Brock Pierce: Blockchain technology

Brock Pierce: Blockchain technology

so I'm here to talk to you about blockchain technology it's something most people don't understand and so I like to take you back in time just to set the context because we all understand the Internet today but it wasn't that long ago that very few people understood what that is and here's how I like to start this conversation yes I wasn't prepared to translate that as host oh that little tease Oh mark with the a and then the ring around it at C that's what I said mm-hmm case if she thought it was about yeah but I'd never heard it around never heard it Mark had said and then it's um it's stupid what I said it violence at n-b-c around know what you're missing if there is violence at NBC GE comm I mean what Allison should know what do you say no nail any wood Internet is that massive computer is the one that's becoming really big now what do you mean that's big wait how does one it no way what are you write to it like mail no a lot of people use it and communicate it I guess they can communicate with NBC writers and producers Allison can you explain what internet is no she can't say anything in ten seconds our lives Allison will be in the studio shortly what does it mean oh I thought you're gonna tell us what this was so I like to start here because we all understand the Internet and we use it it's pervasive in all of our lives every day today and I think that blockchain technology is essentially where the internet was and call it 1994 this is also an article from Newsweek in 1995 talking about how the Internet's going to fail and essentially it's only used by you know criminals and that it's a passing fad and it's going to go away and I think that this is a useful set of context because you know what have you heard about Bitcoin you've probably heard it's insecure you've heard of this company Mount GOx that fail hundreds of millions of dollars disappeared well the underlying protocol has never been hacked it is the most secure system the world has ever seen if you take all of Google's global infrastructure you know times a hundred that's the kind of security or hashing it's over an exaflop the Bitcoin network so it's the most secure system the world has ever seen the first those companies have failed were essentially banks that left their vaults open you've also probably heard that it's used by criminals you may have heard of this thing called the Silk Road you know much like the internet was only used for bad things that's not really the case yes there are some bad things done with this any any new technology is going to have a yin and yang you're gonna see good uses and bad uses and as the technology develops D call it early Fringe users become a minority and the call it mainstream adopters end up using it for better things and so most of the world's top thought leaders venture capitalists academics have all said there's tons of merit to this technology and there's more there than that and you've also maybe heard oh that pic coin went up to a thousand and the price has gone down and it's probably going away the reality is that it's growing exponentially every single metric if you look at it closely aside from price which is kind of the main primary barometer of sentiment which is the data that most of you operate off of every metric is up into the right so what is Bitcoin it's digital value it's fixed supply it's programmable it's a decentralized network which means there's no governing body there's no central authority it's peer-to-peer which means you can't shut it down the only way to shut off Bitcoin is to shut off the internet indefinitely and it's an incorruptible public ledger you can't counterfeit money so you'd say well why now what is this is it something new so for the last 30 years people have talked about building a system like this but no one could figure out how so if you were studying to become a PhD in cryptography computer science mathematics it's very likely that you encountered this concept of the Byzantine generals problem better described as a double spend so the protocols that make up the Internet tcp/ip and such don't allow for you to create unique assets or individual data so for example if I were going to send you an email with a picture attached to it or money when you receive that email how do you know I didn't keep a copy for myself or send it to ten other people simultaneously this is the reason why piracy is a problem and so bitcoins creators solved this incredibly complex problem by creating a shared database or a distributed ledger so this is something new and for the first time in human history I can now transmit value from one person to another anywhere in the world with no middleman with complete transparency it's instant and the fees are negligible and it's a very big deal I mean historically you've always had to have a trusted intermediary or a counterparty in the middle of every transaction including those on the Internet so Bitcoin was the first application and I'm not really here to talk to you about that I'm here to talk to you about blockchain technology so think of the blockchain is the technology that makes Bitcoin possible and bitcoin is the first application so again think of the blockchain is the operating system and bitcoin is now one of about 700 apps that are trying to you know create innovation around the space and you're starting to see lots of major institutions use it but I want to take us through kind of what I think of as the evolution of kind of technology as it relates to what what is disrupting the world in this case we used to communicate with people verbally and that was the verbal sort of communication era telecommunications enabled us to have synchronous communications with other people around the world and obviously a lot of interesting things happened as a result of that the internet allowed us to have asynchronous and scalable communications with people around the world and so I think of all of this as kind of the internet we use today is the Internet of information the blockchain is enabling the internet of value so I can now transmit value in the same way that we can transmit data again on a peer-to-peer basis and I think this is going to be you know hugely disruptive not just to things like finance so there's three types of block chains or to specific that I'm going to talk about so the current system is built upon centralized Ledger's and if we use this as a database concept I have a database you each have a database and I don't trust your data you don't trust my day and that's how the world sort of functions today and that's why you have counterparty risk what the Bitcoin network or blockchain public blockchain is is it's a giant dumb shared database think of it like a Google Doc or in a you know an excel file that essentially is being replicated across millions of computers all over the world and because we're all sharing a database instead of all having our own individual databases I don't need to know you or trust you to rely upon that data and so bitcoins blockchain or some of these other public block chains are these giant shared databases that anyone can operate by running the software and so that's a public blockchain if you've been hearing about JP Morgan and Goldman Sachs and most of the world's top financial institutions are talking about incorporating blockchain technology into their businesses they're not talking about using public block chains they're talking about using private blockchains which is where instead of anyone having access to it I decide which parties have access to it within a walled garden again I like to use the analogy of the internet which is when the internet was first emerging fortune 2,000 companies didn't have any interest in using the public Internet they wanted to use things called intranets and so this is essentially the equivalent of what you're seeing here private blockchains that don't have all the benefit of a public blockchain but it allows you to get some of those things and I think over time everyone will end up migrating into a public Internet or in this case public blockchain and so some examples of what you can do is you start to digitize assets if it is a company I'm invested in that said let me digitize gold so in the same way that I can transfer Bitcoin from one person to another around the world why can't I do this with other assets so we can start to digitize the world's commodities we could also do that with currencies the the Philippines and a few governments around the world have already announced their interest in figuring out how do i issue my currency using this technology so it's not Bitcoin instead it's US dollars or Filipino pesos which is compelling because you've got about a hundred million people in the Philippines and only about five million credit cards and bank accounts so there's an opportunity for a government in this instance to issue that through their central bank or their Federal Reserve a currency using this technology where anyone with a cellphone essentially has access so you can see you know five or six billion people on the planet that don't have access to either are banked I mean unbanked or underbanked all of those people can have you know sort of ubiquitous financial services there's an opportunity for the developing world to essentially leapfrog the developed world much in the same way that Africa went from having you know skipping wired communications and going straight to wireless here's an interesting example of an art company that's saying let me issue a certificate of authenticity in combination with that art and so that you can no longer counterfeit art I should wear tennis shoes today here's an interesting company I guess people collect sneakers but this group is issuing digital certificates of authenticity that's an rfid chip inside of your shoe and if I want to sell that high-end collector shoe or think a Louis Vuitton bag I would be transferring that digital token with it because they're unique you can't counterfeit them and this will bring about the end of sort of counterfeiting of all luxury goods this is another company I'm invested in called chain they've partnered with Nasdaq and Nasdaq is already live doing trades to settle in clear security transactions using the blockchain so again in the same way that a Bitcoin could be transferred I can issue a stock certificate using this and Nasdaq is doing that for what's called their private markets business which is where you take a big big tech companies prior to going public things like Facebook there's robust secondary markets where those stocks are trading and Nasdaq is already live doing that using blockchain technology as the way to settle and clear stock transfers the Australian Stock Exchange in the region is already announced that they're going to be doing the same thing but they're looking to do it for the public markets you know financial transactions around the world typically clear on what's called t + 3 or you have three days settlement we're going to be moving to a world of essentially instant settlement and clearing and again at negligible fees for any financial instrument or asset Tyrion I think is a another very exciting company I'm invested in which is focused on land titling as well as healthcare one of the advantages that America had as a nation is we had a clear chain of title surrounding pretty which allowed there to be you know mortgages and loans but a lot of the world doesn't have that sort of clear chain of title and as we can start to do that with any asset specifically real estate around the world I think that that's going to be a big benefit for the developing world so once you've digitized assets and they've all been issued using something like a blockchain technology by nature if it's digital it also then becomes programmable I can start to to write rules into it for example augur is a prediction market where think about futures if you're in agriculture you might often be buying some sort of futures instrument to mitigate some of the risk around weather conditions it's almost like insurance and so they've built an entire prediction market for futures type trading but where there's no intermediary I can actually write rules into into it for example if I took a dollar bill out and I said okay I'd like to make a bet that it's going to rain tomorrow one of you may say I'd like to take that bet we programmed the rule into the money so that it's going to check the weather conditions tomorrow based upon whatever data set we tell it to look at and the money will automatically arrive in my wallet or yours based upon that outcome again with no escrow agent no intermediary in the middle you can program the asset to do whatever it is that you'd like and you're gonna I think see a lot of interesting uses of that and so I think we're going to be moving from a world where agreements go from being legally binding to technologically binding so if you're a young lawyer today in law school I I recommend you learn how to code because I think the law firms of the future are gonna look a little like this and that's probably also true of accounting but also so once you've now programmed assets and we think about things like corporations which are again paper sort of platforms we now have the ability to create corporations or companies that aren't companies in the sense that they've not been legally incorporated anywhere they're a a piece of code that exists on the internet which we refer to as decentralized autonomous organizations if you've been following the news this week I'm going to skip directly to this one because it's very interesting dow hub has raised about a hundred and fifty million dollars in the last two weeks to create the world's first venture capital firm but where there's no legal incorporation there's no entity that exists anywhere in the world and there's also no venture capitalists the money exists inside of a digital entity that resides on the web with no governing body no central authority no one manages it and if you put money into this vehicle you own a token and that token entitles you to a vote and so anyone can now submit a proposal to this digital entity and say I'd like you to fund my startup idea and all of the token holders around the world you know in a click can say I approve that I like it and if a majority of the token holders around the world have approved that transaction that startup gets funded the prior one is an example of uber where they said I'm going to create a digital marketplace for for driving but where there's no legal entity there's no kübra there's no lift and anyone can put themselves in it and anyone can buy from it but there's no entity again it's a it's a piece of software that is the marketplace essentially connecting drivers and passengers here's an interesting one called open Bazaar which is a decentralized marketplace so it's an entity that exists on the web where anyone can go buy and sell anything they want but much in the same way as Bitcoin it's software that can never be turned off so you have permanent marketplaces that are going to exist there on the web made safe is doing the same thing with storage so if you have a computer and you have extra disk space on it or a server I can say I'm gonna give a hundred gigabytes of my disk to this giant network to create a decentralized version of Dropbox and so if I want to get storage space I'm gonna pay digital currency for everything I use and if I want to offer it up I'm gonna earn digital currency by offering up any extra disk space that I might have aetherium is doing the same thing with compute so I think that much in the same way that the internet is impacted every business in the world in all of our lives this technology is going to be just as prevalent though you're not necessarily going to notice it much in the same way you used to make your phone calls over twisted copper wires and when we migrated over to using voice over IP unless you were in the telecommunications business you never realized it happened the back-end infrastructure of the world is about to change and it's going to get better fast cheaper as a result of that so this is happening now most of the world's top venture firms are all invested in the space and here's the amount of capital that's going in so in night in 1995 the internet raised about a quarter billion dollars in terms of venture funding into those companies Bitcoin in 2014 raised about 350 million last year Bitcoin raised about 780 called 800 million the internet raised about 600 million so this sector has been taking in more venture capital than the internet did in 1995 and 1996 but the world has changed a lot since that it used to cost you about five million dollars to build a basic business to sell you know sneakers online today the cost to build a business have gone down by about 95 to 99 percent depending upon the nature of the business that you're building because of things like Amazon Web Services because of things like open source software and github because of things like sass or software as a service I don't need to build everything every time I want to do something I'm going to grab and compile a number of different technologies to do that so the amount of capital that's coming to this face is going to create a a whirlwind of innovation though it takes time you know that capital has to be deployed into products and services so I'm financing a lot of those sort of companies the internet wasn't very useful until you you know had some of that basic infrastructure like a browser and an email client and search engines so again like a protocol this underlying technology needs bridges roads and tunnels and that's all that's where all this capital is being deployed today to build out that infrastructure and to also provide that technology to existing incumbents that may want to benefit from it you're also seeing most of the world's top financial institutions have all come in at this pace you know incumbents face the the innovators dilemma which is okay I see a new technology you know incumbents don't like disruption generally because the status quo is working for them unfortunately you can't stop innovation so most of the world's financial institutions were taking a look at this technology that was emerging and kind of ignored it initially then decided okay I better understand it because there's a lot of interesting people you know voting with their feet and their time and their money and so the first thing that you do in that situation is you analyze the Rhett's and the opportunities and like all things you're gonna recognize that there's gonna be this is gonna be disruptive in a bad way in some ways for banking correspondent banking for example I think is a segment of the banking world that's going away completely but there's also a lot of opportunity that comes with it most of the financial institutions are focused on the middle and back office because we've seen a lot of innovation on the front sort of line of finance algorithmic trading high-frequency mobile banking that the worlds you know we've been seeing a lot of progress there but the middle and back office was still designed for a world of paper you know fifty to a hundred years ago and it's very antiquated and so they're focused mostly on that you're not going to see a lot of cop line revenue growth amongst these organizations but where you gonna see is a lot of expenses get cut out of the business as they can more efficiently run their businesses on these technologies and some of the stuffs even older take trade finance and we're in a city where that matters twenty trillion dollars a year is you know being transacted around the world but we're running on five hundred year old technology a thing called a bill of lading and a letter of credit where you have a cargo container and a bearer share that says this is the person that's entitled to it so that's an area that we're looking at and beyond finance most of what I'm financing today are healthcare businesses we're doing a bunch of stuff with Phillips right now around using this for medical records again the distributed ledger is not only for finance it's any segment or industry where security matters privacy matters compliance matters Trust matters and so all of these things are areas where you can see opportunities for this technology so healthcare insurance legal services I just funded a company called stamper ii i don't know how popular notaries are here but it's a bit it's a big aspect of kind of trade to say this is who i am and so we built a service where you can integrate it into your email and create an immutable record around every document you have which is time stamped hashed into a blockchain and you can always go back and access it and so for a fraction of a penny everything you do can be notarized and so this is again it's not just a finance thing the I think every industry in the world is going to get impacted by it but I think I'm out of time thank you


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