Enabling Access to Markets: Bitcoin’s Vision of a Participatory Digital Economy

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Yale Journal of International Affairs: In 2008, Satoshi Nakamoto published a white paper about a frictionless, electronic payment system. I was hoping you could discuss a little bit Satoshi’s vision in 2008, and how it has grown up today in 2015.

Patrick Murck: Sure. If you read the white paper, and I encourage anybody to do that (I think that is the primary resource when it comes to the bitcoin protocol), what you will find is, Satoshi had this idea—maybe you could have trusted payments across the Internet in a completely peer-to-peer fashion, without any trusted financial intermediaries involved. I don’t think it’s a surprise that eliminating counter-party risk to financial transactions happened at the same time that we were in the midst of a financial crisis that was fueled by excessive counter-party risk. There was something there, and Satoshi was able to solve this problem. It was a difficult problem to solve, and Satoshi used a number of different techniques. What ended up happening was that you’ve created a completely decentralized transaction network for a number of different transactions. In Satoshi’s vision, it’s about payments. It’s about global payments that are friction-free. Then there are a few different use cases that are discussed in that context. I think how we are seeing it evolve is that people are looking at bitcoin and the block chain (the ledger that runs this transaction network), and they’re saying, “If this could work for payments, I bet this could work for any type of transaction.” A lot of the activity that is springing up right now is around: “How do we leverage an open, decentralized transaction network that has completely eliminated counter-party trust for other things?” Whether it is for voting, recording deed of title, recording author rights and copyright…all sorts of different applications.

YJIA: You are the executive director of the Bitcoin Foundation. Could you talk a little bit about the role of the Foundation in realizing Satoshi’s vision?

Murck: We are a trade association, so we represent our membership. Our membership helps us support our vision and our mission, which is to create more research and development into the Bitcoin Core software project. The Bitcoin Core software project is led by Gavin Andresen, who was handed (or had thrust upon him, if you asked him) the keys to the Bitcoin Core project. He is our chief scientist, and he still leads that project today, with a team of other Bitcoin Core developers. There are five of them who work on the software project. So, for us, funding research and development into the Bitcoin Core reference implementation of the bitcoin protocol, the specification for how you use bitcoin, and software. And doing so because we want to realize a vision for an open and participatory digital economy in the future, whether it is run by bitcoin, or block chains, or something completely different.

YJIA: As the world begins to wrap its head around bitcoin, or at least as I begin to wrap my head around bitcoin, I think something that many people don’t realize is that there is a proverbial arms race of proliferating cryptocurrencies out there. I think there are around 1,000 different forms of cryptocurrency. Can you discuss bitcoin’s relationship with those other forms of cryptocurrency, and perhaps, what distinguishes bitcoin?

Murck: Primarily the thing that distinguishes bitcoin is that it is the first truly decentralized system. There is a first-mover advantage when it comes to these things, to some degree. It has a proven track record of security and stability, and it has network effects. The ecosystem that is being built, is being built around bitcoin. There are other currencies, and some of them are good; some of them are not good. Hopefully what you will see is new currencies, new block chains come up, either because they support a very specific application that is hard or expensive for the block chain to manage for technical reasons, or as research and development experiments into different ways of doing things by consensus, whether it is proof-of-stake, or other things, other than proof-of-work systems that block chain does. What is really interesting is that there is a project called sidechains, which is like a wrapper around the block chain, the Bitcoin Core project, that allows these alternative block chains to essentially be collateralized by the bitcoin network. That is good for the other chains, the sidechains that are built off the bitcoin block chain because now they have real, tangible value to them. It is good for the users of those chains because they know that there is something there, it is not just somebody who is trying to create another coin, and as soon as the price goes up they would get taken advantage of.

YJIA: Sticking with these other forms of cryptocurrency, I am curious to hear your thoughts on things like Darkcoin and Zerocoin, the coins that are alleged to offer almost perfect levels of anonymity? On a related note, what do you see as the potential for these near-anonymous coins to be abused, particularly by violent non-state actors like ISIL?

 Murck: There is always that sort of potential out there, when you are talking about bitcoin, block chains, Zerocoin, or Darkcoin. Any payment network is open to abuse. It is up to people to build responsible systems. If you are building a responsible system, presumably you are looking for those types of edge cases, those use cases, and you are weeding those people out of your system. But you can’t pretend that none of these things will ever be abused. Although it is useful to note that when it comes to illicit activity and criminal activity, cash is king. It always will be because there will never be a digital substitute for something as anonymous as a suitcase full of cash.

YJIA: I think one impediment for the widespread adoption of cryptocurrency, particularly bitcoin in recent years, has been its volatility. How do you see the future of bitcoin volatility, and do you see it decreasing?

Murck: It may decrease over time, but that is something that will have to play out. I think in the near future, it will likely still be slightly volatile. It is sort of like, if you had stock in an early-stage start-up. Bitcoin in some ways is like an unbundled start-up. The difference is, everyone can see a minute-by-minute stock ticker of what that asset looks like, whereas if you are in Twitter on day ten, you wouldn’t have any idea of what your equity is worth. It’s a bit dramatic in that sense. There are consumer products, and there are things that are being built over time, to ease some of the volatility out of the system for the users on the edges of the network who will be most poorly affected by it. And also to allow people who are speculators and who serve a useful price discovery function to play in that market and do what they do.

YJIA: Let’s keep talking about widespread adoption. You have received some big endorsements recently from people like Larry Summers, as well as corporations like Google, Microsoft, et cetera. Larry Summers recently mentioned that in order for Bitcoin to have widespread adoption, it has to shed its hyper-libertarian aura, and he suggested further regulations. To this effect, how do you assess the current national and international regulatory landscape toward bitcoin, and how would you like to see that evolve in the future? 

Murck: I don’t think that Larry Summers endorsed me, but that would be nice if he did. (laughs). He did endorse bitcoin, and some others have as well. You have big brands that are willing to associate their brand with bitcoin now, like Microsoft, Dell, Overstock, and some others. That’s great; that is great market-based legitimacy. You are seeing government legitimacy too because you are seeing regulators who are taking affirmative steps to work with the bitcoin entrepreneurs, companies, and the venture capitalists…everybody in the ecosystem who is evolving bitcoin into a mainstream service, to come up with a regulatory framework that is suitable.

We saw this happen in other industries; this isn’t new. Telecom is an obvious one. When you look at something like state-by-state regulation of money transmitters or financial institutions, you see the same thing happening that played out in telecom. When you string copper wire house-to-house in a single state, it’s a very local business. Having a state public utilities commission that regulates that makes a lot of sense. When you have VoIP [Voice Over Internet Protocol], when you have Skype, and Skype-like things with peer-to-peer voice transmission, it doesn’t make sense for the state of Idaho to regulate that. It is a global technology with a global footprint. At a minimum, it’s a national footprint. You saw the FCC step in, and it took a long time. There was the Pulver decision from the FCC. It took a long time and lot of work to create a federal framework that allowed VoIP to flourish. That’s why we have Skype; that’s why Skype became worth what it did; that’s why we have it to use today. We were able to come to terms with the need for a new regulatory framework that makes sense for this very different type of non-local transaction. So, taking something local, like banking, and making it global on the Internet requires that new approach. I would add, also, that there is this myth that everyone in bitcoin is libertarian. I worked on the Obama campaign, so I am not exactly a libertarian, but I do love bitcoin and the freedoms it provides.

YJIA: Where do you see bitcoin 5 years from now? 20 years from now? Or at least, where would you like to see bitcoin in that time horizon? 

Murck: I hope that it remains very decentralized, very peer-to-peer, and that it opens up opportunity for people, not just in the developed world, not just in Silicon Valley, but around the world. [I hope that it] gives people new avenues into the global financial system. There is an issue with under-banked, under-serviced populations everywhere. Not just financial transactions, but all transactions. Institutions are failing people. You can’t record title of property; you can’t engage in commerce across borders. There are places where those institutions are not going to develop in the way that we would think is best, through democratic governance. If we can use things like the block chain technology and bitcoin to empower those people and help them raise themselves up out of that circumstance, I think that’s fantastic. The traditional system has had sixty years since the era of decolonization to figure this out, and it hasn’t done it yet. Maybe it’s time for somebody else to give it a shot.

YJIA: As we move to wrap up this interview, one question we like to ask all of our guests is: What gives you the most hope for the future? 

Murck: Going around talking to students, talking to people who are entrepreneurial, who are looking at this and seeing not just the opportunity to make money using the block chain and bitcoin technology, but seeing it as an opportunity to change the world for the better. To create a more fair, a more open, and a more participatory system that everybody can be a part of.

YJIA: As a final question: What book are you currently reading?

Murck: I am reading a couple books right now. The one book that I would suggest reading would be The Mystery of Capital by Hernando de Soto. That would be the best book to read if you want to understand the potential of the block chain in a global environment.

About the Interviewee

Patrick Murck is a founding member and Executive Director of the Bitcoin Foundation, prior to which he served as General Counsel of the Bitcoin Foundation. His expertise as an executive in a number of digital currency companies extends across the legal and regulatory issues governing the use of Bitcoin, decentralized financial systems, virtual economies, alternative payment systems, and social loyalty and reward programs. He has appeared before numerous agencies, testified on Bitcoin’s social and economic benefits before the U.S. Senate and has received the distinction of being named among “America’s Outstanding General Counsel” by ALM in The National Law Journal.

Interviewed by Justin Schuster, Yale College ’15

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