It’s an absolute pleasure to be back here

– It’s an absolute pleasure to be back here. I’ve spent the past three weeks really re-familiarising myself with Curtin in a way that, Rohan’s put me to work a little bit so I’ve been actually interviewing and learning a lot of stuff from faculty here. But really, another joy because I haven’t really had much to do with Curtin in the last, when was I here, ’91? So we’re talking 27 years. But it’s sort of been a real opportunity to get to know and understand the institution. And it matters to me a lot because it’s the institution that launched the career you just heard about, the career that I care about. I was a journalist, very proud journalist for a long time. Got to see a lot of the world, worked in four or five different continents, wrote a bunch of books and did a lot of different TV, film and print and radio. So a good, healthy, happy career. But I’ve since left journalism. I’m no longer formally in the profession, albeit indirectly involved with CoinDesk as Roan mentioned. I’ve gone back into academia, I’m at a university. I’m at a great university as well, MIT. But the work I’m doing around the blockchain has gotten me thinking not so much about my first university degree, well it’s my second university degree, which is my graduate diploma from Curtin, but my first one, and the brief profession that I had before I came here to pursue my love of journalism, I did a commerce degree at UWA. And I think, like a lot of students at that age, 18, just basically scraped into commerce. Don’t do that, that’s got money in it. You know, I could see the world on that. And it had nine hours contact time a week, and there was a tavern just down the road where beer was subsidized by the guild. And I got straight C’s. To this day, I think if I’d failed one of those straight C’s, I probably would have realized that this wasn’t the calling for me, and I would have moved into what I’ve always wanted to do, or done something different at least. So I studied commerce, I majored in auditing, believe it or not. (audience chuckling) And I took a job at Deloitte, Haskins & Sells wearing a pinstripe suit working with these partners with their green ledger pads and their tick pins to go down invoices, to make sure that each invoice that was being recorded in the financials was accurate. And I think I was about to go mad. I started reading Zen and the Art of Motorcycle Maintenance. I started putting my furniture on my roof and doing very strange things. I had to escape, and I did. I traveled. I think this is the only way that Australians ever resolve these dilemmas, is to get on an airplane. And I did. And I ended up in London like everyone does, and that also withered me out. And it wasn’t till I was in Thailand, living there for a year, working as an English teacher and meeting journalists who were on the Burmese border and others that I realized, oh my goodness, I have to go back and do what I always wanted to do, which is to write. And my mother, who keeps on being mentioned here, writes to me and says you got to do this graduate diploma Curtin’s, so I did. But the thing that’s really weird about this is all these years later, I am back in the middle of accounting. The blockchain is just a ledger. It’s just a ledger. But what I’ve come to learn, and this is where I now have a much deeper appreciation of my friends at Deloitte, is that accounting is actually the root of civilization. This is a Sumerian tablet. It’s the first sort of cuneiform writing. Really the first sort of really important writing we have. It goes back to 3,000 BC and it’s a ledger. It’s just keeping track of some transactions. And the very first, I don’t know if this one in particular, but the very first name, I can’t read Sumerian, I don’t know if any of you can, but the very first name ever mentioned in written form is of somebody called Kushim in one of these tablets and he’s an accountant. It’s a pretty big deal that the first written record of a name of human beings is an accountant. And it’s actually really quite telling because I’ve come to realize how important accounting is. It’s no coincidence that this is the beginning of civilization. And there’s a really important reason why because record keeping is this foundational aspect of who we are. We have to resolve another problem that is the essence of the sort of human struggle, and that’s trust. We’ve always had to figure out ways to trust each other, to form societies. So we went from living in trees to tribes to settlements and villages and towns and cities and so forth, and along the way we kept on coming up with institutional ways to resolve this mistrust. When we resolved it, then we could enter into exchange. Exchange in all its forms. Not talking about just money and trading. I’m talking about anything of value that requires me to give up something on your return requires trust. And record keeping is really important because it actually gives us a foundational layer upon which we can understand things. If we come to an agreement around a set of facts, we can then enter into exchange. And the great historian, Yuval Harari, talks about this in his book, Sapiens, where he says the reason why we and not say the bonobos or the dolphins or the penguins rule the world is because we know how to tell stories to each other. And it actually doesn’t matter what set of facts it is. It’s that we actually have that story, that we’ve got a recognition of a common truth to work with. So my book is called the Truth Machine, and some people, in the book writing space, you come up for a lot of criticism. There’s a lot of very strong opinions out there, and there’s classic responses. What a stupid title because you can lie in a blockchain. It’s just entrenching lies, and that’s absolutely true. What we’re talking about is a different concept of truth, shared truths. Money is a shared truth. Money is a fiction. There’s no real meaning or real value to money. It’s just a story, it’s a fiction that we tell ourselves so that we can go about the exercise of exchange. It’s actually a ledger. Those pieces of paper and a recordkeeping device and we believe there’s value in it because we’ve told ourselves that. But we need to come to this common understanding about what we’re talking about, and that’s where ledgers come in. They give us that record-keeping foundation. So we’ve done this, and records keeping and ledgers and accounting have just been integral to everything that we do for a long, long time. One the most important manifestations of it was from this guy. His name’s Giovanni de’ Medici. He was the guy who really set the Medicis off on a pretty successful path. Four of them were popes. But until he came along, banking was just as disparaged, horrible usury activity that nobody really appreciated. And he came along and said, you know what, we should take double entry bookkeeping, which is something that the Arabs had invented a couple of centuries earlier; and we can incorporate that into banking. And you know what, we can actually create money in this way because there was this fundamental problem that we faced with how we exchanged the existing money of the time. Notes and coins and things. And that was that what if I were to send it long distances. Who’s the intermediary? I now have to trust this intermediary to carry it. So commerce itself was inherently restricted to local exchange. But these guys came along and said what if we became the trusted ledger keeper, because that’s what, again, that’s what money is. Money keeps track of who’s debt are being shifted around. What if we did that job and we would debit the account of one guy and credit the account of another? And effectively, there could be a transfer of value in that way. So it went from just being credits to actually being integral to the way that our entire monetary system is based, and that’s what banking is today, right? After that, it may be possible for a merchant in Venice to receive payment from an importer in London. And now you had international commerce for the first time. And out of that we grew the Renaissance and the Industry Revolution. This is a pretty important invention. So it’s funny because I’ve actually written books as well about how terrible banking is and the harm that banks have done to our world. As I just said, I’ve sort of escaped accounting with this sort of very negative view of accounting. Accountants and bankers have built the modern world and we should actually probably acknowledge that. This is a very, very, very important invention. But there’s a problem with it. And I like to say that the problem with centralized ledgers comes down to two words. And those words are Lehman and brothers. (audience laughing) So Lehman Brothers was a centralized ledger keeping problem. The fact is we had to trust them, just as we had to trust the Medici, an institution to keep track of all of our records. In their case, all the trading that went on of multiple different weird manufactured assets. And they did that. And you know what, in the year 2007, they had their very best year ever. It was a 19% increase in EPS, earnings per share. Well, nine months later, all of that was reduced to zero. Was that because in nine months everything completely changed? Or was it because in 2007, the record wasn’t really accurate; that it didn’t really reflect what the collective value of those assets should be? There was a problem with the record keeping. That’s what the crisis was. The crisis was a record-keeping problem. So what it gave us is what I call the cost of trust. And this has become an important term for me. I think this is, when we wanna think about whether the blockchain, which is a really complicated, expensive, cumbersome, problematic, difficult technology, is it worth it? It comes down to what the cost of trust is. We have to compare the cost of all of this change and disruption and also, by the way, criminal activity and stuff that happens in that space, to what we might be gaining in return, which is overcoming some of these costs. Well, the cost of trust in that case was however many trillions of wealth was destroyed; and however many hundreds of thousands of jobs were lost. It was an unbelievably destructive event. But it’s not the only form of cost of trust. This is a slum in Nairobi. So this is a house. So it doesn’t, might look like something that you would sort of proudly display to the world, but the person who lives there owns that house. It’s their property. It’s not a landlord who’s renting it to them. That’s the way slums are. People own their homes. Why can’t they make something of that? They can’t because no one in the world will trust that they own that because there’s no reliable register of that ownership. So I got to know Hernando de Soto, the Peruvian economist who has written a lot about this, and he wrote a book called The Mystery of Capital. So when I was living in Argentina, which is one of my forays in that career I had, I wrote a book called The Unfair Trade. Actually, it was after I left Argentina. I went back to Peru to hang out with Hernando, and he explained to me how the people, the Peruvian miners at that time were sort of taking these huge risks and building these artisanal minds, desperately trying to grab gold out of the ground because the price of gold was soaring around the world; had no capacity to actually build an entire model of growth and capitalized development around it because they couldn’t prove that they own the right to those mines. There was no register that they could show. There was no property record that showed (mumbles) just as there’s no property record to show that the canyon owner of this place has something. So banks won’t lend to them. So companies won’t engage with them. So there’s no way to leverage your assets. There are 2.5 billion people in the world who don’t have access to a bank account. There are 2,000,000,000 people who don’t have a form of official ID. They can’t even prove who they are. They are completely locked out of the global economy because we can’t trust the records that prove who they are, that they’ve got these assets, that they’ve got these forms of value. That is a cost of trust. On a global scale, it’s a massive cost of trust. But here’s one that we don’t think we take for granted. Skyscrapers in New York, but there could be skyscrapers anywhere filled with accountants, yet again, busily doing one activity for the most part. They’ll describe it in multiple forms. What it essentially is, is reconciling the accounts of their company with the accounts of another company, because each of those is a separate centralized controlled ledger that requires us to trust the input of that company. And since we don’t trust each other, this very important word that we have to think about here, so we don’t trust each other, we have to reconcile. And we go through this cumbersome, replicative, duplicative process of going through each other’s records all the time. Think of that, multiply that across the economy. How much is the cost of that trust? And think of how our entire economy’s cadence is shaped by that. Weekly, monthly, quarterly, annual audits. And then the stock market that goes up and down depending on whether or not those proven ordered numbers are there. What if we actually had a common record? What if everybody involved in a particular activity who’s trading with each other was able to actually look at this shared record of consensus, recognized truth? Everyone could agree at any given time, in real time, that the latest transaction added to that was something worth value and that therefore we could move on and that exchanges could be built upon that. It could be an incredibly powerful thing. Now I’m not saying that the blockchain of tomorrow can do this. We are a long way from making this ready. But the reason why I’m giving you this talk is to say I am talking about something big. There is a reason why there is an enormous amount of hype around this because it’s a paradigm shift of significant proportions. It really is a 5,000-year-in-the-making change in the way we go about this record-keeping function that is fundamental to civilization. And for me, when I first got interested in this, I wrote about Bitcoin, don’t know if it was 2013, I was covering currencies and I was a columnist at The Wall Street Journal at the time, so I thought ah, this is stupid. Why would anybody want a digital version of a currency? Paper works perfectly well, the dollars is, why would anyone want this stupid thing? What the hell is mining? Made out of a computer? What’s it backed by, right, this classic questions we get, not realizing of course that money is never backed by anything. It’s always a collective expression of value, it’s always a fiction. But I wrote this fairly ordinary column and got called in by some very influential entrepreneurs and some people who had some rich, public service experiences say you’re missing it, you’re missing the forest for the trees. It’s not about the currency. And we’re still stuck in this silly debate. Everybody’s like why Bitcoin, what’s so good about it? It’s a bunch of criminals and drug addicts and everything using this thing. (chuckles) It’s about this. It’s about the idea that we’ve discovered a system that for the first time is able to resolve this record-keeping function. And it happens to have been applied to a very, very important ledger model, which is that of money. So what is it? Well, it’s a decentralized consensus. So we’re trying to figure out how collectively a group of people running computers, a group of institutions can, at any given time, come through a consensus mechanism. So I’m not gonna go into the details of how the blockchain works because some of this stuff gets very technical, but the very core idea is rather than having one centralized record keeper that is taking in details from all of its customers and centralizing that record, every single participant in the ecosystem is actually keeping their version of the same ledger and coming up with a mechanism on an ongoing basis to update that. And it’s got all this powerful cryptography to keep it very secure. And it essentially has this capacity to be updated in real time. So we know at any given moment what the record is. And Bitcoin is the first iteration of this that has succeeded. It has a very innovative way to prove the integrity of the participants in the process because if you think about what it is, it’s a permission-less system. Any single computer anywhere in the world could participate in the ledger-keeping function. But if you could just replicate yourself, which you obviously can, just look at how many real Donald Trumps there are claiming to be, the fake bots of the Internet, it’s very clear that you could quite easy replicate yourself and therefore take over the consensus, right? You get more than 51% of the voting power, that’s not exactly the way to describe it in Bitcoin, but it is essentially the concept; and therefore, once again, start changing the ledger and manipulating it like a centralized ledger keeper. So you could, what they call double spend. You could spend one dollar and spend the same dollar a second time. So Bitcoin’s actually a remarkable achievement because without anybody being in charge, it’s managed to avoid that problem by imposing a very important computational cost in the protocol and what each of these computers are doing and therefore creating a very unique form of security. So this is what it is. And what it comes up with is this ongoing sequence of blocks. In Bitcoin’s case, it’s 10 minutes each. They all have transactions in them and they have this cryptographic structure and it’s rather complicated, but the bottom line is it’s essentially immutable. And I use the word essentially and I put it in quotes up there because I’m not here to tell you that this is some massive utopian solution. At some point, quantum computing could quite easily break this. But this is important. Yes, somebody could actually take over the network. If the Chinese government or any other government for that matter wanted to spend billions and billions and billions of dollars to buy out all the computing power in Bitcoin, it would be able to take over 51% and change it. But for nine years, it hasn’t been broken and that’s a pretty impressive achievement. So it becomes immutable because now that no one can control the ledger, there’s no Medici or Lehman Brothers or anybody else who’s able to say what they think should be in the ledger. It’s actually a consensus process. It’s essentially immutable. Nobody can change it. And again, at the risk of sounding hype-y, this is a big deal because throughout history, records have always been changed. The reason why the Nazis burned books is because that information is valuable. And if you destroy information, if you have the capacity to wipe it away, then you can control people. So an immutable record of history is a pretty good thing. It has its own problems because we might wanna change records, and now we have to deal with the fact that it’s there and figure out how as a society we’re gonna reverse our own transactions rather than changing this shared common record of truth. But just sit with that. Again, I’m not saying we’re ready for this. We’ve got a lot, a lot to happen, and there’s a lot of problems in this. But it’s a big deal. It’s not just a flash in the pan concept. And there’s another really interesting feature that this gives us. One thing is Bitcoin’s the first digital asset. I’m just talking about Bitcoin here because it is the first real proven use case in it. Until it came along, there was no way to prove an asset in digital form because anything digital could be replicated. Anything on the Internet could be just moved and shifted around. So we vent to digital rights management to manage our things in the digital realm. When you had an iTunes account, you didn’t own the song, you had a perpetual license with Apple who would, in theory, sue you if you copied it because they recognize, or lawyers everywhere recognize there was no way to actually control and define assets which need to be unique in scarce forms of property. Instead they would have a litigation system for managing those rights. But now we have for the very first time a representation of value that has a digital form. In Bitcoin’s case, it’s just in entering the ledger, but it’s a digital version of that. And that matters enormously because we know that that digital products are very powerful, that software is powerful. So if we can map the world of value, all the things we do in the world that have value and place it into software, and in and out, interact in that way, we can do a lot of really powerful things that we couldn’t do previously. One of the things that happens is money becomes programmable. So money, currency is agnostic as it is currently now. It doesn’t do anything in particular. It’s very powerful, but it’s just an expression of value. It’s a form of information. I’m telling the world that I’m transferring these dollars to you. But when it’s software, it can actually do its own things. It can turn things on or off. I have a very good friend who lives in Johannesburg, and I watched him, I was in Cambridge at MIT at the time, and another guy was on stage sending money to this friend of mine in Johannesburg. He had his wallet, Bitcoin in his smartphone. His Bitcoin wallet on the screen. And a little image of Lauren, my friend, was just in the corner. Lauren was in a dark, and he was at a school in Soweto in Johannesburg. And he sent money. And what he was actually doing was sending money to a smart meter attached to the school. And the lights came on. And all these people started dancing behind him. The money was programmable. The money acted. It can now do, if this, then that functions. It is a really, really powerful idea. And the other really interesting, I think, powerful idea that’s emerged out of these concepts is smart contracts. And I always use these in quotes as well because contracts, these are not contracts. Contracts are agreements between people and institutions that reside outside of this. Well, what this is about is actually the execution of those contracts so that the terms and conditions that are signed within a contract can now be executed in a way that neither party could ever manipulate because the computers that are part of that decentralized blockchain structure are now following their own protocol for how they execute the terms that you and I have entered into. Neither you and I can change it. And that’s actually really, when we start to think about the multiple ways in which we have to reconcile each other’s activities and we shift it to a smart contract structure, it means that there’s great things that can start to happen across entities and people who wouldn’t otherwise trust each other because the smart contract can execute now our obligations with each other in a more efficient way. So people are starting to think, I’m not gonna go into these too heavily because we don’t have a lot of time, but what’s happened is that now that we’ve thought about that big broader concept, not just obsessing whether or not Bitcoin is gonna ever overcome the dollar, and I personally don’t think it will; I think we have money that’s already working fairly well as it is and Bitcoin will end up being a form of digital gold, in my opinion. But we have understood that the incredible thing about Bitcoin was this capacity to create a decentralized record-keeping system, and that now therefore there are multiple use cases that are being used. This is why our book, again, rather hyperbolically calls it The Future of Everything because it does touch pretty much everything if you think about where record keeping and its function lies within society. So asset registries I’ve talked about. People’s homes in Kenya and anywhere else in the world for that matter, the idea that we might be able to record their property in an immutable way is pretty powerful. You might have heard about ICOs and all the hype associated with these things, initial coin offerings. People have made lots and lots and lots of money, sometimes for fairly useless ideas, but putting that aside, the interesting idea that we can now have an underwriting process that no longer needs an investment bank that I can raise money directly with anybody anywhere for the sake of a function and have them know that their rights will be at least executed according to a smart contract is kind of pretty powerful. There’s similar sort of things for asset issuance. IoTs are important because we have a decentralized world emerging with distributed energy and smart cities and all these devices. There are just gonna be billions of them having to talk to each other. There’s not gonna be a centralized ledger keeper sitting in the middle of all of those transactions. To enable the decentralized future that is inherently coming anyway, I believe we need a decentralized trust architecture. And something like the blockchain, if not the blockchain itself, is going to be necessary to allow that to happen. So supply chain management is a big popular one. This is more, and a lot of these by the way are being thought of currently around private blockchains, which is a different idea than the Bitcoin public blockchain. But it’s still a similar idea of shared distributed computing for consensus. And a really important one that is difficult but is certainly very, very important is digital identity. Because notions of who we are and what we do are gonna be, they need to be given digital qualities. And we have the potential to use this technology to provide trusted records of people’s attestations to their attributes. And anywhere in the world, people who don’t have ID may well now be able to find ways to do this. This is a challenge that has privacy and all sorts of other complications associated with it, but there’s some very interesting research going into it. And look, as I keep saying, we’re still a long way to go. We don’t know how to scale this Bitcoin when it goes seven transactions a second. Visa does 50,000. And blockchains are expensive. There’s a lot of these computers that have to come together. In Bitcoin’s case, it’s expensive because a lot of energy is being expended. A lot of people complain about that and sort of talk about how we could destroy the planet with Bitcoin. I tend to think that, again, it’s like, well, against what, right? Because there’s an enormous amount of cost and waste and also energy consumption that goes in the alternative world. And the other thing that’s interesting about this energy consumption problem in Bitcoin is that it could incentivize people to, it inherently does incentivize people to seek out the cheapest form of energy; and we now know that renewable energy is the cheapest form. So there is a sort of a feedback loop there that’s pretty important. The UX, the user experience of these crypto digital assets is terrible. People don’t really know what a private key is and they’re terrified that if they lose their key, they’ll lose everything, and they’re right. We need to figure out better, easier forms of custody for them. This is a really important point, coordinating around this, particularly these private blockchain ideas which I think aren’t the ideal. I want to have a permission-less open system. But in the meantime, while we have to deal with the complicated world we live in, companies are building private systems. And to do so, they need to get all the parties on the same board to agree to change their sharing and their information around that. The point is that this technology matters because it’s a we technology. You often here CEOs come and say why do I need a blockchain? My company works perfectly well with this system. And the answer is yeah, of course it does. But you’re talking about your proprietary information. The problem you’re trying to solve is not your internal transactions. It’s how you deal with the untrusted parties on the other side. How do we coordinate across supply chains? How do we coordinate across ecosystems and so that we can collectively arrive at something of value? And then there’s this sort of whole regulation problem, like our existing laws don’t know what to do with a system where the authority doesn’t exist. It’s actually a collective system of consensus. Where does the buck stop? Who do you go to subpoena or sue when something’s gone wrong? We need to think differently about what some of our legal frameworks are, and smart contracts has to be designed with this in mind. And then there’s just self-regulation. The entire industry is full of charlatans at the moment who are promising all sorts of crazy things, to the moon proclamations and stuff. I really wan see this industry grow up, and I wanna see some of the broad international institutions that have helped to form the Internet come to bear in this space and figure out what the appropriate governance is so that we can have a self-regulation framework that works. But look, there are, as I said, a lot of critics of this technology, and they sort of point out things like the amount of energy that’s being expended on it. And I talked about all the criminals involved, but they also say, look, you know, it does seven transactions a second, this could never apply. The thing remember is that this specially, but no technology is ever static. We’re in a constant state of innovation, and we’re accelerating that process. If you were saying 15 years ago that, why would you ever think of doing cellphones in Africa? They don’t have cellphones, they don’t use cellphones. To think of new business models built around cellphones in Africa is a stupid idea because they need cellphones. Well, there’s now 73 cellphone subscriptions for every 100 people across Africa. And the rest of the world in total is over 100. So there’s always an assumption of stasis when in fact we are constantly innovating. And in the world of blockchain, it is an incredibly fast process of innovation because it’s open source. The system shares this information and you have collaborative communities everywhere who are constantly building. So I throw out the classic steam engine story here. So Savery’s steam engine is the one that came out in 1698. You’d probably be, well really? It’s really expensive, and how are we gonna work it? But what came along, and he had his condenser and a whole lot of those systems there that made it far better, and that was it, that was the thing that happened. That took 78 years. Things move a bit faster now. But let’s just remember that if you’re gonna, thinking about where this is going, I think it’s important to understand that we are in a state of constant and actually absolutely exhilarating flux. So it might not be the blockchain that solves this, but I do believe we have the makings of a foundation for a distributed trust architecture, which is gonna help us move to a more decentralized economy, and that we need to do that. The other thing I wanna leave you with is this core problem; that we are always at risk of being slaves to the algorithm. And I’m, as a former journalist, very dismayed by what’s happened to facts. And I, unlike most people, don’t necessarily blame Russia for that or Donald Trump or Cambridge Analytica for that matter. But I do blame Facebook or at least those of us who figured that having a closed algorithm that will dictate what our echo chambers should be and which communities should come together and which bullshit they should listen to, that is the problem. So a friend of mine said… I can’t help but think of Animal Farm. If we build these monolithic algorithms that somebody else has designed that we have no input into, and we think it’s the holy solution for everything, then we will become slaves to the algorithm like the Animal Farm, the animals were to communism. Orwell’s analogy. So how do we resolve this? Well, we don’t just act Luddites do and imagine that this isn’t gonna change and we should all just ban Bitcoin and get away from it. We get involved because even though it’s an open source system, and that’s great, that’s much better than the Facebook system, it still has a very small group of people participating in it. They’re all a very narrow group of brilliant, well-intended people. I’m not suggesting there are bad people designing the algorithms behind all these important blockchain developments. But they’re of a certain mindset, and they will inherently build their biases into the technology that is essentially a governance system. This is a system of governance. It will govern our world, it will govern our economy. We need everybody to get involved. We need institutions like Curtin to develop research, to develop learning around it so that everybody, people of all races and certainly across both genders, need to become informed. And they need to learn how to code, but they also need to be involved in the debate, discuss what should our legal system do with this. What should our smart contracts be? What is the future of work in this context? What are accountants gonna do? Get involved. I think this is a really important point, otherwise we’re slaves to the algorithm. So I’m not here to tell you that the blockchain is a utopian solution for everything. It’s a very, very powerful technology. It’s an important paradigm shift 5,000 years in the making. But it is something that is coming regardless, and we need to all get involved. Otherwise, the doomsday machine could be built. So thank you very much for your time. I really appreciate it. I think we’ve got time for some questions, hopefully, Rohan. (applause)