Hey listen, this is another rumour put out by
these videos
yeah yeah yeah yeah
It’s a signal that I saw as positive in
a real way
for the crypto world
I think, but I don’t know, tell me what you think,
these guys that work for Snap, effectively,
in the meantime developed a platform
that I think is called Forge, for Ethereum,
yeah,
with tools, analytics. I think they
initially started with analytics for smart contracts.
Okay, but what kind of data do they collect?
I have absolutely no clue.
Okay.
They announced it yesterday, because what really struck me
is that they work for Snap,
yeah,
and then they got together
and said, enough of this shit, you know,
let’s move to Ethereum, at a time
in which the market was saying “no, everything is collapsing”,
of course.
Do you see it as a positive sign?
It’s definitely an ecosystem
that is continuously evolving, so it also attracts
a lot of external interest from those in other sectors
in order to understand if there’s an opportunity
for them to get in on it. People look to apply
their own skills within this ecosystem,
and say okay, this blockchain system, this context
has highs and lows. When we have highs
-and they’re very fast – there’s an opportunity,
it could be the next big thing,
the internet, a new wave similar to that of the internet,
let’s see if I can assume a role within
this ecosystem. It’s the usual
talk of “no pain, no gain”.
Of course.
Those who dive in and see,
yes.
But how do you orient yourself, being a part
of this world.
How do you orient yourself in the sea
of news that says quite the opposite
and ranges from
“This is a bunch of bullshit” to those
say “hold on, this is the revolution of all revolutions”.
What are your sources, or your approach,
your framework for interpreting the
crypto world?
Usually there are many warning signs,
like buzzwords, that allow you to understand
if the person speaking really knows what they’re talking about,
if it’s a bluff
and likely something that doesn’t have legs.
Okay.
Having been in it
since 2012, so more than 6 years
in the ecosystem, I am able to understand which
know what they are
talking about and those that don’t,
so buzzwords are the easiest way to
filter them out.
Give me an example.
Let’s say that for example now there is all this talk
of holding elections
on the blockchain.
Everybody’s is asking me for my opinion, saying
“Thomas, I heard that
elections can be carried out on the blockchain,
and that we can hold them safely,
corruption, we can,
– elections – use transparency
– policies, – political elections,
yeah, naturally.
I’ll vote for Trump on the blockchain.
Exactly.
This resounds a lot as a hypothesis
because in the end you say, okay, let’s hold an election
on the blockchain, they told us that the blockchain will be safe,
transparent, we have solved the problem of corruption
and voter manipulation.
In reality, this is one of the biggest
misconceptions, one of the biggest
why?
fakes, false friends, false positives,
on the blockchain, in which one says:
“Ah, it makes sense”, it seems to make sense, but in reality,
when you look into it, you quickly understand that
it doesn’t make sense, at least at the moment.
So often already if someone shows up
saying, “Yeah, but cryptocurrencies”.
Why doesn’t it make sense?
It doesn’t make sense because
political votes, structured
in the traditional way, as we have them today
not even digitally,
they are the result of various interactions,
they have reached their current status after
various improvements, attempts, errors, etc.
Switching to blockchain means making a
process transparent, but forgetting that the context is different.
So what does this mean? Let’s look at an example.
We have a vote, and we must make sure
that each person can vote only once.
Yes.
On the blockchain, that means identifying the person voting.
Okay, so if we have Marco, who
goes on the blockchain and decides to vote for Trump,
for example.
Which is exactly how I would have voted.
I figured.
Donald.
Exactly, we decide that
instead of a Kitty crypto, there is a Donald crytpo.
For example, you could say:
“Yeah, come on, let’s vote for Trump”, you, technically,
you could cast that vote. But how do we make sure
You don’t vote one hundred times,
pretending to be one hundred different people.
On the blockchain, this is not possible
without a disclosure, publishing your
identity to the world. And you do not want to let the world know
that Montemagno voted for Trump.
Right.
Otherwise it becomes really easy
to bribe you or essentially
pay you and make sure that you actually have
voted for the person for whom you were paid to vote.
Of course.
This is a huge problem in terms of privacy,
it’s fundamental, and it is for this reason that votes are secret.
On the blockchain, this is lost; even though
there is transparency, which is what you want in the process,
you lose the anonymity and privacy of your vote.
So this is one of big problems
that has yet to be resolved as regards voting on the blockchain
there are cryptographers
like Matthew Green,
who are among the most famous in the world,
that continue to hammer the community
on Twitter, saying, “guys, this talk about voting
on the blockchain doesn’t have legs from any point of view.”
So it’s something that can be sold
very easily as an idea, because it seems great.
But then
in the end reality hits, and you say, okay,
in reality it’s not possible to do this safely for now,
we don’t have the technology. We don’t have certain components.
And you have sources of information that you keep up to date on,
like, I don’t know, I have my technology feed,
there are some people, some media outlets that
I follow because I know what they are. What are yours, or which
would you recommend?
To date, the blockchain community
remains very small, so we have an expansion
of start-ups, but there are still very few key people that are driving
the development of the ecosystem.
In the past there were specific forums,
they were a bit more difficult to find.
Now I´d say that social platforms,
even Twitter, offer
important opinions, and they´re expanding
the ecosystem in a significant manner.
I follow many different people.
Matthew Green is one; he not only
works on the blockchain, he also works on the blockchain,
he’s a cryptographer, so
he works on one of these building blocks that
comprises the blockchain and it always brings us a little
closer to reality. He’s someone who believes in the blockchain
up to a certain point, and that is also important for someone who
believes in it so much, to discuss it with those
who think otherwise. Or whoever has dedicated
all of their life to such complex issues, not everyone
is capable of understanding it. So what do you do? Do you go follow
the expert and ask, okay, this is what the expert says,
what does the expert think of this use case?
He clearly is not a sales expert,
he is not a product expert, he is a technology expert,
so he can only answer certain types of questions.
I really like this approach,
I saw him in an interview with Brian Cox, the astrophysicist.
We talked about it beforehand, and
I really liked his approach, which is an approach
where he does not try to be right, he tries to understand
the truth. Clearly he must say, okay,
what is the origin of the world? And the interesting thing
is that his approach is, I’ll do all of the experiments
imaginable, then, when it seems like,
when I cannot contradict this experiment,
I’ll put it out to the public, and look externally
to find someone who says,
“Look, what you said is bullshit”, and if anyone says this,
I am happy because at least it brings me closer
to the truth. Sometimes in the crypto world I instead see
people looking to be right or convince you
either that it is a bubble or its fucking awesome.
But there are only a few that dig into it
to say, okay, but what is its real application,
true, useful.
In actuality, the truth is that we do not know yet.
It’s like saying, let’s try to take a step back,
pardon me for the usual comparison
with the internet, however, it is also fitting this time.
If at the beginning of the 90s we had asked,
what will be the use case that will make the internet
that will bring the internet to everyone’s home?
Probably the answer in the early 90s or mid 90s
would have been email.
What is the until now a tool on the internet that everyone uses,
email. Then there are other interesting components,
social media, etc. More recent.
But email remained, so even in the blockchain
we already have the initial elements.
I’ll give you data on email that really struck me,
that people move house more easily than
they change their email.
This is of interest.
It is absolutely the most widespread tool,
in absolute.
It’s one of your identities, a digital identity,
just like your Facebook profile.
Despite everything we have said, email is dead
for a lifetime.
It’s dead, it’s dead, it’s dead,
but it’s still there.
Exactly. Right.
And we think it will disappear like the fax machine.
So, even on the blockchain we have
cases of use that are already seen. Like crypto currencies,
Bitcoin, which allow you to have certain properties
on money. There is also crowd funding, like ICOs
or new tokens that are being created, and so on.
But we still don’t know which will be the
main one in 20 years.
We do not know which technological aspect
will render it essential.
It is an assumption that is made by those
who have been working in it for a while, they see the potential,
they say, there are some interesting features,
we think that these features can
help people and our society.
How? In various ways, what is the most relevant?
Right now it’s difficult to know.
Let’s try to keep two hypotheses in mind,
one the opposite of the other. Hypothesis number one,
is that the blockchain world evaporates.
It no longer exists, it was a fleeting
trend.
Hypothesis number two, rather, is that it is part of
new protocols that we use, such as
http.
Which of the two hypotheses seems
more likely to you, I know, but why
and what must take place to go in one direction
or the other?
Clearly if we are having this conversation
it’s also because I believe that the blockchain may have
a very important role. But as we also said
not long ago, it is very interesting to discuss it with those who think
otherwise, to see how the assumptions differ.
Now you start from different assumptions,
from a different general opinion on
what its interesting features
or utility for society may be. Or a lack
or without a company, then you say okay, accordingly
I think the blockchain has a role or does not have a role.
For me, one of the key factors is that of saying that,
regardless, the blockchain solves a problem of trust,
which in my opinion, exists.
Trust in the counterpart.
And in the moment in which you work
or spend an increasingly amount
of your time on the internet, the counterpart
is usually always a person that you don’t know,
or someone that you see on a daily basis.
So there is a problem of trust with all people
and services, companies, with which you interact on the internet
on a daily basis. The blockchain helps you to resolve
a trust issue with new technology.
With these parties.
So Bitcoin, as a concept,
is one of the most obvious applications, how I
am able to exchange values with people that I don’t trust.
This is one of the potential solutions.
How can I bring transparency to a process
in which I think that the large part
of people involved are honest, but not all.
Blockchain helps.
Usually when you have a company
at which you are employed, it can also be
an online community – think of Second Life,
of
any online community.
Fortnite.
Yeah, Fortnite, precisely.
You could make some assumptions based on this,
on these communities, rather
solid assumptions, such as to say, “I think the majority
of the players use it for fun”.
This is something you say, okay, in my opinion
it is credible, and I can rely on this assumption.
But you could also say, “It may be that someone
is using this game because they are paid to”.
For one reason or another, maybe he or she was paid
by the user to improve their own profile,
or reach certain types of objectives, etcetera.
So you have a system where you have a reasonable
certainty or you are convinced
of the fact that the majority of people
are honest, but not all.
But you have to interact with all of these players.
So what do you do? The blockchain is able to intermediate
and resolve these problems, it does not intermediate
with a mediator, which is what usually you call upon in a game.
I don’t trust Marco, let’s involve a mediator
that we can both trust, who mediates in all of our
financial transactions or otherwise.
Another solution is to say let’s involve the blockchain.
There are rules that are clear to everyone.
It brings transparency to the process if the majority
of people involved are honest, we can extend this honesty
to the interest of the group.
So this is a bit of what the blockchain offers.
I think that this is one of the fundamental elements
that allows the creation of communities
that have scalable
features, such as
being rest assured that you will not be
scammed on the internet,
in the late 90s, beginning of 2000 when everyone was
scared of carrying out transactions on the internet.
Then there were some solutions, solutions
that for now have always leaned on intermediaries,
that raised costs and simply shifted
the trust from the counterpart
to the mediator, to the intermediary.
One such example could be PayPal.
Of course.
Or even the manager of a certain platform,
think of Second Life, in which
large, very interesting communities have been created.
Second Life has had radical changes
due to settings of the platform itself.
That said, from today you cannot do this anymore,
or you can do this. These are new limits.
Using a system like the blockchain
allows you to continue to
contribute to these communities, but also
to not have to put complete trust
in a single institution
because often the interests are not aligned.
If one contemplates on the platforms
in existence today, everyone decides in a
continuously manner, based on how the
the wind blows, how the media reports,
to what comes out in the news.
Of course.
So, maybe Twitter says, okay, now
we’re going to ban all of these people. Or the example
of videos, YouTube may tomorrow say,
that’s enough, we will no longer host these videos on the platform,
or we’ll demonetise them or not make them relevant.
So you really are always at the mercy
of a few players that make the rules.
I mean, the business is theirs, so its justifiable that this is how it is.
On the other side, when you’re talking about billions of people,
it is a disaster to not have certainty. If someone cuts you off from the
platform, it’s a disaster.
It’s also true that someone writes
the rules for the blockchain.
Someone proposes them and writes them, but it isn’t a given
that they are put into place. They are put into place if
if they are shareable, or interesting for a
sufficiently large audience.
You can propose your blockchain,
but if then nobody uses it, you will have written it
without it serving a purpose.
Okay, so you put down
rules of your blockchain with your principles.
Exactly.
If people like it, that kind of platform is used.
Exactly, it may be successful,
it may not. Satoshi Nakamoto
proposed Bitcoin in a certain way,
explaining the choices made.
It was used in that way but then
we saw in the following years
that there were new blockchains,
new approaches, based on different assumptions,
different beliefs. Whether then they were adopted
or not, some survived, others did not.
But who is this Satoshi Nakamoto?
The theories that I heard range from
secret services, in any country of the world,
to Elon Musk that while he was on the toilet, besides creating
Tesla, SpaceX,
exactly,
he said, ok, then now I’ll do
he was also doing Sudoku, next to it
he took some notes, he designed the blockchain.
He did it on the fly, and wrote protocols on toilet paper
and there, there is some idea of…
Let’s say people <em>of a great conspiracy or not</em>
Clearly
conspiracy theories are always very
<em>fascinating</em> fascinating, yeah,
And very entertaining, but it is not said that
they reflect what actually happened, and though
we’ll never know, I think
there are some studies that were conducted
that give us a few elements
so we can take something home and say “Ok, we have no idea
but these are the results of studies”.
So what we see is that
mining, for example, which is this operation for
keeping the blockchain going, that re-blocks it, and confirms transactions,
it was initially all done by Satoshi
because there was no one else at the beginning, it was just him
he managed his machines and mined the first bitcoins, right?
Some studies they showed that
the way in which Satoshi mined was very strange
and some patterns have been recognised that are attributable to computers
that are quite uncommon, not those that we find in everyday cases
so some studies, I’ve read
more than one, which was really interesting, they show how
Satoshi likely had access to multiple machines
and probably some academic machines, but not
home computers.
Not so much for power aspects of the machine, but for the fact that
what element does it give us? It makes us understand that maybe
he had access to laboratories or machines of a certain type.
Even university computers, trivially.
So someone even thinks that he could be a professor
or someone connected to the academic world, right?
We don’t know, but it’s an interesting element that, in short,
is rather objective
Based on the educational field
yes, based on the way in which some features can be
extracted from the blocks he generated.
This is already a very interesting element, in my opinion
Then the people who could have this kind of knowledge
as regards all of these aspects, there aren’t many of them, right?
No.
So who could it have been and why did he stop
communicating with the community? Clearly
one of the fundamental factors that we like
seeing in the disappearance of Satoshi
is that removing this legendary figure
and potentially this point of
central failure in the project, whenever you have a person, he is attackable, right?
You do not want that, <em>yes</em>, the project is attacked by attacking a person
so you can say “Ok, this makes sense,
he’s gone, its better this way”, the project is more solid,
it is not attackable because no one knows who Satoshi Nakamoto is.
But obviously there are other theories due to the fact that maybe
he had to step back for personal reasons, right?
And one of the people that is often
hypothesised as an answer to the question by Satoshi Nakamoto is Nick Szabo
but I think Nick Szabo
although he worked on it from the beginning of the nineties, if not before,
and has written a lot of the material that was probably used as a starting point
I see him as very far from the answer, even in discussions,
he is a person that I think is unlikely to
be Satoshi. <em>But he then popularised and invented the</em>
smart contract as a term <em>yes</em>, right?<em>Exactly, yes </em>
A bad, bad contribution to the sector
because they are neither smart nor contracts. <em>No, in fact, it cannot be him.</em>
This and that cannot have gotten it right.
Tell me something about mining because now with the collapse of
Bitcoin, where immediately you have those who say
“See, we knew it, now it’s over” Of course, a classic.
And others who instead say “No, now it’s just a matter of waiting”
Those who were mining and doing business in mining, what are they doing right now?
I worked in the mining industry in Texas in 2014 for a while
At one point I was managing 5% of the shares of Bitcoin
for the company, we had ten thousand machines
Throughout the United States. <em> And where they were </em>
Ten thousand machines scattered throughout the United States?
Yes, we had ten data centres and we produced miners
We sold them to the community and then we started mining on our own too.
The interesting part is that
Take a step back and explain how money is earned by mining.
Essentially, mining is a Bitcoin generation process.
You contribute to the Bitcoin network and you are rewarded with new coins.
it’s the way with which inflation is created in the system.
In fact it is not true that bitcoin is without inflation,
it was simply controlled.
That is, there is always, there are new coins entered into the system
but in a controlled and predictable manner.
So you know, there will be maximum 21 million
and that they are generated at a certain pace.
These new coins generated, who do they go to? To miners,
people who use electricity and invest in
special machines and computers dedicated to mining
and these computers make calculations
that contribute to the security of Bitcoin, they create new blocks
as they say, and in return they are rewarded by a Bitcoin itself,
from the rules of the game, from the protocol
with these new bitcoins, right? <em> Ok.</em>
So it’s an entrepreneurial operation in the sense
that you must invest capital
to invest in these special machines
use electricity and hope for a return
clearly not based on the case
but based on certain types of projections and reasoning
that can be made. It is an investment with many variables, so
you must rely on assumptions when you start, <em>yeah</em>, the game, right?
The only safe or the safest business as regards mining
is to sell the machines that are mining to someone else
so that they bear the risk.
So if Bitcoin is worth thirty thousand you earn a lot of money
Because there is heavy demand <em> Ok.</em>
Generally speaking, miners earn a lot when the price goes up
not when it’s high, but when it is rising.
Why? Because the distribution method of new coins
precisely depends on this.
When you have a stable network, let’s
say for example, the price of Bitcoin
is at $4,000 for one year.
What happens is that the miners are in
a situation of break even.
So there are probably not many new miners
and there is not a decrease
of the number of miners. So more or less it is stable,
the situation. In this case, the miner
earns little, but in a sustainable manner.
So it’s not a big opportunity
for the miner to say, okay, everything is stable,
I’m earning a little but at a constant rate.
What the miner would like is to
earn a lot, quickly,
and that the only circumstance Bitcoins should be kept
is precisely when the price is going up.
Or when you have a new production process
of these machines. Anyway now we are up to speed,
the production process of these mining
machines has already been optimised,
there is not much space
for this second factor. So
what awaits for miners now? That
the price goes up and their machines
make more money in dollars than what they made before.
On the contrary, when the price goes down, its a disaster
for miners.
Because, in this moment they shut down
– how do they support themselves? – Many close shop,
because their electricity costs are fixed,
and constant, independently from the network.
Of course, in the moment in which you have machines
that you paid a certain amount for, you spend a certain fixed amount in electricity
and revenue decreases, because the price has dropped,
you have a problem.
And the problem basically it is reflected in spending on machines
and deciding what to do. You could wait
until the market recovers, assuming that it will,
or not. These miners often have other fixed costs
in addition to electricity. Such as, you need the space,
personnel, all these things.
Then also seen in seeking out a place where
electricity costs little, where fixed costs are not very high,
etcetera.
But and at the moment the market is going down,
it remains down, and you have the miners that continue
to close down, and then who will mine Bitcoin?
What is often believed, from the theoretical point
of view, is that when the price
is low, miners are not interested in selling Bitcoin
at that price. So there is less pressure to sell,
and in theory the price is more likely to go back up.
Because miners, when the price of Bitcoin is high,
They have an interest in keeping the machines running,
they take their earned Bitcoins and sell them.
They do not take a speculative risk on the fact that
it will continue to rise. Very simply, they sell them.
So that’s not a problem because we are saying
that it is going up. Clearly, when the price goes down,
it’s a bit of a mess because miners don’t know if they should
keep it and wait for it to go back up again, or sell it.
Because waiting could also mean selling it
at a loss. – Right.
So it’s a bit of a tricky situation in which,
basically the miner must make choices
based on the price, which is never easy to do.
For example, this business I was working at
as an employee in 2014,
was while the price was going up, it was the
start up in 2014 to more rapid growth in Austin,
so we were number one. When I arrived,
there were 4 of us, two months later there were more than 40.
Which at the time in the blockchain industry
was a big number, it was remarkable as a result.
A year later, the company closed.
Because the price had started to go down and
one of the parameters on the business plan
was a magic number of the infamous assumptions
that said, but how much will Bitcoin be worth
at a minimum in one year?
Exactly.
We had that number placed at $300.
Because the price, when we defined it,
was already over 300 dollars and was rising rapidly
and we thought it would never drop below $300,
at the time. It went down for a few months, it was enough
to make the company go under. Not making the
assurances of machines profitable and scaring investors
who wanted their capital back.
Of course.
So maybe if we had turned the machines off for 3 months,
or if we changed the magic number at the beginning.
Exactly. But then obviously you have fixed costs that depend on it.
What do you expect as a trend of this sector, of course
you have a positive view, but realistically what curve
do you now see?
Look, currently the biggest bet is
if it will go back up again, how long will it take?
That’s right, this is the key question for most companies
in the sector. There are start ups who raised capital
in a different way, and now they are saying, “Okay, we’re in a bear
market, therefore prices are low,
expectations are lower, etc.
What do we do? How long will it last, we can not keep going
indefinitely with limited traction, clearly
even at a time like this there is a little bit of disinterest in the market,
which tends to be cyclical, it somewhat follows the price,
media attention, etcetera.
So, what to do?
It is inevitable that, if the bearish phase of the market
is to last a few years,
probably many companies will have to close.
How long will it last? I don’t know, what we have to do
is get ready for a rise within two months,
six months, two years, four years.
Okay.
My personal opinion, having already seen it happen several times,
is that it will not be a recovery that we’ll see in six months.
Maybe we’ll see it, I think at least another 2-3 years.
Okay.
But you know this, it’s the best time,
without distractions typical of prise rises,
to consolidate, to build.
– The market is being cleaned up. – The market is being cleaned up.
– from the fluff, – exactly, – and so on.
In the past two years, we have seen
very fast growth, that inevitably is not sustainable
and that it needs to settle down for a bit,
in the aftermath. Now it’s the time to get it together,
consolidate and prepare the ground to
make the growth of businesses that
start from scratch stable, they arrived at one hundred, now maybe
they should go to 60/70 and then prepare to go to a thousand,
in the next wave.
This is one of the interesting topics in the crypto world
– of the exchanges. – Yes.
Obviously, in the United States there is Coinbase, which gained
not only a massive amount of investments, but
also supporters, and the network behind it
is not a fly by night operation.
And so this is always reflected
on the fact that, well, probably if they continue
to push us, there is trust in the fact that the management
is what it is. Every day I see
there is talk about newsletters, I launched a new start up
that sends a newsletter every day with 10 news articles
and every day in these 10 articles, we
continuously have new investments, of whatever
type, in crytpo, new initiatives. Facebook,
takes the test, now it has bought the crypto company,
We continue to rummage, all of the big companies
are working on the blockchain
in general. So it’s very interesting
to then understand who will leave first, but,
the topic of exchanges makes money exchange hands
and so it’s an argument that that makes people happy.
Help me better understand the various types
of exchanges.
Let’s say that exchanges offer
one of the biggest opportunities in the industry,
as we are often talking about digital assets.
So these assets that exist on the blockchain
could be Bitcoin, or Tokens,
of the start up that had the ICO.
Or other elements, however must be exchanged
somewhere. This trading floor where the exchange takes place,
it’s the Exchange. The Exchange is a place where people
register and find each other, and
like in a market, communicate
their intentions of purchase or sale
and try to find a match between someone who wants to sell
and someone who wants to buy. So the Exchange is a fundamental
element of infrastructure of this ecosystem,
this ecosystem cannot exist without exchanges.
Coinbase, as you mentioned, is known to be a collector
of licenses, in the sense that they understood that it is
inevitable, for an Exchange, to facilitate the entry and exit
of euros, dollars, the so-called Fiat.
So Coinbase, let’s say, tries to simplify
the entry and exit from the traditional world
towards crypto. They’re not the only ones to try to do these things,
I want to buy 100 Ethereum and I put my money inside,
with a card or I have to send a wire transfer,
what do I do? The Exchanges give you access in different
ways. Or maybe you have, I don’t know, Bitcoin,
and you want to buy Ethereum, you need to go on an exchange
and say that you want to sell Bitcoin to buy Ethereum
at this price. Is someone interested in doing the opposite?
If you find that person, you do the exchange.
This is the concept of the market exchange,
in general, and there are various types of markets –
at the beginning one of the best known was LocalBit,
which still exists today and is one of the ways with which I
approached the ecosystem in 2012, in the sense that
the first question you ask yourself is, how do I buy Bitcoin?
Indeed.
– And at the beginning – I buy them like I sell them
– when I have them – Exactly, yes, it’s the opposite.
And LocalBit is actually a site for ads, for which you say,
I was in Padua at the time at the university,
you could write, I’m willing to meet in person
with someone who is interested in buying or selling my Bitcoins,
at more or less this price, as a range, in the Padua area,
within 5 km. from the centre.
Really, I did not know this.
And what were you doing, did you meet in person?
I’d go, I remember that then
we would meet and we sat down like you and me now, like this.
And we were there, one with a cell phone, the other with cash, usually.
And the exchange was made.
No way!
So, show me the QR code, I’ll send them to you, I’ll give you the cash.
And often, at the time there were not big trust issues,
in the sense that the amounts that were transferred weren’t huge.
– You weren’t first, – exactly,
– give it to me first, – Yes. There were mechanisms
on these markets, they were primordial but they existed
that helped you to have a mediator in the middle.
In that case there was LocalBit
that said, okay, those who sell Bitcoin
sends them to an intermediary account of LocalBitcoins.
Then you give me the cash and it will be unlocked
– the mediator. – Okay, deposit account,
– which acts as an intermediary. – exactly.
But it was not mandatory. In fact, many did it without
I often found myself saying, okay, I’m here, we’re exchanging
200 euros, I saw you in person. There are a lot of people around,
I don’t think you’ll run away.
Excuse me a moment, I need to go to the restroom.
Look, there are stories that I could tell you
of which, yes.
– These things have happened. – If you trade more.
They also happened trivially, It’s something that can happen
in that case is that you get fake cash, they’ll give it to you.
– There is a lot of that – you have to go with the machine.
It depends how much the trade is for, of course usually exchanges
of that kind were small, so maybe you trade, you know,
– 200 euros – does this still happen?
It still exists, it is also one of the
more interesting exchange markets and the most widespread.
In the sense that more or less all of the countries around the world
they have their LocalBit community.
– Of exchanges. – You go to Venezuela,
you say, I want to buy Bitcoin and you do it in person.
This is great. Okay.
To say, in the UK, LocalBitcoins has merchants, dealers,
who do it online with a bank account in the UK,
so you can make a transfer from an account
to a seller to your English account, directly
with LocalBitcoins. However this is more for –
and is designed for people to meet in person.
– Okay. – We meet, we exchange.
yeah
This is the primordial Exchange with which
you solve the problem and I will say, in 2012
it was very complex to find a match.
Because you said, okay, I have to travel 100 km
to find the seller, I remember at the time
we went to Veneto. I found myself in the car sometimes
having driven for an hour and go to, I don’t know, from Verona
in Venice or wherever, to make an exchange.
Okay.
There are other models of markets, Coinbase
is one that we have already mentioned. A new model of markets
is the decentralised market.
But Coinbase, it’s practically like
a bank, that is, if I want to buy
Bitcoin, I make a bank transfer to Coinbase,
yeah,
as if I had to make a bank transfer to TransferWise,
so to speak. If I have to send it, I make a bank transfer to Coinbase,
the money is then in my wallet
and I can carry out my transactions.
Exactly.
– Let’s say that, – If they crack Coinbase.
Obviously, the problem with the Coinbase model
is that you have to trust Coinbase.
Because Coinbase, in reality, is a venue in which
they gather all of these
expressions of interest, of purchase or sale.
They also collect the funds, euro or Bitcoin or Ethereum,
whatever it may be. They have a big basket
and having this basket with
everyone’s funds, everyone’s offers etcetera,
they manage to avoid you having to meet
in person with each other to exchange cash,
– Of course. – cash.
So you simply go on Coinbase and say, okay,
this is what is on offer.
I’ll take the best offer, Coinbase
intermediates as a mediator, I don’t even know where I got them from.
But I know that the trading floor was Coinbase.
If Coinbase runs away with the money or is hacked,
etc., maybe I have bought a piece of paper
that gives me the right to a Bitcoin but I cannot withdraw Bitcoin.
Okay.
the dollar, with Bitcoin credit. If you trade dollars against Bitcoin.
Do these Bitcoins, these dollars, exist? In theory yes,
Do these Bitcoins, these dollars, exist? In theory yes,
in practice I only know when I withdraw them.
It’s like saying, what happens if we all try to make a withdrawal
– from the bank? – Of course.
It depends.
So Coinbase, let’s say, it’s like a bank.
– Yes. – Right.
– It’s the bank model. – It’s the bank model.
Sure. Yes.
The other model is instead decentralised, which is that
on which you landed on.
The decentralised model it is a relatively recent model
it’s been a few years now since the
first decentralised exchanges came into existence, now we are seeing an evolution
of these exchanges, because you know, from the first
primordial version to the version usable by the public, they seem to be various developments
and interactions. Coming up against walls, etc.
Essentially, the decentralised exchange tries to say,
okay, a trading floor – this exchange market – is needed.
However, too many exchanges dove in
and too much money has been lost,
There is Mt. Gox, which is still in progress,
in court and everything
We do not want details, we give guarantees
to the user, given that the blockchain is used for that,
to allow you to do it in a way that
the blockchain itself is the trading floor.
So, decentralised exchanges
say, ok, the trading floor is a smart contract,
which exists on the blockchain. This smart contract
tells us how the rules of the trading floor work.
You cannot cheat, the funds must be there
and the exchange is
instantaneous, atomic, as they say,
it’s called an Atomic Swap, which is an automatic exchange.
It’s like saying, we’re in person, and you give me
Bitcoin and I give you cash.
While at the same time,
at the very same time, the concept is precisely this.
This is what the smart contract does, it assures you
that the exchange takes place at
the same time.
That is what the decentralised exchange does.
It helps bring demand and offer together,
without the possibility for the parties to cheat or not have the funds.
– Okay. – That’s the concept.
And when you see hybrid, is it hybrid?
Yes, the Exchange for example on which we are working,
like Eidoo, is called a hybrid, because
it takes these features from decentralised exchanges.
That’s all to say that it’s all safe, fully transparent,
the exchange is atomic, etcetera. But then
in a model more similar to that of Coinbase,
it resolves the traditional limitations of decentralised exchanges,
that is, if the Exchange it is decentralised,
it has all of these amazing features,
we do we not just only use decentralised exchanges?
Because they are expensive, you have to carry out the transaction,
on the blockchain. And they’re slow.
Why? Because the block on the blockchain –
you have to wait for it to arrive, it serves as a confirmation.
So, the hybrid Exchange, let’s say it takes the best
from centralised exchanges and the best
from decentralised exchanges, and it puts them together. It tells you,
hey, we’re only processing this transaction when
the agreement is final. So maybe you have to wait a few seconds
for the confirmation that the trade has been completed.
For the rest, it has a look, feel,
and user experience that is similar to that
– of the normal exchange. – Right.
So you have speed, a compromise
on costs, but also transparency and security.
Which current crypto projects are the
most interesting for you outside of
exchanges, which are equivalent
to crypto kittens, stuff like that?
Is there something that you see, that’s happening,
in practical use, that has potential for you?
One of the things that I was more interested in
a few years ago was the discussion about
Second Life, what happened on Second Life?
There was a lot of traction, and then?
Gone.
Gone. Now we are slowly seeing
its return. There is a specific project
that I really like, it’s called “Decentraland”,
which actually seeks to be a new Second Life
and say, on Second Life of the things went wrong,
we do not repeat the same mistakes, we use the blockchain
as well as a nice interface, the virtual world,
the land, etc., to create a
virtual community that is safe, day zero of coins,
with all of the features
that made Second Life interesting.
And in Decentraland you can buy the piece of land.
Okay.
Virtual. You have the demonstration of the fact that
land is limited, therefore it’s not that
100 new planets can be created, something like that.
So you have the certainty that if Decentraland is used,
you have your piece of land and it is not diluted, let’s say.
And this goes with a grain of salt, the talk about
non-fungible tokens is great, which we talked about in another
– our chat. – Yes.
If you remember. And so you have the piece of land
that is demonstrably rare. As in reality,
when you buy a piece of land, you say, okay, how many fields
like this exist?
There is really a scarcity,
exactly. And Decentraland obviously has
has its application, where you can see the virtual world,
you can interact with other blockchain projects.
For example, I knew that, I do not remember the name now,
but there is a project where they bring on the blockchain,
let’s say Pokemon, as an idea.
And a collaboration that they had
is to say, okay, we’re bringing the Pokemon to Decentraland.
And so you find these Pokemon
in a virtual world. So you can connect
various projects, this is one of the most obvious, but there are
many others.
There is a whole world of security, every two minutes
I see a new company being established to provide security services.
One, a founder of I-don’t-know-which platform
who died, with the password to the site, so the money is all frozen.
– Of course. – I guess it is
– a Canadian Exchange. – Ah!
That was a Canadian Exchange.
Ah, a Canadian Exchange.
Yes, yes.
At that point, thanks, goodbye.
Exactly.
Even then, there, you certainly have
the pros and cons of decentralisation.
You say, okay, it’s the bank of yourself.
But if you lose your keys, you can’t call the call centre.
Of course. Of course. Sure.
So you say, also from that point of view,
it makes sense to take the best from the various models.
Yes, in fact another one of the big opportunities
in the ecosystem is that of saying,
how do you manage the key?
It’s for that which companies like Ledger, Trezor,
they give you a key, simplify the use,
they tell you, look, do not make a copy of the key yourself,
because you will likely lose it. You put it in the flash drive
and basically it uses the flash drive
and you’re given the key, which is the hardware wallet,
as it’s called. To simplify
the interaction with the keys.
If our friend from the Canadian Exchange
had done things like, let’s say,
they should have been done, the problem would not have happened.
Why did it likely happen?
For a problem of trust.
Because here you say, okay, I have to leave the keys to someone.
Who do I leave the keys with?
Because then, if they are stolen, there is the usual problem
of ownership. On the blockchain, some regulators are saying,
they are proposing to define
the concept of ownership of Bitcoin or cryptos,
transferring the property of the key, that is,
you have the key, so you are the owner.
This doesn’t pan out and it really shows
a lot about this problem, and of the Canadian Exchange,
because you know, the key to a wallet, everyone in this
room could have it, who is the owner?
Of course.
– Someone could have it, – If you have it, it will be stolen
here I am,
Exactly but then we could also both have it
you can copy the key. So the owner,
is it me or you? And if you you had the key and I copied it
secretly, you do not know that I could be the owner too.
So you can see that there is a concept of ownership
– a bit – blurred
Yes, yes. New.
– Great Thomas, thank you very much. – Thank you.
these videos
yeah yeah yeah yeah
It’s a signal that I saw as positive in
a real way
for the crypto world
I think, but I don’t know, tell me what you think,
these guys that work for Snap, effectively,
in the meantime developed a platform
that I think is called Forge, for Ethereum,
yeah,
with tools, analytics. I think they
initially started with analytics for smart contracts.
Okay, but what kind of data do they collect?
I have absolutely no clue.
Okay.
They announced it yesterday, because what really struck me
is that they work for Snap,
yeah,
and then they got together
and said, enough of this shit, you know,
let’s move to Ethereum, at a time
in which the market was saying “no, everything is collapsing”,
of course.
Do you see it as a positive sign?
It’s definitely an ecosystem
that is continuously evolving, so it also attracts
a lot of external interest from those in other sectors
in order to understand if there’s an opportunity
for them to get in on it. People look to apply
their own skills within this ecosystem,
and say okay, this blockchain system, this context
has highs and lows. When we have highs
-and they’re very fast – there’s an opportunity,
it could be the next big thing,
the internet, a new wave similar to that of the internet,
let’s see if I can assume a role within
this ecosystem. It’s the usual
talk of “no pain, no gain”.
Of course.
Those who dive in and see,
yes.
But how do you orient yourself, being a part
of this world.
How do you orient yourself in the sea
of news that says quite the opposite
and ranges from
“This is a bunch of bullshit” to those
say “hold on, this is the revolution of all revolutions”.
What are your sources, or your approach,
your framework for interpreting the
crypto world?
Usually there are many warning signs,
like buzzwords, that allow you to understand
if the person speaking really knows what they’re talking about,
if it’s a bluff
and likely something that doesn’t have legs.
Okay.
Having been in it
since 2012, so more than 6 years
in the ecosystem, I am able to understand which
know what they are
talking about and those that don’t,
so buzzwords are the easiest way to
filter them out.
Give me an example.
Let’s say that for example now there is all this talk
of holding elections
on the blockchain.
Everybody’s is asking me for my opinion, saying
“Thomas, I heard that
elections can be carried out on the blockchain,
and that we can hold them safely,
corruption, we can,
– elections – use transparency
– policies, – political elections,
yeah, naturally.
I’ll vote for Trump on the blockchain.
Exactly.
This resounds a lot as a hypothesis
because in the end you say, okay, let’s hold an election
on the blockchain, they told us that the blockchain will be safe,
transparent, we have solved the problem of corruption
and voter manipulation.
In reality, this is one of the biggest
misconceptions, one of the biggest
why?
fakes, false friends, false positives,
on the blockchain, in which one says:
“Ah, it makes sense”, it seems to make sense, but in reality,
when you look into it, you quickly understand that
it doesn’t make sense, at least at the moment.
So often already if someone shows up
saying, “Yeah, but cryptocurrencies”.
Why doesn’t it make sense?
It doesn’t make sense because
political votes, structured
in the traditional way, as we have them today
not even digitally,
they are the result of various interactions,
they have reached their current status after
various improvements, attempts, errors, etc.
Switching to blockchain means making a
process transparent, but forgetting that the context is different.
So what does this mean? Let’s look at an example.
We have a vote, and we must make sure
that each person can vote only once.
Yes.
On the blockchain, that means identifying the person voting.
Okay, so if we have Marco, who
goes on the blockchain and decides to vote for Trump,
for example.
Which is exactly how I would have voted.
I figured.
Donald.
Exactly, we decide that
instead of a Kitty crypto, there is a Donald crytpo.
For example, you could say:
“Yeah, come on, let’s vote for Trump”, you, technically,
you could cast that vote. But how do we make sure
You don’t vote one hundred times,
pretending to be one hundred different people.
On the blockchain, this is not possible
without a disclosure, publishing your
identity to the world. And you do not want to let the world know
that Montemagno voted for Trump.
Right.
Otherwise it becomes really easy
to bribe you or essentially
pay you and make sure that you actually have
voted for the person for whom you were paid to vote.
Of course.
This is a huge problem in terms of privacy,
it’s fundamental, and it is for this reason that votes are secret.
On the blockchain, this is lost; even though
there is transparency, which is what you want in the process,
you lose the anonymity and privacy of your vote.
So this is one of big problems
that has yet to be resolved as regards voting on the blockchain
there are cryptographers
like Matthew Green,
who are among the most famous in the world,
that continue to hammer the community
on Twitter, saying, “guys, this talk about voting
on the blockchain doesn’t have legs from any point of view.”
So it’s something that can be sold
very easily as an idea, because it seems great.
But then
in the end reality hits, and you say, okay,
in reality it’s not possible to do this safely for now,
we don’t have the technology. We don’t have certain components.
And you have sources of information that you keep up to date on,
like, I don’t know, I have my technology feed,
there are some people, some media outlets that
I follow because I know what they are. What are yours, or which
would you recommend?
To date, the blockchain community
remains very small, so we have an expansion
of start-ups, but there are still very few key people that are driving
the development of the ecosystem.
In the past there were specific forums,
they were a bit more difficult to find.
Now I´d say that social platforms,
even Twitter, offer
important opinions, and they´re expanding
the ecosystem in a significant manner.
I follow many different people.
Matthew Green is one; he not only
works on the blockchain, he also works on the blockchain,
he’s a cryptographer, so
he works on one of these building blocks that
comprises the blockchain and it always brings us a little
closer to reality. He’s someone who believes in the blockchain
up to a certain point, and that is also important for someone who
believes in it so much, to discuss it with those
who think otherwise. Or whoever has dedicated
all of their life to such complex issues, not everyone
is capable of understanding it. So what do you do? Do you go follow
the expert and ask, okay, this is what the expert says,
what does the expert think of this use case?
He clearly is not a sales expert,
he is not a product expert, he is a technology expert,
so he can only answer certain types of questions.
I really like this approach,
I saw him in an interview with Brian Cox, the astrophysicist.
We talked about it beforehand, and
I really liked his approach, which is an approach
where he does not try to be right, he tries to understand
the truth. Clearly he must say, okay,
what is the origin of the world? And the interesting thing
is that his approach is, I’ll do all of the experiments
imaginable, then, when it seems like,
when I cannot contradict this experiment,
I’ll put it out to the public, and look externally
to find someone who says,
“Look, what you said is bullshit”, and if anyone says this,
I am happy because at least it brings me closer
to the truth. Sometimes in the crypto world I instead see
people looking to be right or convince you
either that it is a bubble or its fucking awesome.
But there are only a few that dig into it
to say, okay, but what is its real application,
true, useful.
In actuality, the truth is that we do not know yet.
It’s like saying, let’s try to take a step back,
pardon me for the usual comparison
with the internet, however, it is also fitting this time.
If at the beginning of the 90s we had asked,
what will be the use case that will make the internet
that will bring the internet to everyone’s home?
Probably the answer in the early 90s or mid 90s
would have been email.
What is the until now a tool on the internet that everyone uses,
email. Then there are other interesting components,
social media, etc. More recent.
But email remained, so even in the blockchain
we already have the initial elements.
I’ll give you data on email that really struck me,
that people move house more easily than
they change their email.
This is of interest.
It is absolutely the most widespread tool,
in absolute.
It’s one of your identities, a digital identity,
just like your Facebook profile.
Despite everything we have said, email is dead
for a lifetime.
It’s dead, it’s dead, it’s dead,
but it’s still there.
Exactly. Right.
And we think it will disappear like the fax machine.
So, even on the blockchain we have
cases of use that are already seen. Like crypto currencies,
Bitcoin, which allow you to have certain properties
on money. There is also crowd funding, like ICOs
or new tokens that are being created, and so on.
But we still don’t know which will be the
main one in 20 years.
We do not know which technological aspect
will render it essential.
It is an assumption that is made by those
who have been working in it for a while, they see the potential,
they say, there are some interesting features,
we think that these features can
help people and our society.
How? In various ways, what is the most relevant?
Right now it’s difficult to know.
Let’s try to keep two hypotheses in mind,
one the opposite of the other. Hypothesis number one,
is that the blockchain world evaporates.
It no longer exists, it was a fleeting
trend.
Hypothesis number two, rather, is that it is part of
new protocols that we use, such as
http.
Which of the two hypotheses seems
more likely to you, I know, but why
and what must take place to go in one direction
or the other?
Clearly if we are having this conversation
it’s also because I believe that the blockchain may have
a very important role. But as we also said
not long ago, it is very interesting to discuss it with those who think
otherwise, to see how the assumptions differ.
Now you start from different assumptions,
from a different general opinion on
what its interesting features
or utility for society may be. Or a lack
or without a company, then you say okay, accordingly
I think the blockchain has a role or does not have a role.
For me, one of the key factors is that of saying that,
regardless, the blockchain solves a problem of trust,
which in my opinion, exists.
Trust in the counterpart.
And in the moment in which you work
or spend an increasingly amount
of your time on the internet, the counterpart
is usually always a person that you don’t know,
or someone that you see on a daily basis.
So there is a problem of trust with all people
and services, companies, with which you interact on the internet
on a daily basis. The blockchain helps you to resolve
a trust issue with new technology.
With these parties.
So Bitcoin, as a concept,
is one of the most obvious applications, how I
am able to exchange values with people that I don’t trust.
This is one of the potential solutions.
How can I bring transparency to a process
in which I think that the large part
of people involved are honest, but not all.
Blockchain helps.
Usually when you have a company
at which you are employed, it can also be
an online community – think of Second Life,
of
any online community.
Fortnite.
Yeah, Fortnite, precisely.
You could make some assumptions based on this,
on these communities, rather
solid assumptions, such as to say, “I think the majority
of the players use it for fun”.
This is something you say, okay, in my opinion
it is credible, and I can rely on this assumption.
But you could also say, “It may be that someone
is using this game because they are paid to”.
For one reason or another, maybe he or she was paid
by the user to improve their own profile,
or reach certain types of objectives, etcetera.
So you have a system where you have a reasonable
certainty or you are convinced
of the fact that the majority of people
are honest, but not all.
But you have to interact with all of these players.
So what do you do? The blockchain is able to intermediate
and resolve these problems, it does not intermediate
with a mediator, which is what usually you call upon in a game.
I don’t trust Marco, let’s involve a mediator
that we can both trust, who mediates in all of our
financial transactions or otherwise.
Another solution is to say let’s involve the blockchain.
There are rules that are clear to everyone.
It brings transparency to the process if the majority
of people involved are honest, we can extend this honesty
to the interest of the group.
So this is a bit of what the blockchain offers.
I think that this is one of the fundamental elements
that allows the creation of communities
that have scalable
features, such as
being rest assured that you will not be
scammed on the internet,
in the late 90s, beginning of 2000 when everyone was
scared of carrying out transactions on the internet.
Then there were some solutions, solutions
that for now have always leaned on intermediaries,
that raised costs and simply shifted
the trust from the counterpart
to the mediator, to the intermediary.
One such example could be PayPal.
Of course.
Or even the manager of a certain platform,
think of Second Life, in which
large, very interesting communities have been created.
Second Life has had radical changes
due to settings of the platform itself.
That said, from today you cannot do this anymore,
or you can do this. These are new limits.
Using a system like the blockchain
allows you to continue to
contribute to these communities, but also
to not have to put complete trust
in a single institution
because often the interests are not aligned.
If one contemplates on the platforms
in existence today, everyone decides in a
continuously manner, based on how the
the wind blows, how the media reports,
to what comes out in the news.
Of course.
So, maybe Twitter says, okay, now
we’re going to ban all of these people. Or the example
of videos, YouTube may tomorrow say,
that’s enough, we will no longer host these videos on the platform,
or we’ll demonetise them or not make them relevant.
So you really are always at the mercy
of a few players that make the rules.
I mean, the business is theirs, so its justifiable that this is how it is.
On the other side, when you’re talking about billions of people,
it is a disaster to not have certainty. If someone cuts you off from the
platform, it’s a disaster.
It’s also true that someone writes
the rules for the blockchain.
Someone proposes them and writes them, but it isn’t a given
that they are put into place. They are put into place if
if they are shareable, or interesting for a
sufficiently large audience.
You can propose your blockchain,
but if then nobody uses it, you will have written it
without it serving a purpose.
Okay, so you put down
rules of your blockchain with your principles.
Exactly.
If people like it, that kind of platform is used.
Exactly, it may be successful,
it may not. Satoshi Nakamoto
proposed Bitcoin in a certain way,
explaining the choices made.
It was used in that way but then
we saw in the following years
that there were new blockchains,
new approaches, based on different assumptions,
different beliefs. Whether then they were adopted
or not, some survived, others did not.
But who is this Satoshi Nakamoto?
The theories that I heard range from
secret services, in any country of the world,
to Elon Musk that while he was on the toilet, besides creating
Tesla, SpaceX,
exactly,
he said, ok, then now I’ll do
he was also doing Sudoku, next to it
he took some notes, he designed the blockchain.
He did it on the fly, and wrote protocols on toilet paper
and there, there is some idea of…
Let’s say people <em>of a great conspiracy or not</em>
Clearly
conspiracy theories are always very
<em>fascinating</em> fascinating, yeah,
And very entertaining, but it is not said that
they reflect what actually happened, and though
we’ll never know, I think
there are some studies that were conducted
that give us a few elements
so we can take something home and say “Ok, we have no idea
but these are the results of studies”.
So what we see is that
mining, for example, which is this operation for
keeping the blockchain going, that re-blocks it, and confirms transactions,
it was initially all done by Satoshi
because there was no one else at the beginning, it was just him
he managed his machines and mined the first bitcoins, right?
Some studies they showed that
the way in which Satoshi mined was very strange
and some patterns have been recognised that are attributable to computers
that are quite uncommon, not those that we find in everyday cases
so some studies, I’ve read
more than one, which was really interesting, they show how
Satoshi likely had access to multiple machines
and probably some academic machines, but not
home computers.
Not so much for power aspects of the machine, but for the fact that
what element does it give us? It makes us understand that maybe
he had access to laboratories or machines of a certain type.
Even university computers, trivially.
So someone even thinks that he could be a professor
or someone connected to the academic world, right?
We don’t know, but it’s an interesting element that, in short,
is rather objective
Based on the educational field
yes, based on the way in which some features can be
extracted from the blocks he generated.
This is already a very interesting element, in my opinion
Then the people who could have this kind of knowledge
as regards all of these aspects, there aren’t many of them, right?
No.
So who could it have been and why did he stop
communicating with the community? Clearly
one of the fundamental factors that we like
seeing in the disappearance of Satoshi
is that removing this legendary figure
and potentially this point of
central failure in the project, whenever you have a person, he is attackable, right?
You do not want that, <em>yes</em>, the project is attacked by attacking a person
so you can say “Ok, this makes sense,
he’s gone, its better this way”, the project is more solid,
it is not attackable because no one knows who Satoshi Nakamoto is.
But obviously there are other theories due to the fact that maybe
he had to step back for personal reasons, right?
And one of the people that is often
hypothesised as an answer to the question by Satoshi Nakamoto is Nick Szabo
but I think Nick Szabo
although he worked on it from the beginning of the nineties, if not before,
and has written a lot of the material that was probably used as a starting point
I see him as very far from the answer, even in discussions,
he is a person that I think is unlikely to
be Satoshi. <em>But he then popularised and invented the</em>
smart contract as a term <em>yes</em>, right?<em>Exactly, yes </em>
A bad, bad contribution to the sector
because they are neither smart nor contracts. <em>No, in fact, it cannot be him.</em>
This and that cannot have gotten it right.
Tell me something about mining because now with the collapse of
Bitcoin, where immediately you have those who say
“See, we knew it, now it’s over” Of course, a classic.
And others who instead say “No, now it’s just a matter of waiting”
Those who were mining and doing business in mining, what are they doing right now?
I worked in the mining industry in Texas in 2014 for a while
At one point I was managing 5% of the shares of Bitcoin
for the company, we had ten thousand machines
Throughout the United States. <em> And where they were </em>
Ten thousand machines scattered throughout the United States?
Yes, we had ten data centres and we produced miners
We sold them to the community and then we started mining on our own too.
The interesting part is that
Take a step back and explain how money is earned by mining.
Essentially, mining is a Bitcoin generation process.
You contribute to the Bitcoin network and you are rewarded with new coins.
it’s the way with which inflation is created in the system.
In fact it is not true that bitcoin is without inflation,
it was simply controlled.
That is, there is always, there are new coins entered into the system
but in a controlled and predictable manner.
So you know, there will be maximum 21 million
and that they are generated at a certain pace.
These new coins generated, who do they go to? To miners,
people who use electricity and invest in
special machines and computers dedicated to mining
and these computers make calculations
that contribute to the security of Bitcoin, they create new blocks
as they say, and in return they are rewarded by a Bitcoin itself,
from the rules of the game, from the protocol
with these new bitcoins, right? <em> Ok.</em>
So it’s an entrepreneurial operation in the sense
that you must invest capital
to invest in these special machines
use electricity and hope for a return
clearly not based on the case
but based on certain types of projections and reasoning
that can be made. It is an investment with many variables, so
you must rely on assumptions when you start, <em>yeah</em>, the game, right?
The only safe or the safest business as regards mining
is to sell the machines that are mining to someone else
so that they bear the risk.
So if Bitcoin is worth thirty thousand you earn a lot of money
Because there is heavy demand <em> Ok.</em>
Generally speaking, miners earn a lot when the price goes up
not when it’s high, but when it is rising.
Why? Because the distribution method of new coins
precisely depends on this.
When you have a stable network, let’s
say for example, the price of Bitcoin
is at $4,000 for one year.
What happens is that the miners are in
a situation of break even.
So there are probably not many new miners
and there is not a decrease
of the number of miners. So more or less it is stable,
the situation. In this case, the miner
earns little, but in a sustainable manner.
So it’s not a big opportunity
for the miner to say, okay, everything is stable,
I’m earning a little but at a constant rate.
What the miner would like is to
earn a lot, quickly,
and that the only circumstance Bitcoins should be kept
is precisely when the price is going up.
Or when you have a new production process
of these machines. Anyway now we are up to speed,
the production process of these mining
machines has already been optimised,
there is not much space
for this second factor. So
what awaits for miners now? That
the price goes up and their machines
make more money in dollars than what they made before.
On the contrary, when the price goes down, its a disaster
for miners.
Because, in this moment they shut down
– how do they support themselves? – Many close shop,
because their electricity costs are fixed,
and constant, independently from the network.
Of course, in the moment in which you have machines
that you paid a certain amount for, you spend a certain fixed amount in electricity
and revenue decreases, because the price has dropped,
you have a problem.
And the problem basically it is reflected in spending on machines
and deciding what to do. You could wait
until the market recovers, assuming that it will,
or not. These miners often have other fixed costs
in addition to electricity. Such as, you need the space,
personnel, all these things.
Then also seen in seeking out a place where
electricity costs little, where fixed costs are not very high,
etcetera.
But and at the moment the market is going down,
it remains down, and you have the miners that continue
to close down, and then who will mine Bitcoin?
What is often believed, from the theoretical point
of view, is that when the price
is low, miners are not interested in selling Bitcoin
at that price. So there is less pressure to sell,
and in theory the price is more likely to go back up.
Because miners, when the price of Bitcoin is high,
They have an interest in keeping the machines running,
they take their earned Bitcoins and sell them.
They do not take a speculative risk on the fact that
it will continue to rise. Very simply, they sell them.
So that’s not a problem because we are saying
that it is going up. Clearly, when the price goes down,
it’s a bit of a mess because miners don’t know if they should
keep it and wait for it to go back up again, or sell it.
Because waiting could also mean selling it
at a loss. – Right.
So it’s a bit of a tricky situation in which,
basically the miner must make choices
based on the price, which is never easy to do.
For example, this business I was working at
as an employee in 2014,
was while the price was going up, it was the
start up in 2014 to more rapid growth in Austin,
so we were number one. When I arrived,
there were 4 of us, two months later there were more than 40.
Which at the time in the blockchain industry
was a big number, it was remarkable as a result.
A year later, the company closed.
Because the price had started to go down and
one of the parameters on the business plan
was a magic number of the infamous assumptions
that said, but how much will Bitcoin be worth
at a minimum in one year?
Exactly.
We had that number placed at $300.
Because the price, when we defined it,
was already over 300 dollars and was rising rapidly
and we thought it would never drop below $300,
at the time. It went down for a few months, it was enough
to make the company go under. Not making the
assurances of machines profitable and scaring investors
who wanted their capital back.
Of course.
So maybe if we had turned the machines off for 3 months,
or if we changed the magic number at the beginning.
Exactly. But then obviously you have fixed costs that depend on it.
What do you expect as a trend of this sector, of course
you have a positive view, but realistically what curve
do you now see?
Look, currently the biggest bet is
if it will go back up again, how long will it take?
That’s right, this is the key question for most companies
in the sector. There are start ups who raised capital
in a different way, and now they are saying, “Okay, we’re in a bear
market, therefore prices are low,
expectations are lower, etc.
What do we do? How long will it last, we can not keep going
indefinitely with limited traction, clearly
even at a time like this there is a little bit of disinterest in the market,
which tends to be cyclical, it somewhat follows the price,
media attention, etcetera.
So, what to do?
It is inevitable that, if the bearish phase of the market
is to last a few years,
probably many companies will have to close.
How long will it last? I don’t know, what we have to do
is get ready for a rise within two months,
six months, two years, four years.
Okay.
My personal opinion, having already seen it happen several times,
is that it will not be a recovery that we’ll see in six months.
Maybe we’ll see it, I think at least another 2-3 years.
Okay.
But you know this, it’s the best time,
without distractions typical of prise rises,
to consolidate, to build.
– The market is being cleaned up. – The market is being cleaned up.
– from the fluff, – exactly, – and so on.
In the past two years, we have seen
very fast growth, that inevitably is not sustainable
and that it needs to settle down for a bit,
in the aftermath. Now it’s the time to get it together,
consolidate and prepare the ground to
make the growth of businesses that
start from scratch stable, they arrived at one hundred, now maybe
they should go to 60/70 and then prepare to go to a thousand,
in the next wave.
This is one of the interesting topics in the crypto world
– of the exchanges. – Yes.
Obviously, in the United States there is Coinbase, which gained
not only a massive amount of investments, but
also supporters, and the network behind it
is not a fly by night operation.
And so this is always reflected
on the fact that, well, probably if they continue
to push us, there is trust in the fact that the management
is what it is. Every day I see
there is talk about newsletters, I launched a new start up
that sends a newsletter every day with 10 news articles
and every day in these 10 articles, we
continuously have new investments, of whatever
type, in crytpo, new initiatives. Facebook,
takes the test, now it has bought the crypto company,
We continue to rummage, all of the big companies
are working on the blockchain
in general. So it’s very interesting
to then understand who will leave first, but,
the topic of exchanges makes money exchange hands
and so it’s an argument that that makes people happy.
Help me better understand the various types
of exchanges.
Let’s say that exchanges offer
one of the biggest opportunities in the industry,
as we are often talking about digital assets.
So these assets that exist on the blockchain
could be Bitcoin, or Tokens,
of the start up that had the ICO.
Or other elements, however must be exchanged
somewhere. This trading floor where the exchange takes place,
it’s the Exchange. The Exchange is a place where people
register and find each other, and
like in a market, communicate
their intentions of purchase or sale
and try to find a match between someone who wants to sell
and someone who wants to buy. So the Exchange is a fundamental
element of infrastructure of this ecosystem,
this ecosystem cannot exist without exchanges.
Coinbase, as you mentioned, is known to be a collector
of licenses, in the sense that they understood that it is
inevitable, for an Exchange, to facilitate the entry and exit
of euros, dollars, the so-called Fiat.
So Coinbase, let’s say, tries to simplify
the entry and exit from the traditional world
towards crypto. They’re not the only ones to try to do these things,
I want to buy 100 Ethereum and I put my money inside,
with a card or I have to send a wire transfer,
what do I do? The Exchanges give you access in different
ways. Or maybe you have, I don’t know, Bitcoin,
and you want to buy Ethereum, you need to go on an exchange
and say that you want to sell Bitcoin to buy Ethereum
at this price. Is someone interested in doing the opposite?
If you find that person, you do the exchange.
This is the concept of the market exchange,
in general, and there are various types of markets –
at the beginning one of the best known was LocalBit,
which still exists today and is one of the ways with which I
approached the ecosystem in 2012, in the sense that
the first question you ask yourself is, how do I buy Bitcoin?
Indeed.
– And at the beginning – I buy them like I sell them
– when I have them – Exactly, yes, it’s the opposite.
And LocalBit is actually a site for ads, for which you say,
I was in Padua at the time at the university,
you could write, I’m willing to meet in person
with someone who is interested in buying or selling my Bitcoins,
at more or less this price, as a range, in the Padua area,
within 5 km. from the centre.
Really, I did not know this.
And what were you doing, did you meet in person?
I’d go, I remember that then
we would meet and we sat down like you and me now, like this.
And we were there, one with a cell phone, the other with cash, usually.
And the exchange was made.
No way!
So, show me the QR code, I’ll send them to you, I’ll give you the cash.
And often, at the time there were not big trust issues,
in the sense that the amounts that were transferred weren’t huge.
– You weren’t first, – exactly,
– give it to me first, – Yes. There were mechanisms
on these markets, they were primordial but they existed
that helped you to have a mediator in the middle.
In that case there was LocalBit
that said, okay, those who sell Bitcoin
sends them to an intermediary account of LocalBitcoins.
Then you give me the cash and it will be unlocked
– the mediator. – Okay, deposit account,
– which acts as an intermediary. – exactly.
But it was not mandatory. In fact, many did it without
I often found myself saying, okay, I’m here, we’re exchanging
200 euros, I saw you in person. There are a lot of people around,
I don’t think you’ll run away.
Excuse me a moment, I need to go to the restroom.
Look, there are stories that I could tell you
of which, yes.
– These things have happened. – If you trade more.
They also happened trivially, It’s something that can happen
in that case is that you get fake cash, they’ll give it to you.
– There is a lot of that – you have to go with the machine.
It depends how much the trade is for, of course usually exchanges
of that kind were small, so maybe you trade, you know,
– 200 euros – does this still happen?
It still exists, it is also one of the
more interesting exchange markets and the most widespread.
In the sense that more or less all of the countries around the world
they have their LocalBit community.
– Of exchanges. – You go to Venezuela,
you say, I want to buy Bitcoin and you do it in person.
This is great. Okay.
To say, in the UK, LocalBitcoins has merchants, dealers,
who do it online with a bank account in the UK,
so you can make a transfer from an account
to a seller to your English account, directly
with LocalBitcoins. However this is more for –
and is designed for people to meet in person.
– Okay. – We meet, we exchange.
yeah
This is the primordial Exchange with which
you solve the problem and I will say, in 2012
it was very complex to find a match.
Because you said, okay, I have to travel 100 km
to find the seller, I remember at the time
we went to Veneto. I found myself in the car sometimes
having driven for an hour and go to, I don’t know, from Verona
in Venice or wherever, to make an exchange.
Okay.
There are other models of markets, Coinbase
is one that we have already mentioned. A new model of markets
is the decentralised market.
But Coinbase, it’s practically like
a bank, that is, if I want to buy
Bitcoin, I make a bank transfer to Coinbase,
yeah,
as if I had to make a bank transfer to TransferWise,
so to speak. If I have to send it, I make a bank transfer to Coinbase,
the money is then in my wallet
and I can carry out my transactions.
Exactly.
– Let’s say that, – If they crack Coinbase.
Obviously, the problem with the Coinbase model
is that you have to trust Coinbase.
Because Coinbase, in reality, is a venue in which
they gather all of these
expressions of interest, of purchase or sale.
They also collect the funds, euro or Bitcoin or Ethereum,
whatever it may be. They have a big basket
and having this basket with
everyone’s funds, everyone’s offers etcetera,
they manage to avoid you having to meet
in person with each other to exchange cash,
– Of course. – cash.
So you simply go on Coinbase and say, okay,
this is what is on offer.
I’ll take the best offer, Coinbase
intermediates as a mediator, I don’t even know where I got them from.
But I know that the trading floor was Coinbase.
If Coinbase runs away with the money or is hacked,
etc., maybe I have bought a piece of paper
that gives me the right to a Bitcoin but I cannot withdraw Bitcoin.
Okay.
the dollar, with Bitcoin credit. If you trade dollars against Bitcoin.
Do these Bitcoins, these dollars, exist? In theory yes,
Do these Bitcoins, these dollars, exist? In theory yes,
in practice I only know when I withdraw them.
It’s like saying, what happens if we all try to make a withdrawal
– from the bank? – Of course.
It depends.
So Coinbase, let’s say, it’s like a bank.
– Yes. – Right.
– It’s the bank model. – It’s the bank model.
Sure. Yes.
The other model is instead decentralised, which is that
on which you landed on.
The decentralised model it is a relatively recent model
it’s been a few years now since the
first decentralised exchanges came into existence, now we are seeing an evolution
of these exchanges, because you know, from the first
primordial version to the version usable by the public, they seem to be various developments
and interactions. Coming up against walls, etc.
Essentially, the decentralised exchange tries to say,
okay, a trading floor – this exchange market – is needed.
However, too many exchanges dove in
and too much money has been lost,
There is Mt. Gox, which is still in progress,
in court and everything
We do not want details, we give guarantees
to the user, given that the blockchain is used for that,
to allow you to do it in a way that
the blockchain itself is the trading floor.
So, decentralised exchanges
say, ok, the trading floor is a smart contract,
which exists on the blockchain. This smart contract
tells us how the rules of the trading floor work.
You cannot cheat, the funds must be there
and the exchange is
instantaneous, atomic, as they say,
it’s called an Atomic Swap, which is an automatic exchange.
It’s like saying, we’re in person, and you give me
Bitcoin and I give you cash.
While at the same time,
at the very same time, the concept is precisely this.
This is what the smart contract does, it assures you
that the exchange takes place at
the same time.
That is what the decentralised exchange does.
It helps bring demand and offer together,
without the possibility for the parties to cheat or not have the funds.
– Okay. – That’s the concept.
And when you see hybrid, is it hybrid?
Yes, the Exchange for example on which we are working,
like Eidoo, is called a hybrid, because
it takes these features from decentralised exchanges.
That’s all to say that it’s all safe, fully transparent,
the exchange is atomic, etcetera. But then
in a model more similar to that of Coinbase,
it resolves the traditional limitations of decentralised exchanges,
that is, if the Exchange it is decentralised,
it has all of these amazing features,
we do we not just only use decentralised exchanges?
Because they are expensive, you have to carry out the transaction,
on the blockchain. And they’re slow.
Why? Because the block on the blockchain –
you have to wait for it to arrive, it serves as a confirmation.
So, the hybrid Exchange, let’s say it takes the best
from centralised exchanges and the best
from decentralised exchanges, and it puts them together. It tells you,
hey, we’re only processing this transaction when
the agreement is final. So maybe you have to wait a few seconds
for the confirmation that the trade has been completed.
For the rest, it has a look, feel,
and user experience that is similar to that
– of the normal exchange. – Right.
So you have speed, a compromise
on costs, but also transparency and security.
Which current crypto projects are the
most interesting for you outside of
exchanges, which are equivalent
to crypto kittens, stuff like that?
Is there something that you see, that’s happening,
in practical use, that has potential for you?
One of the things that I was more interested in
a few years ago was the discussion about
Second Life, what happened on Second Life?
There was a lot of traction, and then?
Gone.
Gone. Now we are slowly seeing
its return. There is a specific project
that I really like, it’s called “Decentraland”,
which actually seeks to be a new Second Life
and say, on Second Life of the things went wrong,
we do not repeat the same mistakes, we use the blockchain
as well as a nice interface, the virtual world,
the land, etc., to create a
virtual community that is safe, day zero of coins,
with all of the features
that made Second Life interesting.
And in Decentraland you can buy the piece of land.
Okay.
Virtual. You have the demonstration of the fact that
land is limited, therefore it’s not that
100 new planets can be created, something like that.
So you have the certainty that if Decentraland is used,
you have your piece of land and it is not diluted, let’s say.
And this goes with a grain of salt, the talk about
non-fungible tokens is great, which we talked about in another
– our chat. – Yes.
If you remember. And so you have the piece of land
that is demonstrably rare. As in reality,
when you buy a piece of land, you say, okay, how many fields
like this exist?
There is really a scarcity,
exactly. And Decentraland obviously has
has its application, where you can see the virtual world,
you can interact with other blockchain projects.
For example, I knew that, I do not remember the name now,
but there is a project where they bring on the blockchain,
let’s say Pokemon, as an idea.
And a collaboration that they had
is to say, okay, we’re bringing the Pokemon to Decentraland.
And so you find these Pokemon
in a virtual world. So you can connect
various projects, this is one of the most obvious, but there are
many others.
There is a whole world of security, every two minutes
I see a new company being established to provide security services.
One, a founder of I-don’t-know-which platform
who died, with the password to the site, so the money is all frozen.
– Of course. – I guess it is
– a Canadian Exchange. – Ah!
That was a Canadian Exchange.
Ah, a Canadian Exchange.
Yes, yes.
At that point, thanks, goodbye.
Exactly.
Even then, there, you certainly have
the pros and cons of decentralisation.
You say, okay, it’s the bank of yourself.
But if you lose your keys, you can’t call the call centre.
Of course. Of course. Sure.
So you say, also from that point of view,
it makes sense to take the best from the various models.
Yes, in fact another one of the big opportunities
in the ecosystem is that of saying,
how do you manage the key?
It’s for that which companies like Ledger, Trezor,
they give you a key, simplify the use,
they tell you, look, do not make a copy of the key yourself,
because you will likely lose it. You put it in the flash drive
and basically it uses the flash drive
and you’re given the key, which is the hardware wallet,
as it’s called. To simplify
the interaction with the keys.
If our friend from the Canadian Exchange
had done things like, let’s say,
they should have been done, the problem would not have happened.
Why did it likely happen?
For a problem of trust.
Because here you say, okay, I have to leave the keys to someone.
Who do I leave the keys with?
Because then, if they are stolen, there is the usual problem
of ownership. On the blockchain, some regulators are saying,
they are proposing to define
the concept of ownership of Bitcoin or cryptos,
transferring the property of the key, that is,
you have the key, so you are the owner.
This doesn’t pan out and it really shows
a lot about this problem, and of the Canadian Exchange,
because you know, the key to a wallet, everyone in this
room could have it, who is the owner?
Of course.
– Someone could have it, – If you have it, it will be stolen
here I am,
Exactly but then we could also both have it
you can copy the key. So the owner,
is it me or you? And if you you had the key and I copied it
secretly, you do not know that I could be the owner too.
So you can see that there is a concept of ownership
– a bit – blurred
Yes, yes. New.
– Great Thomas, thank you very much. – Thank you.
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