the two forms of power that come to people. First form is voice, and the second form is exit. You either speak up with your voice, express your political will and force change, and when that doesn’t work, you get to the second most important power that all humans have and that’s exit.

Now, borders have been erected for millennia to prevent exit, to slow down exit. You can’t easily emigrate, opt out, colonize, depart, exit. But what happens when exit is not a physical act but a virtual act? What happens when people decide to exit from the financial system in a virtual way? Brexit. Bitexit.

You can keep the inside of the gilded cage. It is demographically stagnated, it’s over-leveraged, it’s swimming in debt, it’s out of control and it serves a tiny sliver of the population. You can keep it. An entire generation of millennials no longer believes in that fiction of bank security, of future possibility, of deferred earnings, of interest rates, of mortgages. They will exit. They are exiting in droves, not just here, even more so in the countries where the existing system of inside finance of the system of control is used despotically, is used oppressively.

China is exiting in droves and it’s barely started. Bitcoin’s been around for nine years, and so what does the insider group do? What do the regulators do in response to assist them that cannot be regulated? They regulate the bits they can. They regulate the exchanges, they regulate the bank accounts, they regulate the national currency side of things. They shut down the on-ramps and off-ramps. They say, “We will not let you take your money with you.”

And what do millennials say to that? “Dude, I don’t have any fucking money. All I have is my creative potential, my spirit, my productivity, and I can sell that directly for Bitcoin without an exchange, without an on-ramp, without an off-ramp. And when I need to buy something, I’ll use my digital currency directly without reentering your system to which I was never invited. Shut down the on-ramps, shut down the off-ramps and I will stay on board. I will stay digital. I won’t touch your gilded cage anymore because I don’t need you. I exit.

Thank you.”

END

The Beginners Guide to Buying Bitcoin using the Square Cash App

Setup a Cash App account and start buying Bitcoin today!

This is the exhaustive guide for buying Bitcoin using the Square Cash app. We will go over each step and what you’ll need to do. Note, this has a know your customer (KYC) process that gets pretty involved, so be ready for that. Also, if you’re new to Bitcoin, it’s advisable that you should transfer your Bitcoin to a hardware wallet, such as a Ledger Nano X, or some other non custodial wallet. You can learn more about that with a quick google search, but this tutorial is just to get you started with buying Bitcoin so let’s get started!

(This was written as of 9/15/2019, Use this app at your own risk!)

Step 1: Download Square Cash app from App Store or Play Store

For this step, be sure you’re downloading the correct app, as of now it looks like:

Step 2: Provide Your Phone Number or email Address

Step 3: Verify The Code sent to your phone number or emial

Step 4: Add Bank Information Using Debit Card

Step 5: Enter first and last name

Step 6: Create Cashtag $

Step 7: On the welcome screen, click the icon on the top left

Step 8: (optional) Invite Friends to use Cash app

Step 9: On the Cash App accounts screen click on the BTC Bitcoin icon

(Optional) To earn $5 you can use my referral code SCLSXPK after clicking on the upper left icon, on the account screen scroll down to Referral Code and enter SCLSXPK

Step 10: At the Cash App Bitcoin account screen click on ‘Buy’

Step 11: (optional) add Face ID

Step 12: Verify first and last name

Step 13: Add your date of birth

Step 14: add the last 4 of your SSN

Step 15: Scan your ID

Step 16: You’ll need to scan both sides of your Drivers License

Step 17: Authorize the bank you’d like to buy Bitcoin with

Step 18: Back at the Bitcoin screen, enter the amount of BTC you’d like

Step 19: Verify ID (follow prompts)

Step 20: You’ll receive a verification Text

Step 21: Verify amount and click Confirm

Step 22: You’ll see the ‘You purchased’ prompt

Step 23: Enable Bitcoin Withdraws for Cash App

Step 24: More KYC for withdraws (only need to do this once)

Step 25: Select ‘reason’ you use Bitcoin (doesn’t matter)

Step 26: Enter main source of income

Step 27: Select employment status

Step 28: Enter job title

Step 29: Enter name of employer

Step 30: Take a selfie

Step 31: You should receive this prompt

Step 32: Once Cash App verifies you, you’re able to withdraw Bitcoin!

Step 33: Go back to your Bitcoin Wallet in the Cash App

Step 34: If you choose to withdraw, you can do so now

Step 35: After selecting withdraw amount,you can send to address by scanning QR code, or copy/paste the destination address

That’s it, You can now use the Cash App to Buy/Sell Bitcoin!

Learn more about The Distillery

The Significance of Bitcoin, Part 2: Proof of Work & Immutability

What Makes Proof of Work Important?

It’s set in stone. The idiomatic expression ‘set in stone’ or ‘written in stone’ have come to signify permanence, unchangeable, absoluteness, and immutability. The best way to conceptualize Proof of Work is to look at examples from the ancient world. The most recognizable records of human history that come to mind are often massive stone architectures such as the Pyramids of Egypt, the Great Wall of China, Machu Picchu, the Aztec Temples at Teotihuacán, and so forth. These structures embody immutability, these structures are Proof of Work. They required massive amounts of man hours, labor, design, and engineering to complete.

Machu Picchu
The Great Wall
Teotihuacán
The Pyramids of Egypt

These monuments go beyond great structures, they’re also systems of record. It’s no surprise they’re considered important historical artifacts. They signify the greatness of their respective cultures, and often within they contain the cultural history, etched in hieroglyphics, characters, sculptures, and depictions, carved into the edifice. Immutability of this record comes from the fact it would be nearly impossible to re-create or rewrite the history without massive proof of work or evidence of tampering.

Proof of Work in the Digital Age

So, if few things in human existence can truly be considered ‘immutable’ how does this extend to the modern era? In Bitcoin’s case, how do you create an immutable, decentralized, open, borderless, neutral system of money and economic model?

Bitcoin indeed solves this. The Bitcoin blockchain, the immutable system of record, cryptographically secured, backed by a massive distributed network of computation is a digital monument of immutability. Let’s have a quick look into how this works.

Securing the Bitcoin Network

At the heart of Bitcoin’s Proof of Work is the SHA-256 cryptographic hash function. This standard encryption method is what the miners of the Bitcoin network use to compete with each other to construct the next block in the chain by finding taking the ‘header’ of the current block, and finding the ‘nonce’ a random number that when found by a miner, produces a unique deterministic fingerprint of the next block, and the only way to do this is brute forcing SHA-256 calculations using massive computation.

To get an idea of how competitive bitcoin mining has become, there exists across the globe, massive warehouses, full of ranks and rows of specialized mining computers that do nothing but perform SHA-256 as quickly and as efficiently as possible using special ASIC (Application Specific Integrated Circuit) chips.

BTC mining — Bitcoin Mining Warehouse – Source ieee.org

Transactions & Mining on Bitcoin

When a Bitcoin transaction occurs, as in moving any amount form one address to another address, regardless of who controls it, the following process as seen below in Fig. 1 occurs. First, the sender authorizes the transaction, and broadcasts it to the bitcoin network consisting of mining nodes and full nodes. Mining nodes are also full nodes, but full nodes are not always mining nodes. These transactions get added to the memory pool (mempool) and await validation from nodes. The miners then add the transaction to the candidate block they are constructing and if they find the nonce of the candidate block they create the cadidate block (with or without transactions) and broadcast to the other nodes on the network. All the other nodes confirm the transaction to verify that the consensus rules have been followed and the candidate block gets added to the blockchain.

Fig.1 Bitcoin Mining Process – Source tech.eu

But, this fully doesn’t explain the security of the Bitcoin network. If miners are the validators of the transactions, then anyone owning enough miners could potentially subvert the Blockchain, also known as a 51% attack. Intuitively, Bitcoin’s Proof of Work algorithm prevents this. It is algorithmically designed so that it takes the miners, on average, 10 minutes to ‘mine’ a single block.

The massive compute power and randomness required to obtain the nonce prevents having rogue miners fully control the Bitcoin blockchain. The nonce difficulty is dynamically adjusted so that approximately every two weeks, the network checks how fast the miners have worked. If they’ve mined blocks faster (or slower) than expected, the network then automatically modifies the difficulty of the Proof of Work and increases/decreases it to keep the 10 minute block time.

Cutthroat Competition Keeps Bitcoin Secure

Due to the competitiveness of proof of work mining, if a miner finds a nonce for a block it may very well be that another miner has also found the nonce at the same time. During this ‘fickle’ time, as multiple mined blocks propagate throughout the network, only one will survive, the block with the longest chain. Furthermore as a safeguard preventing miners from quickly dumping its newly minted bitcoin before determining the longest chain, the algorithm dictates that the miner cannot spend it’s Bitcoin reward for 100 blocks, and as Andreas Antonopoulos explains:

When you earn a reward check for mining a block, you can’t spend that for 100 blocks. Why? Because for one block, history is fickle, right. After 100 blocks, if your transaction is still in the chain, it is history, right. Think about the Bitcoin blockchain as geological strata. You’re drilling a core sample in the ice in Antarctica, the top ten centimeters are slush, they come, they go, they melt, the wind blows, stuff around, you can’t tell anything. You go three meters down, you’re looking at 100 years of history and that layer hasn’t moved in 100 years. You go 300 meters down and you’re looking at the Cretaceous era and that millimeter thin layer hasn’t moved in millions of years at all. And the way that happens is because layers get deposited on top and compacted. And the deeper they are, the harder it is to change them. Bitcoins consensus algorithm creates a geological history if you like. At the top, the winds blowing and things are very fickle. You go 144 blocks down which is one-day old, the probability of a block changing after 144 confirmations is vanishingly small.
Consensus Algorithms, Blockchain Technology and Bitcoin UCL – by Andreas M. Antonopoulos

Immutability as a Service

This game theoretical model is the heart of Bitcoin, this gives it it’s immutability, the effort involved to launch a 51% attack on the Bitcoin network is exceedingly difficult, and due to the cumulative mining effect, the network gets stronger with every block. Without proof of work it is impossible to modify or change data that is embedded in the Bitcoin network.

An open, global, neutral, immutable, censorship resistant, store of value is a killer application. Asset forfeiture, unlawful seizure, This goes beyond individual stores of value. Where it really gets interesting is that Bitcoin enables the ability of nation states to avoid financial and economic sanctions. This is a game changer. Powerful nations can no longer use sanctions as a weapon.

Governments will try (and fail) to Sanction Bitcoin Addresses

Source:https://home.treasury.gov/news/press-releases/sm556

More than anything, the above effort was more of a symbolic gesture, to deter the use of cryptocurrency. Since state actors only can use legislation to try to stop the use, and not actually destroy Bitcoin. Without valid Proof of Work, there really is no way to stop Bitcoin, and even then, Bitcoin is more than resilient to attack, due to it’s Anti-Fragile properties. We will discuss this in an upcoming blog, so stay tuned!

Additional Information on Proof of Work

For an excellent explanation of how mining works see Chapter 6 of this guide .

The Significance of Bitcoin, Part 1: Stealing Fire from the Gods

94,504 bitcoin were moved today in a transaction. That’s $1,000,000,000 transfered[sic] for a $700 fee. No government, bank or third party had to verify the transaction, nor could they have stopped it if they wanted to. The true power of bitcoin. 🔥
@Rhythmtrader

Think about that for a second. In an age of financial surveillance, regulations, KYC, global trade wars, negative interest rates, and speculative bubbles, a massive and more importantly, unstoppable move of capital was conducted peer-to-peer with no intermediary, no government, no bank, and we really don’t know who or what conducted the transaction. This is the age of digital currency, this is the future of finance, this is the significance of Bitcoin.

You can view the bespoke transaction here.

In this series, we take a look at the technological significance of the Bitcoin protocol. Invented in 2008 and introduced in 2009 under the pseudonym Satoshi Nakamoto, Bitcoin has emerged from the fringes of the cypherpunk movement to become an unstoppable force in technology and finance.

Prometheus and the Gift of Fire

By Heinrich Füger – [1], Public Domain, https://commons.wikimedia.org/w/index.php?curid=175869

According to Greek Mythology, Prometheus took pity on man’s primitive and fragile state, and stole fire from Hephaestus’s workshop on Mt. Olympus and gifted it to mankind. Prometheus also taught man how to use this newfound technology, ushering great advances is science and metalworking.

Outraged by Prometheus’ theft, Zeus bestowed punishment by having Prometheus chained to a rock and having an eagle devour his liver, to perpetuate suffering, the liver regenerated nightly so the eagle would also return to torment Prometheus.

So how does Bitcoin fit into this? Andreas Antonopolous describes:

“Satoshi is Prometheus. He took money from the banks and gave it to man, and now there’s no taking that back. Once you have knowledge, knowledge is eternal.”
Andreas Antonopoulos – Melbourne Bitcoin Technology Center, 2016

Privacy and Disintermediation

Looking at the privacy model of Bitcoin and you’ll quickly notice efficiencies straight away. Bitcoin eliminates the need for Trusted Third Parties, and Counterparties.

Bitcoin Privacy Model “Bitcoin: A Peer-to-Peer Electronic Cash System”, Satoshi Nakamoto

Rethinking the Concepts of Money

On its surface, Bitcoin appears to have many of the attributes of traditional currencies and stores of value with the obvious advantage that it has no ‘physical form’ and thus no need for storage. Digging further, you’ll notice it’s much more than this.

From a very high level, all Bitcoins are ‘stored’ in virtual addresses only accessible via private/public key keypairs. Software known as ‘wallets’ serve as the user interface for transferring value from address to address. New Bitcoins are created using a Proof of Work process called ‘mining’ where computers try to solve mathematical equations to earn whats called a ‘block reward’ where every 10 minutes new Bitcoins are created on an algorithmic schedule. These newly minted bitcoins are either held by the miner, traded for goods or services, or sold on a exchange for cash.

Now if you’re new to Bitcoin, this may seem like a lot of jargon. Don’t worry if you don’t understand it right away! The important part of this is that anyone, anywhere in the world at any time can without trust, personal identification, credit worthiness, conduct commerce or send value for any reason, regardless of race, color, creed, religion, or even sentience (addresses can belong to software programs!).

Bitcoin Clearing & Settlements

One of the most important features of Bitcoin is the manner in which it eliminates certain counterparty risks associated with monetary exchange. Bitcoin transactions are cleared in near real time on a global basis, as they are made. Until now, this was impossible with the current financial infrastructure. To do this with traditional financial instruments, the only true way to really do this is to physically trade currency for goods and services. And no, PayPal and Venmo, and other such services don’t count, as they are not technically settled instantly, nor are they final!

With the introduction of Bitcoin and other cryptocurrencies, you’re able to create a immutable financial arrangement on a peer-to-peer basis between any two entities, anywhere in the world. You are transferring value over the internet, peer-to-peer, in a trust-less fashion, where the transfer of coins from address to address are rearranged when the transaction is confirmed on the bitcoin ledger which is known commonly as “the blockchain”.