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David Morris inhis TED Talk

It is quite fascinating listening to David Morris talk about how cryptocurrency can shape the financial system in the future. He keeps things in perspective even while dealing with a heady subject and paints a picture that is really easy to comprehend.

In his engaging TEDx Talk, David Morris explores how Bitcoin and related technologies will radically change just about everything.

For our Fintech readers, we have segmented his talk into various sections so that our readers can understand clearly and easily without getting bogged down in the details.

Can you expand the role of money in the theme of your talk which is Emergence and how blockchain comes into the equation?

So the theme of the event today is Emergence and we would like to think that we move in a time of Emergence and there have been many similar times of Emergence throughout history. For example if we go back to the third kingdom of Egypt about 2666 BC, the king whose name was Djoser at that time commanded his people to build a pyramid of six steps surrounded by a large temple complex. And it was the first of the great Egyptian pyramids and it was an astonishingly complex project. Materials had to come from throughout the kingdom, thousands of labors worked according to a plan that unfolded in over 20 years. The man who put that plan together and executed it was called Imhotep and he was a scholar, physician, and an architect and more than a thousand years later he would be deified by the Egyptian people as a patron saint among other things. Now it is very appropriate that the man who helped usher in Egypt’s era of pyramid building is remembered by history as a writer because all of these grand projects, the things that emerged are the product of many people working together through space and over time united by communication technology, whether you are building a pyramid or Great Wall of China or a transcontinental railroad. These structures, these groups of people working together what the sociologist Lewis Mumford called ‘mega-machines’…networks of people joined by roads, by words and by laws to pursue collective dreams. Mumford was writing in the early twentieth century but he wouldn’t have been too surprised by the shape of our society has taken in the time since then.

We now have globe-spanning instantaneous communication, we have transportation networks that can take us anywhere we want to go within a few days and we have one of the largest, richest and most complex education systems the world has ever seen. Now this has allowed us to accomplish great things, not just in the physical realm but in terms of technological innovation. So take the phones you have in your pockets, like the pyramids the components of those phones came from far away but in this case we are talking about halfway around the world, not just the far reaches of the Egyptian empire. The labor that went into that phone involves millions of people not just thousands and technology that it developed over more than a 100 years going back at least to the time of telegraph. As a human accomplishment, the iPhone puts the pyramids of Giza to shame. Now the example of the iPhone also gets us into a realm of topic that we are not usually used to thinking about as a communication technology or a form of social organization, and that’s money. We now increasingly believe that a lot of the laborers who worked on the great pyramid were actually paid and not slaves as was so often depicted in Hollywood movies. King Djoser also had to pay for the materials, he had to pay for food for the laborers and it was really easy for him to marshal those resources, right…he was the king, he just says we are going to build this huge pile of rock in tribute to me and it happens.

For us to accomplish big things it is a little bit more complicated and also a little bit more efficient. We make individual choices about our spending, our investments, our donations, our taxes and that money goes to various things we believe we need or we want to see happen. And that has allowed us to do some amazing things. We have a money system that is more efficient, more effective than many points in history, if not any points in history. That also allowed us to accomplish all these great things. And you may not necessarily wish to divulge the case, I can talk to you for hours about income and inequality as long as you can afford my fee but we don’t have to agree that reality is fair to agree that is reality. That’s why I am here today to talk to you about something called a blockchain that is emerging and will make do for the money system what internet did for information and what the internal combustion engine did for transportation by making it more swift, cheap, widespread and granular. The blockchain is something you may already be familiar with from the example of cryptocurrency bitcoin everybody was talking about especially couple of years ago. And bitcoin and the technologies that emerge out of it are going to help us take our society to a new level of efficiency and we are going to have collective projects like this pyramid that are simultaneously grander and more subtle than you have ever seen before.

How our money system lags behind when you compare it with the advancements made in communication technology?

At present, somehow in this era of astonishingly advanced communication technologies and transportation networks our money system lags a little bit behind. So we have a lot of points that are kind of pain-points where there are maybe inefficiencies, excessive strangulating fees or what the classifieds back in the days used to call misconnections. So for example, we can now talk live to somebody in Mongolia over video chat but if we want to send them 20 dollars it might take a week. If you are an inventor, you can browse Alibaba for the parts available from factories halfway around the world, but to pay for those parts, you may actually have to go down to the bank, purchase a money order, put it in an envelope and send it across the ocean. A Bedouin traveling in desert can download Moby Dick to his iPhone for free but if he wrote the great Arabian novel and his American publisher wanted to send him a royalty cheque, Western Union might end up taking 25 percent of that. A huge portion of our economic activity now passes through credit card companies, wire transfers, clearing houses and other middlemen. And some of them fit together well while some of them don’t. But the systems these companies created were necessary in their time and even great accomplishments, and we still use them because they are the best way that we can connect our assets to this big thing we call the internet.

But imagine having gone through all those examples of problems our system has, if our ledgers, if our assets and debts were connected more directly to the internet. If we could instantaneously send money digitally to one and another from any point we now access the internet to any point we now access the internet. If could help donations for food to disaster zones, it could prevent currency manipulation by corrupt government, it can have all kinds of effects maybe making it easier for you to buy a Coke with your phone. Now the problem with this idea is of course those ledgers as soon as they are put on the internet would be instantly destroyed by a legion of hackers. Imagine DDoS attacks, phishing, spyware, all targeted directly to your precious bank account. Within days if not weeks, the entire money supply of the world would be divided between China, Russia and Nigeria. This is because the internet, for all the same reasons that it was able to spread very quickly around the world; it is actually not a terribly secure technology and certainly not a very reliable one. We have all experienced you know Netflix stutter a bit while you are watching a video, that is annoying but that little stutter middle of a bank transfer is potentially catastrophic.

What is the role of blockchain to mitigate the limitations of the current money system?

Now this is where the blockchain comes in. A little less than ten years ago, someone and we really still don’t know who figured out how to make data secure on the internet. The technical detail of how the blockchain works are arcane to say the least so I am going to do my best to get it over with really quickly. Blockchains including the one that runs the cryptocurrency bitcoin use digital currency to incentivize hosts around the world to keep copies of a single ledger tracking debits and assets in any given currency. These nodes connect to one another to constantly check what’s on that ledger and make sure everybody has matching copies. If for example one node or even many nodes were corrupted then the rest of the network would kick them off. This is how we are able to have a large network that connects people from one point to another to a single ledger that is trustworthy. The end users, the people who hold accounts on these ledgers use private keys to access their entries and therefore can send money anywhere in the world using that technology. Now, I am leaving out a million things including some core security features but we will just take an example that’s in the world to kind of get the point across. The bitcoin network holds more than 3.3 billion dollars in financial assets. It has been around for six years and even though it is connected to the wild west of the internet, even though individual or private keys have been stolen or lost in various ways, the fundamental underlying architecture that protects that 3.3 billion dollars of assets has never been breached.

It is as safe as any bank ledger and it is safer than most credit card networks as any customer of Target or Ashley Madison can tell you. Now this fundamental innovation is why institutions like UBS, Barclays, Goldman Sachs and Citi Bank have all hired blockchain engineers to explore projects for them. It is why venture capitals like Andreessen Horowitz and Lightspeed Ventures have put tens of millions of dollars into startups like Circle and Ripple Apps which have raised 50 million and 30 million dollars respectively. Those investments aren’t just premised on the idea that people are going to buy Cokes with bitcoin or send money home to India. This is a fundamental new piece of our financial infrastructure. Ripple is focused on building using blockchain an alternative to the ACH system that banks currently use to transfer funds from one to another. A study by Banco Santander last year concluded that banks worldwide could save up to 20 billion dollars each year if they used the blockchain instead of ACH to conduct their internal transfers. Other startups are working to connect non-cash assets to blockchains, things like stocks, futures, houses and cars. And because we have total security on the blockchain, this new form of titling system could replace the paper and personnel heavy system that we have now. At the other end of the scale, blockchain payment systems allow things to work on a very fine scale and very small payments, because blockchain currencies are not just cheap to send, so transactions sent over this network cost about one-tenth of one percent which compared to Visa which charges you three percent. It is a pretty huge difference. But these transactions aren’t just cheap to send, you can send them in any size and very fast.

How does Internet of Things fit in the scheme of things?

Now this is important for what we are calling the Internet of Things. This developing ecosystem of objects that live in the real world around us and that we interact with to get in touch with internet in various of ways. A really preliminary version of Internet of Things you might actually have seen if you were parking in downtown St. Pete in Tampa Bay. There is a system called ParkMobile, it is a phone app that sort of kind of connects into parking system here and when you look at that screen, it tells you right up front that you are paying for your parking but you are also paying an extra 35 cents or so because you forgot your quarters. Now that 35 cents doesn’t go to the people who run the ParkMobile app, almost all of goes to payment processors, credit card companies and you know I am just guessing here but I would guess that if St. Pete used the blockchain based parking payment system, we collectively would save you know maybe ten grand a year or something like that. And even that barely scratches the surface. Because blockchain asset ledgers can also be automated in various ways leading to what are called smart contracts. Now to understand smart contracts we can start with a human innovation at least on par with the pyramids and the iPhone. This is a vending machine. And this is a beer vending machine, one of the highest evolutions of the form. A vending machine is kind of like a contract or a financial algorithm. You put money in one end and hopefully you get a single outcome at the other end. Now a vending machine doesn’t rely on any humans to maintain it on a day-to-day basis and as long as there are no mechanical problems, a vending machine is pretty trustworthy. We actually have in our everyday lives things that we kind of wish worked a little bit more like vending machines and we call them contracts. You lay out all these parts because you want to put in one input on one end and get a predictable result on the other end.

Unfortunately because humans are involved in so many stages of the execution of a contract, we actually have to get these people called lawyers who come in and make sure everybody is fulfilling their terms, it often involves a lot of fighting. One of the best examples is a will. I have a friend whose father passed away couple of years ago and he inherited a small amount of property and he has been navigating a labyrinth of bankers and lawyers just trying to get access to this thing that is legally his due. That’s money that could be in the economy being productive but it is tied up in red-tape. But what if the property in question were entered into a distributed blockchain ledger and the will was not a paper document but a distributed program that automatically transferred that property to the right person’s ledger when it learned the original owner had passed away. By the way because all the programs that live on the blockchain are as secure as the ledgers that live there, your crazy Aunt Sally cannot come in and mess around with the will even if she is the world’s greatest hacker.

What are the implications of artificial intelligence supported by blockchain networks in the future?

So cryptocurrency backed by blockchain networks and managed using smart contracts that are also distributed creates a lot of large and small efficiencies. But come with me if you will one step further to the realm where things get really weird. Because once money is this fast, granular and flexible, it can be connected to the economy in all sorts of interesting ways and managed by robots. Artificial intelligence is gifted with the agility of the blockchain asset network could set real-time prices on things we need to know about in real-time especially as population increases. So perhaps the price of data on a fiber network, the price of electricity, the price of capacity on a highway or urban surge pricing for traffic, makes you already have a kind of limited example of what this looks like. Some of you may know that about 84 percent of all the stock trade that takes place on the New York Stock Exchange is actually conducted by computers that are processing inputs and making decisions about which direction the stock should swing. They are on a very limited scale on a one, single system.

Take that kind of logic and expand it out to the world and you have got something that not only reduces certain frustration in our everyday lives but actually makes our entire economy more efficient by setting prices more quickly and more effectively. Now, as long as we are over the line into weirdness, let’s take it one step further. We are only a few years from self-driving cars and Uber has actually among other people has invested heavily in this technology. That means that within you know I would say within everybody’s lifetime who is in this room, we are going to have something like Johnny Cab from Total Recall. So we are going to have automatic taxis running around but if we take those taxis and join them with a few other intelligent systems and host certain parts of their system on a blockchain that’s linked to cryptocurrency like bitcoin, we can do some pretty crazy things. You could pay the taxi from the phone or wherever with your cryptocurrency, then the taxi goes around the corner and buys gas and orders its own maintenance using the same currency. Over time as it accumulates profits, this cab might be smart enough to say go out and buy a second copy of itself and continue operating two around the city and eventually build an entire of cabs, its own service stations, anything. Because of the financial flexibility that these tools give to artificial intelligences, we create these things potentially called distributed autonomous corporations. They are set up by groups of investors who design the business logic that’s going to dictate how they behave and inserts an original pool of capital. They are in turn given digital tokens that amount to shares in the corporation. This structure is going to be as much of an innovation as the limited liability corporation was in its time. What it allows is for anybody anywhere in the world to provide capital support for any project anywhere else. Now a lot of this is theoretically possible using the financial technology that we are operating with right now. But it is much the same way that it is possible to build a super computer using vacuum tubes.

So let us bring us back to the very near future, we have talked about flexibility, granularity and speed but let’s talk about reach. I hinted at this a little bit earlier but these corporations and all the other transactions we were talking about, they can go as far as the internet itself. This system can make stable currencies, loans, relief funds and investments available in the regions of the world that are not currently very well connected to the global finance. What many people in developing economies lack are not resources, it’s not discipline, it’s not motivation…it is capital. There are all kinds of sources of wealth and human wellbeing that are untapped across the world. Rich fields that go un-ploughed for the lack of an ox, wells that go untapped for the lack of a shovel. When we have instantaneous access we can do something about that because even some of the poorest people in the world right now have access to the internet mostly through cell-phones. They are even ahead of us in some ways using digital currencies that are resident on those phones like Kenya’s M-Pesa system. We connect those currencies to global capital and we can really start putting some of these currently under utilized resources to work. It could trigger a global jump to lightspeed. And once those resources are harnessed to the ‘mega-machine’ that is our society as a whole, we are going to be able to do a lot better than king Djoser. We might end up building pyramids of our own but may be they are going to be on Mars. Thanks.

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