Bitcoin has become known as the first electronic currency that can conveniently be transferred between individuals across the globe. For Andreas M. Antonopoulos, who has authored two books on Bitcoin, the digital money is not only about convenience. For him, it is most interesting for its fundamental political value.
iRights.Media: What is the main difference between Bitcoin and traditional banking?
Andreas M. Antonopoulos: Less than 20 percent of the population on this planet have a credit card. There are vast numbers of people who have no access to banking, and politics is a big reason for that, as well as access to technology. Bitcoin is network-based banking and it is decentralized; there is no company, no bank, no government. It is people-to-people, just like cash.
And I can have access to Bitcoins as soon as I have an internet connection?
Maybe even before. Often, you can also send and receive Bitcoin via text messaging. Probably the most well-known service is called Coinapult but there are many similar systems in use. They are not ideal though, because, in the case of SMS, you’re using a local intermediary and not interacting directly with Bitcoin. In the long run, what you really want to see are wallets that are directly controlling Bitcoin transactions on capable phones. With the current pace of technological development, smartphone prices will start to drop below 20 US-Dollar. So I think that is not a significant obstacle in moving forward. Facebook penetration is much greater than banking penetration throughout the developing world. Smartphone penetration is also greater than banking penetration, so we’re certainly achieving more with smartphones than with banks.
Against this backdrop, what do you think about the efforts of large banks that also try to incorporate blockchain technology into their business models in order to become more efficient?
I am really bored by them. What the big banks are doing with blockchain is marginal and incremental; because what they are building are centralized control systems based on blockchain technology, which is almost a contradiction in terms. Bitcoin is the internet of money and, just like the general internet, its power comes from the fact that it is global, public and open. To have a private blockchain makes as much sense as to have a private internet. It is something much less useful, much less interesting.
What is the problem with a centralized and private blockchain system?
First of all, you do not have the system of mutual, public surveillance that ensures against fraud in the Bitcoin system. And secondly, it concentrates power in the hands of banking institutions. We have seen that such power leads to corruption and profit motives that are contrary to the interest of the wider public.
If all Bitcoin transactions happen on a public ledger, isn’t that some sort of perfect surveillance architecture?
People will have the choice of making their Bitcoin transactions open and transparent. They can do so voluntarily, which is very useful for government organizations, non-profit organizations and other organizations that are accountable to the public. But, at the same time, people will have the choice of keeping their transactions private.
How is that possible in a public system?
At the moment Bitcoin is using pseudonyms to protect the identities of those who wish to remain anonymous, but there are a number of proposals to increase the privacy of Bitcoin transactions quite radically. I think we’re still seeing the very early stages of Bitcoin, not the final product. It’s continuing to evolve.
The production of new Bitcoins, or “Bitcoin mining”, today necessitates very powerful computers that perform sophisticated calculations. These computers are very expensive and not accessible to everyone. Isn’t that some form of power centralization, too?
This has indeed caused some centralization, but the production of new Bitcoins is limited and decreasing every year, which automatically diminishes the centralization effect; in other words, this problem is going to solve itself.
Why is the number of Bitcoins limited?
The final amount of Bitcoins is capped because the money intends to simulate a resource that is scarce and of limited supply, similar to the production of precious metals which are limited and, therefore, have a solid and sound foundation as a store value. It is based on a very different economic policy than most of the national currencies we see today.
Who decided to cap the final amount of Bitcoins and who would be able to uncap the amount? Who is in charge?
Nobody controls Bitcoin and there is no presidency of Bitcoin. There are companies that participate in the internet and there are companies that participate in Bitcoin but, like on the internet, there is no central point of power that provides any meaningful control. The controls that exist, the rules, by which Bitcoin operates, are encoded in software and in order to change the rules you need almost every single participant to agree to change the rules; the threshold is 95 percent. Given the fact that the cap on supply is one of the reasons that Bitcoin has value, it is extremely unlikely that you would get the entire population that owns Bitcoin to voluntarily reduce the value of their own currency.
How can states handle money laundering or donations to terrorists via Bitcoin?
There is nothing they can do. They cannot compromise the control structures of Bitcoin. Traditional regulators have no power over Bitcoin, and there are hundreds and hundreds of other currencies, some of them much more anonymous and designed to be much stealthier than Bitcoin itself. The illusion that crimes can be addressed through the control of their financing, and the idea that complete control over financing is something effective, desirable or even possible is now dead. Zeroing in on financing is just one of the means of addressing crime. Ultimately, we are going to have to think of better ways to organize our societies to deal with crimes.
However, traditional banks do cooperate with states and regulators. Is there a possibility that some of the block-chain versions of traditional banks might actually proliferate to the degree that they will remain the mainstream instead of Bitcoin?
No. Traditional banking is constrained by borders, regulators and the need to maintain control over end-to-end financing. It is now facing competition from currencies that do not have to play by those rules. Traditional banking cannot be global and open, it cannot be resistant against censorship, it cannot be neutral, and it cannot offer the economic means to fight exclusion throughout the world. That means that whatever they do, it will simply be a slow, insecure, and closed system necessarily limited in scope. And that can never compete against a neutral system that welcomes the four billion people in the world who have been left out by the banking system with open arms.
Is there one common misconception about Bitcoin that you would like to challenge?
The most common misconception is that Bitcoin is only used by criminals. However, in many countries, the banks are the criminals. If you trust the banks, it means you belong to a very small minority of the world population that has not yet been robbed by them. Most people in the developing world are quite familiar with this experience, and if, for example, Deutsche Bank goes down I think the Germans will learn the same lesson when their government bails out Deutsche Bank at the expense of the people. Bitcoin is not used by criminals; it is used by all the people who have repeatedly been betrayed by banks and governments in order to regain their political and economic freedom. That is the main reason why Bitcoin is popular. Criminals can use many other systems. The most effective bank for money laundering is HSBC, and they don’t support Bitcoin.
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