foreign
[Music]
what is this new virtual world that we
are about to enter and how do we go
about building it
my starting premise is this is the most
important thing that Humanity will ever
build
a virtual world to rival the real world
and how do you do that and I shouldn't
hide from the very beginning that I see
crypto as part of that project
after many years of trying to
come up with my own view on what crypto
is all about this is uh this is where I
am right now that crypto is a lather
towards
a virtual world that we're trying to
build
let me
tell you a little bit about my book
history has begun where I describe a
theory of virtualism how do we build a
society built on
on virtual reality and also my manifest
of virtualism that was sold as an nft in
2021 and that you can find easily I
think on openc or Zora if you want to
take a look and it's up 15 points of how
to build a virtual world
I'll start
with nfts very briefly and then we'll
move on to
currency monetary history and ether and
how ether fits into that this happened
just uh yesterday or a couple days ago
Damien Hurst famous contemporary artists
burned a number of his works I think a
thousand of his works you can see some
of the works hanging there on the wall
and he burned them because they had been
sold as nfts and the buyers were able to
choose whether they wanted to keep the
nft or whether they wanted to keep the
physical object
and we could only keep one which I think
is an interesting premise interesting of
the ten thousand that was sold about
half five thousand chose the nft and
therefore the physical work was
destroyed and have chose the physical
work and the nft was destroyed
first does it with considerably
considerable style you see here this is
almost a medical covid-like operation by
which it destroys the the works and here
he is looking attentively at that there
won't be any slides let me make a a few
initial comments I see this as
not a big fan of Damian hers but I see
this is a very interesting premise that
nfts only make sense if there is no
physical object
directly correspond to that the virtual
object the nft cannot really survive if
there is a physical object on the side
and you have to pick whether you want
the physical object or you want the
virtual object where I think that Hurst
is not going far enough and most of us
are not going far enough is that in this
case the nft still refers to a physical
object there on the walls and even if
it's destroyed it was there to begin
with we still haven't figured out how to
have nfts that don't refer to physical
reality at all how to truly Embrace this
symbolic gesture of destroying the
physical object that's what I like about
this the symbolic gesture of destroying
the physical object and being left only
with a virtual object now how do we do
that and I think the answer is more or
less clear
I'm interested in in how you're thinking
about that yourselves
nfts cannot be a gpac cannot be a
painting cannot be a video
nfts have to be a form of access
permission to a program
to a metaverse of some kind it's very
different to have a painting you can
hang on the wall and there's an nft
corresponding to it but is this really
what we want you know the nft is in your
wallet on the blockchain but in fact
when you show it to your friends you
show it on the wall perhaps a video on a
screen that you have in your apartment
this is not what we want we want an ift
that lives entirely on the blockchain
that is entirely a virtual object and
this can only happen with some kind of
metaverse if you hang your painting on a
metaverse a virtual object on a
metaverse what is really happening here
is that you're having access to the
metaverse program you are becoming a
co-creator in that metaverse and that's
what an ad nft is about an nft is a form
of power over a virtual environment
with an nft you become a co-creator in
that environment an nft is not a
physical object and does not refer to a
physical object
an nft can take the form of a painting
that you hang on a virtual apartment in
a virtual building in a virtual world
that already
involves some access and deployment of
the metaverse program but more radically
and more interestingly a metaverse would
be for example the ability to drive a
car in the metaverse where the access to
the program is much deeper and allows
for much more functionality and many
other possibilities as we know in the
future if you operate a shop in the
metaverse you have an nft
that allows you to operate that shot
this I think is much more interesting
than the Commerce driven idea of NXT as
giving you property and perhaps access
to income the nft gives you power to
enter the code to enter the program of a
virtual world
now
with this in mind
with this symbolic gesture of destroying
the physical world and migrating fully
to a virtual world how do we think about
money and I hope I'll give you a broad
perspective
uh rooted in monetary history of how in
fact we are very close to what I would
call the Holy Grail of monetary
economics
what is my what is money
money is not real money is virtual and
by definition it has to be virtual I
think many people today in our society
still have an enormous difficulty
accepting this the money is the most
sacred thing they can think of and the
idea that it is not real that it is
virtual is very disturbing and you see a
lot of resistance to this a little later
I'll argue that Bitcoin is a very good
example of how people do not accept
money as virtual and kind of retrace
back to the idea of money as a physical
thing and you know that Michael sailor
for example is now very interested in
this idea that money is energy
so we're now suddenly converting money
back into something entirely physical
when I'm going obviously to disagree
with that but I think on the other hand
it's becoming easier and easier for us
to think of money as virtual
a good
turning point was I think the financial
crazy of 2008.
where everyone
suddenly realized that rather than being
something very solid very sound money
was a set of entries into a computer
program that could be change that will
and a lot of money could suddenly
disappear be canceled or transferred for
someone else and banks that were
bankrupt suddenly the next day were not
bankrupt because someone had turned the
switch in a central computer for many
people this was dramatic and still is
and it's affected our products very
deeply but it was a learning moment of
money as virtual many people in the
system already knew this but I think
2008 was a moment when the public in
general suddenly woke up to that reality
crypto I think is also part of this
learning process perhaps some of you are
going to resist the idea that crypto is
not real that it is virtual but I think
it's easy to make the argument that it
is virtual after all
before
2010 before 2008 there was no crypto
so it can't be something that has always
existed like gold it's something that is
created is a product of recreation
five eight years ago Bitcoin was worth I
don't even remember almost nothing
and today uh it is worth I think about
twenty thousand one Bitcoin so how does
this correspond to something real and
not to the way we look at it not to a
virtual world
and finally and this is very much in in
the line of my of my work what happened
to russian Central Bank Reserves back at
the beginning of March you remember that
after Russia invaded Ukraine
Janet Yellen and Mario draghi had a
phone conversation and they came up with
the idea that the reserves that the
Russian Central Bank had in Europe and
the United States were going to be
frozen it turns out that all these
treasuries and Bonds were not something
that Russia had they were again only an
entry in a computer program and they
could be disconnected from central banks
in the UK in the US and in Frankfurt the
European Central Bank
even cash that Russia had in facilities
at these European central banks were
suddenly canceled very easy to cancel
you just have to ban your central banks
from dealing with the Russian Central
Bank and suddenly all the 300 billion of
reserves that the Russian Central Bank
has parked in Western central banks have
been frozen and cannot be touched
think about this that the
the very top the apex of the money
hierarchy treasuries suddenly evaporated
and Russia found out overnight that it
no longer had that those 300 billion
in the future I can conceive very easily
that this will be used again and not
after a phone call between
to Central Bankers now converted into
politicians but actually demanded by the
public
imagine 10 years from now bolsonaro is
still president of Brazil the Amazon is
burning bolsonaro doesn't do anything
what can we do we're not going to send
our military there but how about we
communicate to bolsonaro that these
reserves have been frozen and they will
only be unfrozen if it does if it does
something about the Amazon
it's very easy to do I think the genie
is out of the bottle and it was very
difficult to stop this this affects how
we think about money because suddenly
it's difficult for many developing
countries to park their reserves in
Western countries as they're always
thinking about what could happen in the
future and the way this is going to
affect the dollar is is a very important
story
2008 crypto
geopolitics and the way geopolitics has
also transformed the way we think about
money
I think if you think about this there is
clearly a sense in our societies today
that money has evaporated that we lost a
hold of money that is something that can
be manipulated or will by the elites of
the people in charge there is now a
desperate search to find a kind of money
that cannot be manipulated in this way
which is of course a goal very Central
to crypto
economists call a form of money that
cannot be touched a form of outside
money as opposed to what I've described
so far inside money what is outside
money is money that does not correspond
to a liability or to a promise to pay or
to an obligation
if you have treasuries they are
essentially a promise that the FED has
to give you that money back if you have
a bank deposit is a promise the bank has
given you to return your money
but if you have gold there's no promise
no one is
needs to to promise to your gold is
yours it's an object that you can hold
and have property in without any
corresponding liability and that's what
makes it solid and sound it's an actual
uh it's an actual thing rather than just
a promise all the other forms of money
if you think about it they are they turn
out to be forms of credit they turn out
to be promises to pay not real money
there's a search for a form of outside
money for many people would be gold for
many others you would be Bitcoin because
the same applies to bitcoin when you
have Bitcoin it's not that anyone owes
you Bitcoin particularly if it's not in
a in an exchange but even in an exchange
it's a different question
it's a sort of storage it's not like a
security where the security itself is a
promise that someone is made to pay
so form of outside money can we find
well an obvious candidate would be gold
and for many people
the beauty of gold is that it is a form
of outside money it stands gold doesn't
correspond to any promise to any form of
credit
but the problem with gold is the
opposite
even though it's a form of outside money
it's not a form of virtual money
remember we want to have a form of
virtual outside money a money that is
not a promise to pay but it is virtual
and throughout history people have been
very aware that called had serious
problems and the serious problems were
essentially that is not programmable
it's not virtual it's not programmable
it's just a thing it's a physical thing
the problems with the gold standard were
obviously as Ben Bernanke said at one
point the money supply cannot be
adjusted according to economic
circumstances I've already mentioned
Michael seller and Ben bernank and again
didn't get any booze uh for any of them
very very nice very polite but uh so
gold cannot be adjusted according to
economic circumstances economic
adjustment takes place very slowly in
the gold standard through prices and
through salaries slow and painful
adjustment you don't have the ability to
adjust the money supply
you don't have the ability to increase
you know true gold standard you don't
have the ability to increase the money
supply as the economy grows to adjust
money creation to GDP growth all these
are fatal flaws when it comes to
building a genuine economy
monetary history and this is very clear
in the book by David Graber that that I
understand lots of people here like and
lots of people in the ethereum community
like
describes a permanent tension
oscillation between two views on the one
hand money is a real thing on the other
hand money is a virtual thing and from
the point of view of what I've talked
about so far you understand this tension
and this oscillation
on the one hand you want money to be
something real that cannot be freely
manipulated by those in power
so you turn towards gold for example but
then when you embrace the gold standard
you end up with a problem that it's not
programmable and you cannot build a
modern economy on a form of money that
is not programmable and then you return
as you did after 1971 abandoning the
gold standard you return to a form of
virtual programmable money which is what
we have today but then you run into the
problem that it's not really money
it's just credit
today all the money around us is credit
is not money so you see the the goal
here the Holy Grail is to have a form of
money that is virtual but that when it
becomes virtual does not stop being
money and does not turn into credit
the turn towards virtual money often
destroys money and turns it to credit
but to turn towards physical reality
also to turn destroys money because it
turns it into a physical object a piece
of gold is not what we call money and is
not what we want for money so I already
mentioned sailor this idea that
Bitcoin is a real thing it's a Quantum
of energy each Bitcoin corresponds to a
Quantum of energy and apparently he
likes this
but I think the view in the ethereum
community is quite different as we'll
see
um
is is Bitcoin virtual or there's
actually the Bitcoin Community kind of
refrain from going all the way and
accepted a form of of virtual crypto
crypto does offer the promise
of combining
what people used to think was impossible
combining the idea of virtual money with
the idea of outside money a money that
is virtual but does not correspond to an
obligation or credit or promise to pay
I would argue and I'll finish with that
I will argue that
ether
is like Bitcoin a form of outside money
again if you have one youth
no one owes you one if it's yours it's
you the relationship is between you and
the eve and there's no one else there's
no third party this is what defines
outside money but as opposed to bitcoin
and
uh uh I I I think this is how I would
distinguish Bitcoin from from ethereum
the idea of virtuality as opposed to
bitcoin uh ether is also a form of
virtual money and I'll make uh
two preliminary arguments not being an
expert uh and talking to an audience of
experts on ethereum two initial comments
first of all the idea of layer one and
Layer Two and roll-ups
I find the idea very promising and very
intriguing
because it allows you to do what money
always has to do to have a level of
elasticity
to be able to expand according to
circumstances not just according to
economic growth but to kind of follow
people in what they want to do you don't
want a form of money that is a
restriction on economic activity you
want a form of money that allows people
to do different things now in the system
that we have today
that's also possible I can personally
create money
if I pick someone in the audience and I
say you know up a year from now I will
give you uh
the house in Florida and here is a IOU
this IOU is actually a form of money and
then the question is whether you trust
me and you accept it
so I can two of us can can create a form
of money and we want to have an
ecosystem where this is possible now I
think Roll-Ups in Layer Two allow this
to be possible
people can create different apps on top
of the ethereum network to do different
things and they can create their own
currencies these currencies are going to
be different from ether in ways we're
going to talk about now but you can
create these currencies and you can
do whatever you want to do with other
economic agents and and create all kinds
of utilities and functionalities and
ethereum allows you to do this there is
a hierarchy
during periods of economic uh normalcy
and perhaps during periods of expansion
all forms of money and all forms of
credit seem to be the same in the
current Fiat system in periods of
expansion money in deposits is
essentially the same as money as cash
but in a period of Crisis suddenly you
realize that deposits are not real money
and cash even though I don't think that
cash is outside money it's the form of
inside money but it's a form of inside
money that is getting a little bit
outside we can talk about that
cash is better than deposits and I think
in the ethereum community you can have
something similar now in periods of
expansion all the apps on on Layer Two
look the same as ether in periods of
contraction and discipline it turns out
that they're not quite the same and the
collateral is going to be recalled and
it turns out that ether is much more
solid what distinguished the hierarchy
is that even though a layer 2 you can
create whatever you want it's critical
that on layer 2 you cannot create ether
ether is
it's in a higher level in the hierarchy
of money is in a higher level and it's
that sense that on layer 2 you cannot
create ether
it's that sense that provides discipline
to the system at the same time that
having a layer two and having Roll-Ups
allows you to have elasticity so that
the ethereum community the ethereum
economy just like the Fiat economy that
we have today can expand and contract
according to economic circumstances what
is the difference between the ethereum
community economy and the Fiat economy
that we have today it expands and
contracts according to what a
decentralized system of billions of
economic agents decide to do it does not
contract and expand according to the
decisions of a central Authority so it
allows you to do the same without the
flaws of the Fiat system the second way
and here I'll talk with a lot of
trepidation I I heard Justin Drake
yesterday talking about ultrasound money
I'm still trying to digest and to
understand everything that is involved
here but I was struck and I'll finish
with this I was struck by this idea
that in the ethereum economy in the
ethereum system
money can be destroyed it is permanently
being created and destroyed there's
permanently issuance and burning of
ether which seems to me a radically
different way of thinking about money
than perhaps every previous way of
thinking about money and certainly from
Bitcoin as well because it breaks with
the taboo that money is a physical thing
that has an existence of its own the
idea is that we have control over ether
and we can create a system where if it's
necessary for ether to be issued for
reasons providing security to the system
to the network that can be done but then
it can also be freely destroyed and
consumed by the system
then you have a kind of permanent cycle
of creation and destruction
in the ethereum system ether is in the
service of the system
David Hoffman told me yesterday this is
very different from Bitcoin where
Bitcoin system is in the service of
Bitcoin the currency
but this I believe one way to put it is
that if there is really the code of an
economic metaverse
and ether is understood as a virtual
currency in a way that Bitcoin is not
finished with two minutes to spare or
perhaps even
seven minutes to spare very glad to
answer your questions uh please don't
ask me questions about
proofs uh I I am not the best person to
answer that but uh very very happy to
answer all your questions thank you is
there an issue for
the modernness of ether that it's not
backed by men with guns
it's not backed by men with guns
yes uh I mean I I think it is
uh
every political system is ultimately
based on the Monopoly of violence
so how do we solve this problem for for
ethereum um that's one of the reasons I
think and I've argued many people in in
the crypto community that this approach
that we're going to do whatever we want
to do
and political authorities will have to
go along seems to be naive
and that if ethereum or crypto are going
to take over our economies are going to
become the center of our economies this
will have to be a process of
transformation from within with high
levels of cooperation with political
authorities
if there is a confrontation the sense
that cryptography is resistance to
violence
seems to me profoundly naive because
there are many ways and I think over the
past year or two people in the crypto
space have discovered this there are
many ways that you can use violence to
destroy crypto
so the way I see it is perhaps in one
article that I published a couple of
years ago I thought that the tax issue
would be Central that eventually there
might be some kind of agreement
compromised between political
authorities and crypto that
crypto acquires a certain of evil
unvulnerability to political coercion in
exchange for some form of access and and
some form of collaboration with
political authorities on the taxing
issue but I feel very strongly that this
has been done cooperatively throughout
the process and I'm kind of optimistic
that I see in my contacts with the
crypto space that there's been a lot of
evolution on this point and that sense
of that we are in a deadly confrontation
with Fiat and political authorities
slowly disappearing in a more
constructive attitude is developing
thanks
we have six minutes so if you want Hello
uh I want to ask you how do you think is
going to be the transition from Fiat
money that we have today to Virtual
money especially regarding uh how fast
this is going to be and how traumatic
this is going to be
I think it will be traumatic that I
agree with the kind of consensus view in
in the community I don't think and you
can probably tell from my from my
comments I don't think the question is
really about inflation
I don't think that and again Bitcoin
bitcoiners are very obsessed with the
idea of inflation the question for me is
fundamentally about this search which is
becoming more and more desperate for a
form of outside money that that the
system we have where money has really
disappeared I would go so far as to say
we live in an economy where there is no
money there's only credit there's a
credit everywhere and everything is
credit even cash is credit because after
all credit
cash is a promise to pay a certain
basket of goods
and with inflation of 10 this I think a
point where inflation is important that
promise evaporates but even in India in
2016 banknotes will recall coercively
recall and so even cash is not the kind
of money we want there is today in our
societies more and more discontent with
the sense that we don't have anything
like money
we have forms of credit there are
obviously under the control of the
correlators and debtors are subject to
relations of power I think it's a very
political question of this kind
and it is also geopolitical
the system today works because at the
top at the Apex it's the dollar
the dollar is quite interesting because
even though it's not a form of outside
money it is hierarchical superior
I think I would argue that even treasury
bills are hierarchical superior to cash
if the cash is in a different currency
at the top of the system is the dollar
but then the question you have to ask
yourself is not a question that is
discussed in in the crypto space a lot
is to what extent is the system reliant
on the survival of the dollar as the top
of the pyramid
and how much is that survival of the top
of the pyramid dependent on American
geopolitical power
and America's ability to project and
impose its power worldwide
now that that power is in crisis and
increasingly Under Pressure what impact
will that have on the monetary system
can the monetary system survive without
a negomonic
power at the top and I would argue with
Kent and we're seeing already the uh the
waves of that and of course I advise you
to be very attentive to what is
happening this week both in the UK with
guilds and yesterday Janet Yellen said
that she is extremely concerned by the
lack of demand for treasuries
uh so things are happening
hi my question is could you give a real
life example of why it's a shortcoming
that gold is not programmable yeah many
many ways to do it I mean the most
Prozac
problem is since it is a physical object
there's problems of storage there's
problems of transfer there are problems
of movement you cannot program it in the
sense of determining that at your death
your supply of gold will be divided
between your children in three parts I
mean you can tell a bank to do this but
you cannot program the gold itself but
obviously you can program ether to do
this very easily so at very Prozac level
it's this then at a more systemic level
it's an economic question of how do we
for example counteract pressure a
certain heating up of the economy how do
we adjust the economy
to different circumstances and we know
from economics this is necessary I'm
sure there's a lot of resistance in this
room to this idea of adjusting the
economy but I would suggest that the
resistance is to the idea that a central
Authority will do this adjustment
but if the adjustment is being done by
everyone collectively
I don't see that that is such a big
problem and I don't see how a modern
economy can work in that way we're going
through booms and busts in the gold
standard extremely painful adjustments
and most economic historians that I
respect think that
the two world wars were directly
connected to the inability to have some
control of our economies
the idea of the virtual world is that we
are in control as human beings it's not
that reality is in control
hi over here very very nice talk I found
it really I found it really
thought-provoking and I wanted to ask
you about these properties of money as
both virtual currency and debt
representation
um over the last couple of improvement
proposals ethereum has
effectively implemented deflationary
properties and I wanted to ask what do
you think about this and if this can
affect ethereum as virtual currency and
real money yes
yes so as I said what I find interesting
is just so Justin thinks that it's the
first currency that is deflationary not
that it has a deflationary impact on
prices but that the currency itself is
deflationary that the money supply will
reduce I'm not entirely sure that
economists might argue that Fiat in some
circumstances can also have these
characteristics when a central bank
decides to contract the money supply but
I do think it's different and I think it
is a revolution in the way we think
about money the sense that money can be
destroyed
the sense that money is just a a a code
a social code a way of organizing
society and not a physical thing and
yesterday I was thinking after just in
stock that it actually seems to make
intuitive sense to me that as you use
money part of it has to be consumed
when you use oil
you don't end up with the same amount of
oil that you started when you go to a
shop and buy something why should you
end up with the same amount of money
some of it should be consumed as it is
uh in in transaction fees in the
ethereum system but then of course you
also have to create it and allows you I
think uh like to know what Justin thinks
about this but it allows you to the more
ether is burned the more ether can be
created and the sense that you can
create ether uh also allows you to do
lots of things that for example Bitcoin
will not be able to do in terms of
providing for the security of the system
so I do think it's a new way to think
about money or not quite clear yet of
all the implications I think maybe a
last question there
the blue sweater
see
us