MODERATOR: Good afternoon, everyone. We’re so glad you’re here

MODERATOR: Good afternoon, everyone. We’re so glad you’re here. I’d like to welcome Michael Casey, who is the chairman of the CoinDesk Advisory Board and senior advisor at the MIT Media Labs Digital Currency Initiative. And we also have Peter Rizzo, who is the editor-in-chief of CoinDesk, and we’re so pleased to have both of them here. Just a few housekeeping items before I start. Please take a moment to silence your cellphones. At the conclusion of our speakers’ remarks, we’ll open the floor to questions. Please wait for the microphone before you ask your question. I’d ask as a courtesy that you state your name and your media affiliation. Today’s briefing is on the record, and with that, let me turn it over to Pete. MR RIZZO: Great. Yes, thanks for having us. Can you hear me? Is this – mike’s good? Great. So I guess a little bit more about myself. My name’s Pete Rizzo, editor for We’re the global leader in blockchain news. We’re also the organizer of the upcoming conference Consensus, which will be in New York this May from the 14th to the 16th. That’s part of New York Blockchain Week, which is a series of about seven or eight events now that will all focus on blockchain technology. So I think for our talk we’re going to start pretty high-level: What is blockchain technology from 10,000 feet? But I guess from our vantage point, we’re dealing with an industry that’s very multifaceted, all these events that break it into all these different segments for different audiences of different people. So that’s a little bit about me and my work. Mike, do you want to talk about your — MR CASEY: Yeah, sure. Okay, great, thanks for having us, everybody. So I wear two hats, this one with CoinDesk where I’m the chairman of the advisory board. We have a board made up of a number of experts representing industry and academia helping us sort of shape the narrative around essentially what matters with this technology as it goes forward. And the reason why people like Simon Johnson, for example, who is a MIT Sloan professor gets involved in this is because a lot of us see this technology as this enabling platform for a very different economic model going forward, and that the more that it develops, the more important it is that a lot of these different segments and these different structures get evolved. So my other hat is as a senior advisor at MIT Media Labs Digital Currency Initiative, where, similarly, we’re working on trying to sort of build out the underlying infrastructure of this technology and look at a lot of the use cases, especially those that apply in a sort of social impact context, some of which deal with the UN and deal with kind of international contexts for this. So really, this is a very broad topic. Blockchain is just a technology, but because of what it’s sort of tackling in terms of record keeping and in terms of the way in which we prove out and get consensus around facts, it has extremely broad applications, because the kind of veracity of information – the question – is fundamental to how civilization works, basically, and how economies evolve. And I’m going to make one little sort of very shameless pitch: Just wrote a book. It’s called The Truth Machine; it’s the sequel to a previous book with my coauthor from The Wall Street Journal, Paul Vigna – The Truth Machine, The Blockchain, and the Future of Everything. So it’s a good kind of explainer, and some of the ideas that I’ll be talking about today draw from the themes that we work through in that book. MR RIZZO: Great. Well, I think I want to focus in and hone on something you said there, that blockchain is a technology. I think that’s something that, dealing with many people coming to this from many walks of life, they’re oftentimes hearing about blockchain in very strange contexts. They see this wall of numbers, they see these coin prices going up and down, they see these funny-named startups raising billions of dollars, so maybe let’s just unpack that a little bit. What makes blockchain a technology, I guess, and how do you explain it or introduce it as a technology? MR CASEY: Yeah, so, I mean, essentially, it to me is a mechanism for allowing a network of computers to arrive at consensus. And so there’s this — MR RIZZO: And what is consensus? MR CASEY: So consensus is the – kind of effectively an agreement, right? So the idea that there is a record – in this case, it’s a ledger that is a record of transactions. The first use case is the best way to explain that: bitcoin, which is a currency in which transactions are recorded, and every single transaction is essentially recorded in this ledger. What needs to happen for that ledger and, therefore, the currency itself to function in a fully decentralized way – a manner in which nobody has any sort of central control over what happens – is that there has to be a mechanism by which all of the computers that are separately maintaining the ledger, independently maintaining the same ledger, can arrive at consensus and then upgrade that ledger on an ongoing basis. And that’s — MR RIZZO: I think it’s – yeah, I think it’s important that blockchain is a software. MR CASEY: Right. MR RIZZO: I think that’s one of the things that’s often undersold about it. So you see these images of coins, of gold, but this is a computer program. People are running it on real computers, and – but it’s able to create this huge economic or sort of network effect. When you see that, how do you explain those two? MR CASEY: Yeah, actually, it’s quite useful, I think, to do what I think I did when I first got into this space. I was a journalist myself at the Wall Street Journal, and the first thing that most people do when they hear about bitcoin is they just think of a coin or a piece of paper or something digital, so that’s a digital representation of this physical thing. And it’s actually the wrong way to think about it. It’s actually – when you go down the rabbit hole, you discover that money itself is not actually these tokens either; it’s actually – those just represent what money is, which is this process by which we keep track of our exchanges and our records, right? So that’s when you – when you do that and you see that, then you can start to say, well, what is bitcoin? Well, bitcoin is a software, is a technology that allows us to better maintain that record. And then when you go down that – further down that hole, you start to realize, well, actually how could we apply this recordkeeping function, this decentralized way of tracking transactions to all sorts of other things? And if you think about it, much of our exchanges of value with people are essentially transactions. When you write a post on Facebook, right, you’re effectively transacting. You’re transacting in data, and data is valuable. So what we now have is the capacity to keep track of all – many, many other forms of data that take – to take something valuable, and the value part, I think, is really important as well. MR RIZZO: Yeah, I’d like to start a little bit, even a step back from that, I think it’s important to also realize it’s a software, but we’re here because this is a computer science innovation, right? So we all communicate via protocols and algorithms today. We send data through, essentially, these complex computer programs. The difference with bitcoin in terms of it being a computer science innovation is it operates differently than the other protocols we use today. An example I like to use is SMS, right? So if you send a text message – if you send 20 text messages or 40 text messages, the protocol doesn’t care. It doesn’t need to know how much you’re using. Those texts are the same to everybody. If you send an email, you don’t necessarily need to know who sent that email where, right? We’re all using the sort of common protocol but we don’t necessarily have a need to understand how much other people are using it. What’s interesting is with money, that’s totally different. If I send you money and I send the same money to someone else and you both try to use your monies, well, only one of you can really have the money. So again, just backing up, I think it’s helpful to view blockchain broadly. It’s an innovation in computer science. It essentially governs and moves data in a different way than we’ve seen before and it’s, in many ways, like a lot of the things we use but sort of take for granted today, whether it’s HTTP or SMS or the Simple Mail Transfer Protocol. There’s all these ways that govern data. This is a new way of governing data. I think what becomes hard, then, as Mike alluded to, is just how do you make this tangible, right? I think the ways that people do it, it’s maybe this visualization of coins, but you’re bringing up – the UN itself has done some tests as sort of — MR CASEY: Yeah. MR RIZZO: — proof how these protocols can be put into a real-life context. MR CASEY: Yeah, there’s actually – there’s so many different UN cases. One of the – before I mention the UN cases – I think it’s a really important way to look at – but that – one that I think is interesting, right – so what Pete’s talking about in terms of this need to assure that data that’s transferred in some cases cannot be replicated – and money is the classic case – can be applied in lots of other realms as well. So his point is like, yeah, SMS messages – it doesn’t matter. It’s like there’s no real value attached to the message, per se. Once we place value on it, it’s important. Think of – one area that might be useful to think about where this happens is voting, right? So we can’t – if you’re going to be voting, which is a form of sending a message, and you want to do that electronically, you obviously don’t want the person to be able to send multiple votes. So what we call the double-spend problem when it comes to bitcoin, right – we don’t – you can’t be allowed to double-spend the same bitcoin or the same dollar or the same – anything else that has value. You can’t double-spend a vote, right? So that’s how we start to think about – data structures where it’s really important that there is this integrity and the lack of replicatability to that data, it becomes really important. So I think that’s a good one to voting as – and there are people working on interesting voting applications around this. There’s even a test being done, a pilot with absentee voters for a Massachusetts – one particular Massachusetts county. And the reason why that’s kind of interesting is because these absentee voters have never had a secret ballot before. The whole point of mailing in the ballot required that there had to be a third party to the – so now, you can – through this protocol, potentially – it’s a pilot, we’ll see what happens. But in theory, the idea would be that you can vote on your phone, and whereas that would have seemed like a – sort of a really risky thing in the past because the person could double vote, because of this protocol we now have the potential to both create single one person, one vote functions on the phone, and give them the secrecy of being able to vote on their own, right. So these are the kinds of ideas that are coming up. Shall I weigh in on the UN, I mean – MR RIZZO: Well just – I think it’s just important to have tangible examples. MR CASEY: Yeah, exactly. MR RIZZO: I think the voting one was good, and I think what you were saying is this can be applied in a lot of contexts, and I think one of the great narratives around the space right now is – or the technology itself is – there’s this great R&D that is happening globally to try to figure out, where can this be applied? What are the specific problems that this solves? You might hear that blockchain is a solution looking for a problem, and to an extent that’s partly true. But it’s also important to remember that the reason it’s a solution is that it solves a real problem in computer science. And it is put forth in the market in a similar way to other things that you are used to, right; there’s all these protocols, now there are new financial protocols, maybe nonfinancial protocols. MR CASEY: Well, the World Food Program, right, is a really good example of this. They have a pilot – it’s fairly large in fact – in Jordan, in a Syrian refugee camp where there’s this fundamental concern if they’re going to be delivering food. And they deliver food in a kind of a token basis, right, so it’s a – you’re not delivering food. MR RIZZO: What’s a token, is a – it’s a — MR CASEY: A token that represents a right to a food distribution of some sort, and they can spend that token at different – at different places. But there’s this – traditionally, in these camps, there’ve been sort of a lack of control over it, it’s – they’re not well policed, there are crooks who get in there and do all sorts of things, there’s violence around, taking charge of people’s tokens. But now they’ve got a control over it, because only they have the right, they have the private key that gives them the access to that. In this case, the private key is a biometric model, which has other questions, but nonetheless it’s only them that can do this, right. So that’s that level of it, but the other part is it tracks every food distribution transaction so that they – they can sort of, at any given time, have a universal record of where – how much food is being spent. And so even though they’re using multiple different vendors, different little grocers, the WFP is able to actually keep track of this. MR RIZZO: Well, I was just going to say, bouncing off what you were saying, one of the reasons I think people are looking to deploy this – the technology in these contexts is, again, blockchains are software, and software is fairly cheap. As we’ve seen with other software solutions, you can think about the web and mobile – boom in startups, right, that it’s really easy to have a new startup, to have a new software and to try to apply it in a certain context, and then again, that’s what we’re seeing is this great R&D. But there are sort of limitations to what the technology can do today, and that – speaking of another narrative, is there’s a lot of overstatement about what the technology is capable of. There’s a lot of people who are maybe looking to exploit. And journalism – I guess at CoinDesk, one of the things we deal with a lot is people who are saying things that are incorrect in the market or that may cause market harm. So I guess I maybe wanted to ask you I guess, what advice would you give to people who are coming to the space maybe new? How do they delineate – how do they make sense of these – what may seem like a wild claim, right, the ability we can send value anywhere in the world now at a fairly low cost, right. That may seem like a ridiculous claim, and you have other ridiculous claims like – how do you kind of figure out — MR CASEY: Yeah. So, like, having coming from journalism, and academia I think, I can speak to both of those. One is – keep the – I supposed it’s okay to just use the acronym, right, the BS meter should be held – kept on strong – strong force. Because there’s a lot of people when you come to this phase where (a) not a lot of people understand it, (b) there are – there is the capacity to overstretch and overhype what it can be, and (c) there’s a lot of money to be made because of the sort of – this money raising that’s going on in the cryptocurrency market. So you do get scammers, lots of them, who will come in and make these wild claims and raise money quickly. So first of all, just to be skeptical. And I would – here’s a pitch I’ll put in for MIT Media Lab: one of the reasons why the digital currency initiative was established by Joi Ito, who is the director of the Media Lab – those of you from the Japanese media probably know about Joi, he’s quite a personality in Japan – was to recognize that just as the internet needed this buildout of the protocols before we’d be ready to add all the applications on top of it, there’s still an enormous amount of work that needs to go into what we call the base layer, right. So the internet works on TC/PIP, and not many people know about it. It’s like the internal combustion engine, if you like, of the internet. And many of us don’t even know about it, but it’s absolutely critical that transmission control protocol and the internet protocol – the combination of those two – gave us the structure of the internet that allowed information to be shared in a distributed way. Getting that right took 30 years, it was just done in quiet by DARPA and at Stanford. Now unfortunately, we have to build out the similar kind of idea for bitcoin and for blockchain with the whole world watching it and throwing money at it, and it’s much harder. So institutions like MIT, but also – I would be remiss to talk about Cornell and Princeton and others, Stanford – who are really working hard on these things. We’re very much focused on this buildout of the infrastructure, to make sure it works, and to make sure it’s scalable, because one of the challenges that we face is – some of these things work in a very small context, and even bitcoin has serious challenges in terms of how many transactions it can do per second. If we want to roll this out and make this a solution for the entire world, we really need it to be more robust and more scalable. And so one of the things that’s happening at MIT is this development, something called the Lightning Network. So I don’t want to get too geeky here, but it’s a – it’s sort of a middle layer or a second layer solution. If you think about what software does, it’s a stack. It starts off with this base layer, and then you add the middle layer, middleware, and then you get software and you get applications. So Lightning is kind of like a middle layer or middleware, and it – it takes a lot of the pressure off all of the processing that’s needed in bitcoin. And that’s one of the things that’s being developed at MIT. We have the lead architect of that project. So these are the kinds of things that need to happen. And so when you’re looking – to bring it back to the point about what a journalist should be looking for – just know that a lot of work needs to happen, seek out the experts who are working on that base level. It’s not to say that the people who are doing work on impressive applications aren’t also valid, and in many respects it’s their work that helps inform the work that happens at the infrastructure level. But you need to think about it as the evolution of a big ecosystem. The one last thing I’ll say – it picks up on what Pete was saying – this R&D process is fascinating, because unlike technology that is run by, say, IBM when it’s in its closed house, or GE or any company for that matter who has its own R&D outfit, it’s all proprietary and it’s all controlled by their own mindset – much of this technology is open-source. So it’s a hive mind, it’s — MR RIZZO: What do you mean by open source? MR CASEY: Right, so these are open licenses. You write the code, you develop the code, and it can be used by other people. Bitcoin and others have certain controls as to who can actually commit code to that, but there’s a process by which others can all contribute to it. But just as importantly, you can take that code, you can copy it without any legal ramifications and create a fork, create a different version of it, work on top of it. All these things make for a much more vibrant and open and innovative ecosystem of invention and R&D. So when people say, “Well, bitcoin can only do seven transactions a second and it can’t scale,” and so forth, that’s all true in the moment, but I think it’s unwise to assume that there’s not a really good chance that this massive – there are literally thousands and thousands of developers around the world who are working on this stuff – will come up with solutions one way or another. It’s very hard to predict what those are, but there is – this is a very dynamic environment, and I think it’s one of the most important aspects of what’s going on. MR RIZZO: Yeah, I think the important balance here is between short-term thinking and long-term thinking, right. In the short-term, it’s easy to undervalue everything. In the long-term, a lot of that stuff comes true, right. You could’ve said that the internet – oh, is it really going to allow us to communicate instantly via applications – is something like Twitter, which – the 140-character message – is that going to have political implications, right. What you see with technology over time is it starts as something really small, it’s used by a few people, it’s hard to use, and then it evolves. So I guess from my perspective at CoinDesk, right, I think for my journalist hat, so I need to skeptical to make sure the information and news on our platform is accurate, up to date, and that ultimately there’s no market harm being done. But someone who’s trying to recruit the next generation of journalists who devote their time and energy to this. I also encourage them to use their imagination a bit, right. I think as Mike was saying, the technology is limited today. It can do small things, but those things are really powerful, right. You have bitcoin, the example of this global currency software that people are using. You have innovative concepts like Ethereum which you might have heard of, where people think that they can launch applications that behave differently without censorship. You do have to sort of – I caution a little bit against over-skepticism, because I think with technology, it’s easy to sort of criticize everything and then to think, “Oh, it’s useless, it doesn’t do what it’s supposed to do today.” You do kind of have to live between these two realities. And the fact of the matter is, just like the internet in the early ‘90s, we don’t use Does that mean we don’t buy pet food online? The answer is no, right. So we’re kind of living between these two realities where, one, we see this future; why do we see this? Because we have this innovation. And we also have to live with the short term, which is that the programs that Mike is doing at MIT, where people are exploring how do you just evolve the base layers, that’s going to evolve and grow over time, but probably very slowly or – that’s – so there’s some difference between these two — MR CASEY: Yeah, absolutely. I want to pick up on the reference to the ‘90s, because I think it’s a useful one to think about. What we just went through and kind of are still going through in the cryptocurrency world, you’re probably aware that the price of bitcoin soared – it got up to $19,000 – it’s now down – actually, it had a big jump up today, but, like, it’s a very volatile marketplace. And broadly, cryptocurrencies, ICOs, this whole idea of the initial coin offering – and I quite frankly believe it was and probably still is a bubble, and a very kind of extreme and crazy one. But I think it’s worthwhile to – really, the way that people described it, actually, to think about these two things — MR RIZZO: I think people saw my eyebrows when you said that. MR CASEY: Oh, yeah. (Laughter.) The beauty of this space is there can be differences of opinion quite comfortably. MR RIZZO: Your opinion, yeah. MR CASEY: Inside of these organizations. But look, I think it – and certainly when it – and I – but I think when I talk about a bubble, I talk about bubbles as being sort of transitional things, by the way. Because we were in the middle of a bubble at the end of 2013 when we got to $1,000; we came down. So who knows where bitcoin ends up, right. But my point is rather that the – what’s going on underneath it is the most interesting thing. So the dot-com bubble is really quite informative. We all tend to think about and these crazy ideas that just raised all this money, and then immediately went bust and people lost loads of money, right. And that’s what everyone talks about. They forget the fact that when you’re – when speculation is unleashed and capital is unleashed, it goes to all sorts of places, some of which – in fact, a large amount of which, goes into infrastructure. And that infrastructure sticks around and it gets used by people in the future. So what happened during the dot-com bubble was a lot of this money went into fiberoptic cable. It went into the development of 3G mobile technology. It went into things like big data centers. And all of that was then available when the dust settled after the collapse of the boom, for the big players to come along – the Facebooks, the Amazons, the Googles, and others – to give us this whole new realm of search, social media, cloud computing – all the stuff that we now take for granted was built upon the foundation that was laid during the madness of the dot-com bubble. I think something similar is underway right now. And this is, again, just my vision. I don’t know this for sure. But because of this sort of collective collaborative pool of people who are being brought together around these ideas, they’re being incentivized by these tokens, there’s money being thrown at ideas. And there’s this sort of like a social infrastructure that’s being developed. And the ideas they’re coming up with are being laid down in a new form of foundation, and that foundation is open source code, right. Because those ideas get codified, and then in sort of two or three years’ time, somebody comes along and says, “That’s a great idea. I can take that code, and I can add some more code here and build something else.” Which is pretty much what Satoshi Nakamoto did with bitcoin. He found a whole lot of ideas that were lying around, cobbled them together, and came up with this incredible system. So I think that we need to think, again, about the bubble. To Pete’s point, be skeptical, because people are making ridiculous amounts of money on what we often call vaporware – there’s nothing there. But on the other hand, the broad kind of ecosystem that’s evolving around and including all this speculation is actually collectively building something that could be very, very powerful in the future. MR RIZZO: Maybe we wanted to go to questions now, or — MODERATOR: Yeah, with a room full of journalists, maybe that time has come. And we’ll ask – we’ll have journalists ask questions. MR RIZZO: Sure. Great. QUESTION: Hi. I’m Widad Franco with NHK, Japanese public TV. My apologies because I understand this very little and it’s going to be a very basic question. MR RIZZO: Oh, great. QUESTION: So you hear a lot about – and even at the UN when they talk about using blockchain, they say that it – because things are trackable, it gives an opportunity for openness and transparency. In many ways, same as you were saying with the WFP projects. But – so if it’s so trackable, why is it used so much in the dark web or – like, that’s the part that I don’t understand. How can it be accountable and then you’re using it for all these other things that you don’t want to be tracked? So maybe there’s something I don’t understand that’s – MR RIZZO: Yeah, I think the best way to answer that is, like, everything is relative, right. So there is some things we choose to make public online in certain ways and then might not be visible elsewhere. So I think when people say that blockchain is – blockchains are transparent, that means that they can be transparent if they are created that way, and the people involved are maintaining that standard, right. So these are open networks. And it’s not a guarantee that they’re all going to evolve in the same way. I’m struggling to think of, like, a really good example for that. But — MR CASEY: Well, bitcoin itself is a good way to think about it, right. Because – so what bitcoin achieves – that is, the protocol bitcoin, the software itself – is a public ledger that all these participants can look at to assure themselves that the transactions are being sort of recorded accurately. So there’s a certain amount of public information that’s required in that process. And that’s what’s public. What’s not public is the identity – and this is actually the key word – of the individuals who are acting on that thing. What bitcoin has – actually, what’s interesting, a lot of people, and not only just sort of the anarchists and libertarians, but also people who care about privacy for even business reasons say is a flaw of bitcoin is that even though your identity is pseudonymous – that is, you are identified by addresses that are sequences of numbers and letters that actually reflect a unique address on the blockchain – that can be traced. And eventually, that tracing can find out – can link you to a real name, right. MR RIZZO: And that’s not different from concepts that we have today, right. Your phone number, if I found it on the street, I wouldn’t know that it’s yours necessarily. But if I want to find out who you are based on that information, I can. MR CASEY: Right. So some people are taking advantage of the pseudonymous nature of that, and sort of funneling money around, because regulators can’t see that it’s you and so forth, right. But they’re also finding that sometimes they’re getting caught. And if you look at what Katie Haun, who was formerly at the Department of Justice and worked on this, a famous case with the FBI discovered she was able to identify ironically these two thieves were actually from the FBI, who were supposed to be tracking down the perpetrator of the Silk Road stuff. But they were able to trace them all the way down, and that became a bit of a use case that shows how bitcoin is not necessarily the best way to hide money. It might be better to just get a big suitcase full of Swiss francs or dollars, in fact. But that said, I mean, it’s that – contrasts the two. And there are some people who are working on privacy protocols, which actually make it much harder to trace the individuals, but still give this sufficient amount of public information to prove the veracity of the information. And some people see that is going to be, yet, another dark web problem, but others, including big banks on Wall Street, are happy to see those developments with this technology because it means that when they’re entering into market deals, they don’t have to show their book, right, which is an important aspect of business. So privacy is always this – regulators and law enforcement want to have everything public, but it’s not just crooks who want privacy, right. We’ve had a big discussion around privacy lately. So there’s real benefits in trying to get this balance right. QUESTION: Thank you. Martin Suter, I work for several Swiss newspapers. Since there’s a lot of hype, I wonder sometimes what can go wrong. And I have two questions here, really. I mean, I’m fascinated by the increasing energy requirements to mint new bitcoins. Is there kind of a limit to that? I mean, it doesn’t sound really scalable. And the other question is: What can go wrong as far as when the government authorities kind of step in and kind of try to shut down these systems? MR RIZZO: You want to — MR CASEY: Two big questions. You want — MR RIZZO: The big question is – let’s – we can start with the energy requirement. So I guess to unpack that for people who are unfamiliar, so blockchain is a software. In order to operate the software, you have to run it on a computer, which requires some sort of hardware. In the case of bitcoin, the way the software works is that the – everyone is devoting their computer power to securing it, and the protocol produces a reward for people who do that proportionate to how much computing power they provide. So there’s a huge incentive for people to provide more computing power. So hence you hear these things that bitcoin mining and cryptocurrency mining takes a ton of electricity, which it does, right. So the innovation has been so great in the sector that there are now specialized computers that only mine. They just use as much energy as possible to try to put as much energy to securing the protocol and maximizing the rewards. And there’s some controversy about whether that is good or bad, which I think, again, is a societal question that I think people have to come to, right – it’s like “What is the value of the service that this provides?” I think it’s an interesting question because we don’t ask that about things like the internet, right, or we don’t ask about the energy requirements of, like, running these softwares because we all accept that their value is greater than the cost, right? So we – you don’t hear green energy people talking about how much energy the internet takes, or if you do maybe I’m not reading the right newspapers. But I think we have this conception that energy should be proportional to value. I think right now, the reason that there’s a lot of criticism here is the energy, maybe people don’t think is proportionate to the value. Maybe that’s because they don’t understand the value that bitcoin provides or that, as a society, we haven’t accepted that yet, or maybe as a society we’ll never accept that, right? We’ll just say that this is too much electricity for this cost and we’ll never do it. But I think that’s important to remember that that’s a choice that we all make, right? We made the decision at some point that we were going to make cars. Cars require a massive amount of resources that need to be taken from the Earth, assembled, and they burn energy. Like, there’s all – right – so the energy question, I think, is fascinating because we often don’t unpack just how wasteful the systems that we use are, and when we see a new system, we sometimes don’t evaluate it on a – what I think is, like, maybe a rational basis. MR CASEY: I think that’s the best answer that you can give to this, but I will just add something else, and that it’s like – it’s also useful to step back and think about how incentives work in this process because at the end of the day, all of that energy that’s being consumed is costing the miner money, right? They have to pay for this. They’re not actually incentivized – I mean, there was a bit of an alarmist article today about this coal-fired power plant being restarted to do bitcoin, which is terrible PR for it. But for the most part, what they’re looking for is cheap energy, and the reality is that cheap energy is now last year, in much of the world renewable, right? And so there’s actually an incentive for them to seek out renewable energy. Now, you can then throw that back and say, “Well, hang on a second. That’s going to displace the rest of us who are using that renewable – we’re going to have to start using dirty fuel.” So the point is, though, regardless of all of that, that there is this constant incentive process built into it. And I would argue that because of this, there will eventually – if bitcoin reaches the level where we can truly start worrying about its impact on the world, it will become so important that there will be incentives for people to build the most efficient energy systems we have for renewable energies to be developed and so forth. Yes. QUESTION: But isn’t there something fundamentally wrong if you have the technology that – that needs increasing energy the longer you use it? I mean, typically, what we want is something – I mean, the more it is used, it is needing less energy, more efficiency. But here, this whole mining process becomes ever more energy-dependent. I mean, it needs much more all the time. MR CASEY: But if we unpack what Pete said, right – so it’s about, like, what is the value of it, right? So if – I mean, you just have to get speculative about this. MR RIZZO: Yeah. MR CASEY: But, like, if we were to push this thing to the very end where bitcoin takes over the entire world’s recordkeeping system, then presumably that would be the point at which we would no longer need to add any more because its value – its value will be determined, right – the price of bitcoin will be determined by its value to society. We’ve continually increased the production of all sorts of other things. This is a form of the production. The real question is – and again, we’re open about this. We’re not saying that necessarily bitcoin is the right way to go, but that it is – it – that it be weighed against whatever other costs it is displacing, right? So this expansion is at least – I think at least a bet on the idea that bitcoin will expand. I’ll just say one quick thing about what – when people say – because again, the answer most people say is, like, that bitcoin’s useless, right? So therefore, why would we be wasting all this energy on something that’s useless? Well, that’s obviously a value judgment, but I think it’s very important for people to understand why a decentralized form of value exchange is fundamentally valuable to society, right? It really gives people’s – it is a very empowering thing and it starts to sort of create a much more reliable foundation of information upon which we can start to act. So it’s just that – the point is it’s a very complex question because we need to think about what is the value, and I know that’s hard to distill into a 400-word piece because it’s much easier to say “coal-fired plant bitcoin bad,” but there’s this much bigger, bigger question about value and what we’re displacing. MR RIZZO: Yeah. I think a lot of times, you have to ask a question and then ask another question, right? So is the communication of information across the globe worth the cost of the internet today? Maybe the answer is yes now. Is the uncensorable communication of value worth the cost that bitcoin brings? We’ll have to decide that. MR CASEY: Yeah. MR RIZZO: Sure. I don’t know if we’re picking. MR CASEY: I don’t know. We’ll let them pick here. QUESTION: Hi, I’m Sara. I’m a reporter for The Nikkei, which is a Japanese business newspaper. MR RIZZO: Oh, cool. Yeah. QUESTION: I have a question about ICOs. MR RIZZO: Sure. QUESTION: So as you said, a lot of money is coming into the market, even though there is limited tangible use cases, and especially for ICOs, they allow people to raise money quickly and develop the technology. But when I talked to people who are doing ICOs, they don’t even have any – they are – they have good intention, but they don’t have actual technology right now. And do you think it’s still a good idea, good tool – like, ICOs is a good tool for people to be able to raise money at this point, even though when – like, there are, like, years of — MR RIZZO: Yeah. That’s a tough one. So just to unpack that a little bit – I don’t know if people are familiar with ICOs. There’s this concept called the initial coin offering. So what it is is, as you were saying, people who want to build the software, they will go out to the community and they will say, “We will sell you the data that will run on the software and if you buy it, we will make it, and it’ll do what we say,” right? So there’s this inherent promise where they want to make something, they’re going to sell the thing by which it runs, and you hope that they return that. And I think in your case, this is one of those things where it’s skepticism versus long-term imagination, right? So the long-term imagination is is it – do we want a system where anyone who has an idea can go to the open global internet community and post their idea even if they don’t have the infrastructure and allow people to invest in their idea, whatever it is, as long as it’s a software-based blockchain-type system? Do we want that sort of ability of capital-raising? Or – and – but we – and if we do, we also have to accept the short term in which this is going to be a horribly abused thing by people with no intention of ever delivering a software. This is what happens when new things are created. I think the short answer is a lot of the ICOs are bad; a tremendous amount of them will produce nothing. I think that the reason for that is just that it’s early, right? We don’t really, as a society or a community of intellectual, like, people who are looking at it is we don’t really super-understand, like, what this is, right? I think – but that said, it’s important to note that there have been cases in the past where this has been effective. I think Ethereum is one of the most notable. So it’s the second-largest cryptocurrency and it’s called Ethereum, started by this now 24-year-old Canadian named Vitalik Buterin. He saw this vision that bitcoin was an uncensorable valuable – value protocol and he said, “I want people to be able to build applications to really have an app or a game or some type of service like I have on the internet, but that can’t be censored as well.” So he went out to the community, he raised this money. The difference between him and the other people who have done ICO-type fundraisings is he delivered the product, right? Ethereum is now something where all these ICOs are even occurring because he built his original vision with this fundraising tool. So I think – again, we’re – it’s another example where we’re living between the short-term reality and this long-term vision. Do we want to in the future empower more people like this young computer scientist who had a vision that sounded very crazy at the time? A lot of people doubted him. Do we want to empower him to be able to do that and unlock that value, and then what’s the cost? And I think in the short term, the cost is always going to be that people will lose money, people will get scammed, and I think it’s an unfortunate learning process, yeah. MR CASEY: I’m going to weigh in just very quickly because I know we want to get some more questions in, but I just want to say as well that lessons of history are useful here. The first limited stock companies in The Netherlands that emerged – massive scams, massive hype. This always happens and what happens is society then says, “Oh, oh, oh, oh, how do we – how do we deal with this?” And we can deal with it in two ways. One is it could be a top-down regulatory solution, and there’s a lot of that already happening and I’m not passing judgment. I think that’s one way to go about it. So the SEC and – obviously, and Japan’s addressing it, China has already banned ICOs. There’s a variety of regulatory reactions you can have to that, but there’s also this internal self-regulatory function that emerges in these marketplaces. So you look at the stock market, there are ratings agencies, there are sort of stop-loss measures that get built into exchanges. There’s all these rules about segregated accounts and there’s rules about what minorities – rules protecting minority investors. And some of that is, again, regulatory and some of it is just best practices. And you know who plays a vital role in all this, the development of these ecosystems, is the press, right? So a well-informed press that takes on a role as being the BS radar capacity to ask questions actually is a critical part of the evolution of this – of this thing. So we are very early days in the ICOs, but in the future I think that it’s quite possible that these sorts of token issuances will be just considered a very respectable way to issue things but precisely because society is going to make it much harder for people to run off with their money. There’s always going to be scams, but we’ll get to a kind of a near-enough-is-good-enough type position where there is enough confidence in the system. And we have to go through these waves of volatility and bubbles and so forth until we get there, but I think this stuff is here to stay. I mean, I personally think that right now if you’re going to buy kind of cryptocurrencies, and we are definitely not here to give investment advice, but there’s a lot more safety in what we would see as mined coins that – where there is a decentralized system that – well, there’s – okay, you’re going to say otherwise. (Laughter.) MR RIZZO: I think – I don’t know if I would go there. MR CASEY: Wouldn’t go – but okay, fine. But I — MR RIZZO: I would just say that like there’s – there are still email scams, right? That’s – there are still social media scams. I think technologies are always capable of being abused. It’s just as they get older that there’s just less – I didn’t mean to — MR CASEY: No, but I mean it’s just an interesting point that if you – like if you have a bunch of coins, tokens, and you sell them to the public and there’s nothing there, it’s quite different from a process by which there is this decentralized network who are all competing to gain access to those things. MR RIZZO: But kind of tying back to – you were trying to tie it back to mining, I think, a little bit. MR CASEY: Yeah, that’s what I’m saying. That’s what mining is, right? So mining is a different way to get hold of those coins. QUESTION: One quick follow-up question. You mentioned about the voting system that’s been pilot – like there’s a pilot program that’s been implemented. Is it done using ICOs or, like, is it – ICO necessary? Like are there any ICOs cases that close to what the voting system achieves? MR CASEY: I don’t – this one I’m talking about is not – doesn’t use a cryptocurrency. It’s a – on a permissioned system, right? So that’s a whole other conversation we can have, but there’s a very different — MR RIZZO: There’s different flavors, yeah. MR CASEY: — different kind of blockchain that doesn’t require a cryptocurrency to be the incentive. In their case they’re looking to build out – it’s called – I guess it’s called Voat, V-o-a-t, but it might be Voting, but V-o-a-t is the name of the startup, something like that. They basically have a permission system where they – whereby they’re going other have a range of different actors. It might be the Republican party, the Democratic party, the Federal Commission – a variety of actors validating the network for their own purposes. They’re not incentivized like bitcoin minors are to carry out this validation work, to do this – to do all that computation. So there’s no presence of a coin in that environment. But there are people looking at staking and using coins. There’s a whole other conversation we can have. MR RIZZO: I just want to unpack some of the terminology that you’re using, because I think we – as internet users – so my whole life I’ve used the internet. We’re very divorced from like how it functions, right. So there’s modems and there’s fiber optic cables, and then we use browsers which are on PCs, right? There’s this very innate understanding we have of the delineation of, like, how it works, right? No one – if you can’t get online on your computer, your instinct is not, “Oh, the internet has crashed.” Like you are able to understand and have some relational understanding of where you are and what the system is. Your first inclination might be I – should I check my modem? Is my phone dead? Does it – am I even on a cellphone network, right? You know how to ask questions that in this current environment with blockchains it’s very difficult, because you don’t have an awareness of the topology of it because it’s hard to place yourself in relation to it. So even what Mike was saying with why it makes sense to have, like, maybe a miner in the system, these are all just parts of the system, and like, you don’t always need all the same parts. They can be rearranged. And part of the problem is we frankly just don’t really know what the best combinations are. And right now the R&D and the interest in finding the right solution is so great that people are literally putting together every combination that they can think of, right? It’s like when you look at the pictures of old flying machines. It’s like one of the things in the space you’ll see these old airplanes that like bounce, they literally bounce up and down, right? Like you wouldn’t get in one of those and fly today because we understand that, like, rocket-propelled planes are better. And that took a lot of plane crashes, unfortunately, yeah. MODERATOR: So let’s go to the Washington Foreign Press Center, and then we’ll come back to Barbara and to Ali. Go ahead, Washington. QUESTION: Okay, thank you. Thank you for the briefing. I have two questions. My first question is about attitude of the government lawmakers, and is it regulated or pushing it forward or just let it go without any interferences? My second question is about how the blockchain technology merged with the other (inaudible) technologies such as AI, IoT? And so thank you. MR RIZZO: The first one was regulation — MR CASEY: Regulation, how are governments approaching it. MR RIZZO: You want to take that? You’re the government — MR CASEY: I love the government. Definitely not the government. But I think that there’s a variety of ways in which – governments are definitely taking an interest and more than an interest. They are acting now, and they’re approaching it as governments will, I think, from the framework of their own existing policy topology. It’s kind of like the law is framed by language, and so – at the moment, for example, there is a lot of focus on whether or not ICOs represent securities. And under the way that U.S. law is framed, whether it is appropriate or not, many people now believe that many of those ICOs are securities and that the SEC will one way or another – it’s taking a very long time and it’s taking a very cautious approach – is going to start making rules which will effectively retroactively make a lot of those ICOs have to pay some sort of a price for the fact that they’ve actually issued unregistered securities. That’s a widely held view, at least it’s an emerging view. That’s one area. One – another area where governments all around the world – and by the way, these positions vary from jurisdiction to jurisdiction, and that makes it very interesting because it’s a global, borderless technology. Startups who want to form new ideas can very, very easily, compared to other technologies, go and set up somewhere else. So ICOs, for example, are looked upon much more favorably in places like Gibraltar and Malta, these sort of smaller jurisdictions. Singapore has another position that’s a little more flexible than the one that the SEC is likely to have. All of this is happening on that. Other areas are what happens with tax, and that’s become more universal around the world. I think people are starting to see that bitcoin and cryptocurrencies should be regarded as property. That doesn’t mean that – from the eyes of the tax, right, not necessarily from the eyes of other areas of the government. But the IRS views bitcoin as property, so, therefore, you need to report your capital gains if you buy and sell currency. So that’s another way to think about it. And then there’s this whole question about: Is it money? So the money transmission laws are being applied largely around the areas of identity and know your customer so that whether or not exchanges – those that sort of buy and sell bitcoin for dollars, thereby moving people in and out of the official financial system – should be regulated as if they are money transmitters and therefore be required to get identification of all their users and so forth. And there’s another great variety of ways in which different jurisdictions are applying that – different barriers, different rules and things. And it’s quite interesting to see when somewhere like New York introduced something called the BitLicense a few years ago. It did have an impact because it was seen by many as being pretty onerous and fairly restrictive on the capacity of startups to actually bootstrap their operations, because they had to come up with a lot more capital to comply with the BitLicense laws. So New York’s laws – because again, this another area. We’ve got state-run jurisdictions and federal jurisdictions. It gets very complicated – triggered quite a bit of an exodus, so a lot of companies ended up going elsewhere or having to shut down operations. And so this feeds into this whole conversation about regulatory arbitrage where there is sort of all this globally competing operations – jurisdictions – and therefore what that will do to the technology. So that’s the first question. MR RIZZO: I think that was a great answer. I’m just going to add something small to that, which is that as someone who is trying to encourage more people to do journalism in this space, I think – it’s unfortunate to me that there’s so much emphasis in the initial questions on regulation. It is really a rich tapestry of things that are going on in terms of technological development and ideas, and if you are new to the space, I would encourage you to think beyond those sort of easy questions, right? It’s easy to kind of ask, like, about the tax implications and the regulatory implications. And they’re very important; I don’t mean to undercut what Mike said. I think his answers were very good. It’s just that as someone who has kind of dealt with a lot of introductory questions, I find that people sort of gravitate to this one. And I keep asking myself why – like why is it that when we hear about blockchain we immediately ask if it’s, like, legal or regulated. There’s something like psychological that’s kind of interested in it. And I think, like, did we really ask that when people showed you a telephone? Did you think is it like okay other use this, or did you spend all day like – or did they spend all day trying to, like, reach other people who had the telephone? And I sort of find myself wishing that more people who ask questions just asked it about the technology rather than the rules around it. I just do think it’s – because the technology has the ability to produce money and value, there’s – it has triggered something in us where we – as journalists we ask these sort of questions that, I think if you applied it in other contexts, they just like wouldn’t be the first thing you think of, and I would just implore you to go beyond that. MR CASEY: There was a second question, but this is such a rich vein that I want to tap it a bit further, and it – only because I agree entirely with Pete. I wish people as well would ask other questions. But I think it’s interesting to also speculate on the way we ask those questions. Like, “Is it a security?” is a question that’s framed by an existing set of laws, when in fact the technology may or may not fit into that, right. In the prior book that we wrote, we had a section where we wrote about regulation. We called it, “square peg, round hole,” because we’ve established laws around the financial system, around what is money and what are those things, and really once you have a decentralized record keeping system in which tokens are a new form of money, it actually is not necessarily clear – and I’ll say not necessarily, I don’t know for sure, I’m not a lawyer – whether some of these really should apply to any of these things. Sometimes it just doesn’t apply. This concept of custody, for example, which is one that is applied for securities laws, is problematic when people talk about – think of a multisig custody, where two parties, both the user and the custodian, have control over the bitcoin, and neither one can steal it. The custody questions becomes a different one, right, it’s an example of how much it changes. MR RIZZO: And the way that I ask this in a different way is that I think a lot of people, like, they ask the question like, “Why is bitcoin going up and down in value?” And the better question is, “Why does it have value at all?” And I think, like, that’s the really interesting thing, and it’s amazing to see people pass over it. It’s like, how does this data system – how does this software – how is it capable of even having value? That is a far more interesting question, but people kind of fixate on this – oh it’s up a thousand dollars, it’s down fifteen thousand dollars – it is behaving as money. This is like a – this is a data system that behaves like – systems have only been able to create in the way where governments issue paper money. So it’s – I’m not sure, but I would just encourage more people to look beyond that, right. Sometimes the question that you ask – like think about that question and what it means. It means that you’ve overseen – you’ve skipped over so much in just asking why is the price up or down. It’s the question is, why is the price, why is it at all? I don’t know. MR CASEY: Yeah, and we could – that’s another one we could go down. What’s the – wait, there’s a second question. MR RIZZO: Oh, the second question was AI — QUESTION: (Off-mike.) MR CASEY: Okay, so there’s a lot of – AI’s – I’m not so sure about AI, I think that’s way too complicated to think of how the blockchain would interact with that. There are lots of people trying to build systems to keep track of all of the different interactions of data that are required to build AI systems, and the idea that every single data entry could be logged in a way that we would have a greater capacity to prove the veracity of that, might give us greater confidence in the underlying information that’s feeding the AIs. And so AI as – blockchain is something that enables AI is an interesting idea. And in a similar way, I think there’s probably even further advances being done on IoT, because in the same way that – if you think about a system of money whereby people’s transactions with each other need to be verified to allow us to enter into economic exchanges, in an IoT world you will have multiple devices that will need to exchange value. And that value can be money, but it can also be data. All of that is also going to need some sort of decentralized logging system. Are we just going to have AWS or Google be the mastermind ledger keeper of our entire Internet of Things? I don’t think that’s a great idea. We can think about a much more decentralized architecture that would allow these things. But having said all of that, for both AI and IoT, this is one of these moments when you especially have to put your BS radar on, because is the technology ready? Because there’s an enormous amount of data that is going to be generated in these environments, and certainly none of the decentralized, purely permissionless blockchains have the capacity, at the moment at least, to handle that, right. MR RIZZO: I think that’s a good answer, yeah. QUESTION: Yeah, Barbara, from ISunTV in Hong Kong. Council on Foreign Relations recently issued paperwork – it’s basically about the foreign policy advice paperwork – and talking about how United States should strengthen their position in the digital economy in terms of this, the era of artificial intelligence. And I think that’s a good paper because it’s provide a lot of very down to earth advice on how to provide more educational training opportunities for American people. However, it is little bit disappointing to find that there’s no animation about this decentralized economy, which has been regarded, especially by the technology field, as an inevitability of the future in the coming decades. And meanwhile, we see that the – the SEC adopted a very over-heavy regulation – adoptions afford this ICOs, and the – lot of people, and one of the most – how do you say, the popular topics in the investment industry now is talking about how to go to other Asian countries like Singapore, or European countries like Switzerland, to go public, to get ICO. So yeah, so this is my question: since here today we are in the Foreign Press Center in New York, I think probably I would like to hear some sort of advice from the speakers. MR RIZZO: Well, I just think what you’re noting is that – so it sounds like you’re asking about the regulatory environment and how do regulators respond when you can always go somewhere else where the rules are a little bit better? QUESTION: Yeah, things like how to reform the domestic — MR CASEY: In the interest of promoting innovation, right? Yeah. QUESTION: Yeah. MR RIZZO: Oh, that’s a little bit different one, so — MR CASEY: Well, no – but I think that – I agree. I think – certainly the Council on Foreign Relations not mentioning blockchain technology and decentralized architectures generally, is an oversight without a doubt. I mean, I share your disappointment. I think that that – that they need to be confronting this. And I also think that – that it’s absolutely appropriate and important that government agencies and regulators think very hard about what – what their actions do in terms of promoting or discouraging innovation. And it’s not to say that they shouldn’t regulate some things, but there is this real concern, and I think that a starting point would be to your original point that – recognize that this is an important technology, and therefore at least come up with a position and make sure that that position is informed by the risk of innovation. I will – I will challenge a little bit you saying that the SEC is coming out with some very strict regulations. That’s not – it’s not quite right. The SEC has made a lot of signals about the way it’s thinking; it hasn’t actually acted very aggressively yet. It hasn’t – certainly hasn’t written any regulations. What it’s done is made a number of pronouncements about how it views ICOs and these things in the context of existing laws. And my concern with what they’re doing is not that they don’t have every right or that they shouldn’t be doing this, but that they might signal too much of their heavy-handed, draconian stuff, and not really try to recognize that there’s a lot of really innovative ideas. I worry, for example, that if all we talk about with ICOs is the money that’s being raised, and not this other idea of tokens, which is called a utility token, which is a very, very interesting idea of how we use our medium of exchange to actually change the governance of communities that use those tokens, and start to resolve huge questions about resource use and efficiencies. That by just focusing on how much money’s raised and therefore the ICOs, and whether it’s a security, we’re just not letting this narrative emerge, and then the innovators are saying, “Well, I’m getting all the wrong signals from here. Whether or not it’s true or not, the SEC’s not signaling me right. I’m going to go off and do this in Singapore,” right. So, look, I think that’s a very legitimate concern, and I think that to the most part, when you do talk to U.S. regulators, they generally get the right message and they say, “We’re supportive of innovation, we want to do this.” I think they need to be aware that this is a very different environment than the previous ones, precisely because it’s global and open sourced. And the understanding of what that messaging is needs to be a bit more nuanced, I would say that much. MR RIZZO: Me? Yeah, I don’t have any — MR CASEY: Okay. We’ll give another one to – MODERATOR: Let’s go to Ali. QUESTION: Hi. Ali Bekthaoui, I work for the newswire AFP. I had a question on value of bitcoin. I’m sorry. Peter. MR RIZZO: It’s okay. QUESTION: Its own value. I just wanted to know that – we went from around $20,000 at the end of the year for bitcoin. Now we are around seven or eight thousand. Is there – what’s the state of mind in the bitcoin community? Is there some disappointment? Is there – has bitcoin – has bitcoin become a boring asset like some other assets? And also, what’s – what are the reasons why we have now a range around 7,000 for the bitcoin that has not really moved since two months? MR RIZZO: Hmm, are you sure you don’t want to — MR CASEY: This is you — MR RIZZO: I’m the value guy all the sudden? MR CASEY: You got all the market coverage, you’re — MR RIZZO: So your question was why is it down and how does the community view that, right? I think the people who are technologists, they view it as, obviously an achievement, right? The fact that the money – you can – I guess there’s a few ways to view it, right? Think of how much money came out of the system, and the exchanges are still up, people have been ostensibly getting their money and being able to withdraw it. I think in some ways the bubble is a big achievement. The last time we had a bubble this big in 2013, exchanges went down, people weren’t able to claim money. In this case, we actually had a software system escalate in value substantially, and then people got their money. They may have gotten less money than they put in, but that’s a fact of all markets. But in terms of the actual design and structural integrity of the bitcoin economy – and I guess you can debate its relation to the regular economy and like how sound it is. I don’t think anyone’s going to argue that the cryptocurrency market is sound, but it is functional above what it was four years ago, right? If you look at what happened four years ago, there was a huge spike in value, but the drawdown of that was not safe. People lost money; people got hurt. In this case – knock on wood – minus a few obvious soft spots in the system, it seems like we might have drawn down $500 billion out of this technology system without any significant loss. That’s a big if. We might not know for some time if that was successful. In a lot of ways that’s an achievement. I think it’s important to recognize that’s a — is a legitimate technological achievement. And so the actual value of it, is $7,000 a rational number? I’ve been looking a lot at like old computer advertisements, like PCs like once cost like $6,000. Like, so you have a calculator in your pocket and everyone has a cell phone here that can perform calculating functions. Someone used to charge $150 for that. So there’s kind of two schools of thought here, I guess. It depends on how you see the value of these systems. Is the value that bitcoin provides today going to become something that’s so accessible that it isn’t worth as much, right? Calculation – it’s still the same as it was in 1970. There’s just – we don’t pay for it anymore. It’s so basic to what we use, or is it going to be something where it becomes more and more valuable over time and it becomes $50,000, a million dollars? I don’t know. I think there’s two ways to look at it. One is that definitely technology improves. Where that technology creates lasting value, those are two separate things. QUESTION: But as an asset class, as an investment, there is some disappointment on what it could have been, what some expectations — MR CASEY: Well, I think it depends on who you’re talking to in the community. I mean, clearly, people who have been in this for a while are just saying whatever. I mean, $8,000 is still significantly higher than it was at the beginning of last year, right? So there’s people who are still sitting on massive gains even if they had entered the market in early 2017. MR RIZZO: If you think about it, it’s like if you – even if you entered the market last May and it was $2,000 and it went up to $20,000, it was possible for you to have captured, like, a ridiculous amount of the total percentage returns of the asset. MR CASEY: Right. I mean, this – so that’s that perspective. Now, what is interesting is – the fact that you used the word “asset class” is interesting because that phrase has started to emerge toward the end of 2017 and it was specifically focused on the professional investors. So yeah, there might be a bunch of guys, the hedge funds and others, who got in at 19,000. Actually, a lot of them might have been the ones that were shorting it as well. We don’t know. But the thing is there’s definitely some disappointment, one would think, for the newcomers, and those might have been mom and pop investors and so forth. Again, that’s not very different from other bubbles and things like that. I think your question though was specifically the community, and I tend to think of the community as being folks who’ve been in this for a while. This is like – wow, this is just a slightly more exaggerated in absolute terms, but certainly not necessarily in percentage terms, event that looked – we’ve been through this a number of times. Certainly we did it in 2013 and 2014. MR RIZZO: I mean, I started reporting in 2013, probably around the same time you did. I mean, some of the stuff you look at how much value is in these systems. You can debate whether that’s real value or what those numbers represent. I think it’s definitely sobering and it’s definitely an achievement even at this current price, yeah. MR CASEY: I mean, it’s very volatile. And it’s one of the reasons why it’s hard – if you just think about bitcoin as a pure currency play to buy your cups of coffee with and so forth, all of that is problematic, but there’s a whole other conversation we can have about what – what a sort of a functioning cryptocurrency would look like for the purposes of that. But I think Pete’s point about like just – I think the test that the market was put to through this is really important, and also what is the value? I think really important to just say the very fact that it has value, I tend to think that it comes down to the very existence of a censorship-resistant record of transactions. That very fact, in and of itself, is incredibly powerful. MR RIZZO: Yeah, so bitcoin isn’t just value. It is also a way to communicate value. So all cryptocurrencies are that, right? So you get into, like, there’s all these shady cryptocurrencies. There’s like thousands of them. They all can be traded. That’s like another thing that I think people pass over a lot, is like the worst cryptocurrency, like you can go down the bottom of the list, scroll down to the absolute bottom of CoinMarketCap or whatever data service, it’s like it still can be sent to someone else. You can hand over the keys to those assets to someone else. At the worst of the worst of the technology, there is – it still provides utility. It still is able to capture the spark of value. MR CASEY: You might not want to own it yourself. MR RIZZO: Yeah, you might not want to. (Laughter.) But theoretically you can. MR CASEY: Yes, exactly. It’s that functionality that’s actually the most interesting aspect of it all. MODERATOR: So we have time for one last question. MR CASEY: That one in the front here, I don’t think – I think this – MODERATOR: (Off-mike.) QUESTION: Thank you. I’m Weier Ge with China Business Network. So my question is: How soon can we see a real application in, like, daily life from blockchain technology? And if you would like to predict it, it could be in what area? MR CASEY: I think we already have them in the same way – they just don’t have the word “blockchain” on the front of them. Blockchain is going to be a back-office solution, right? It’s not the thing that sits – when you get in your car, you are not driving an internal combustion engine, right? You’re driving the application, which is the car. We’ve already – bitcoin is an application of blockchain, right? That WFP, the World Food Program, still it’s a pilot but it’s an actually ongoing, functioning, real pilot in real life for those refugees, right? There are supply chain applications that are being used, and I think to answer the second part of your question, I think supply chains, for the time being largely on permissioned blockchains, are a real potentially a useful use case because you have this problem of multiple parties who have a common interest of wanting to sell more and more of the final good but don’t necessarily trust each other. So this is a technology that grapples with the core problem of human mistrust, and in a supply chain that’s a problem with a common goal, and that’s what’s interesting about that. So I think supply chains are – there’s a lot of energy going into developing supply chain applications largely on permissioned – which is not quite decentralized – systems. But yeah, there are already stuff – not a lot. That’s absolutely true. And the skeptics who say show me this – show me my hoverboard, where’s the magical blockchain solution, are right to suggest that it’s not pervasively in society. But this is a massive change, this technology, an enormous – it requires an enormous amount of development. It took 30 years for the internet to get to the level where it could be applied. We’re dealing with something very similar. It’s incredibly complex. We’re talking about the way human beings share value with each other. We’ve been using centralized recordkeeping for 2,000 or maybe 6,000 years. Since the beginning of civilization we’ve had somebody that keeps the record. Shifting that process, that core function of civilization to a decentralized architecture isn’t going to be easy, right? So it’s inevitably early days, and I think it’s important to step back and say, to be actually quite wowed by the fact that bitcoin is doing what bitcoin is doing. And we joke about if we only really – one of the most – one of – ICOs are a proven use case on Ethereum. I would also say that. That is actually a fundraising vehicle that works on Ethereum. One of the other Ethereums is cryptokitties, and cryptokitties is joked about as a kind of a useless thing. People made nonreplicable versions of these digital avatars, right? They’re cats and they could breed with each other and come up with a different cat. And that seems completely pointless, and that’s one narrative you can say is, like, this is the most ridiculous waste of energy and effort. But what we’re talking about is something really powerful, a digital creative work that is able to be – MR RIZZO: Traded. MR CASEY: — traded. And it can’t change. It’s a unique digital work. Think about photos. Think about how – think about the pirating of anything, right? So there’s stuff being built that’s pretty powerful, and we need to – MR RIZZO: I have those Topps baseball cards. That would be called cryptokitties tomorrow, right? You’ve been able to create a finite thing that people can trade digitally Going back to your question, I think, about predicting when things will happen, I have said this a few years ago and I think it’s true: It’s likely that this technology will produce the stupidest things for, like, a very long time. MR CASEY: The internet was pretty good at doing that at from the start. MR RIZZO: Until their usefulness is, like, at a huge scale where it’s actually somewhat awe-inspiring – you go through Twitter and like YouTube and like all these things where the initial use cases, like, are sometimes – like, how different is Twitter versus people spamming each other on message boards in 1990? The difference is one impacted an election – one can impact elections, and one doesn’t. And I think it’s very unlikely that we maybe get tons of new things. I think blockchains are already things. There are already very varied, and I think they’ll just be exceedingly dumb until they’re not. Yeah, I don’t know. MR CASEY: Exceedingly dumb. More dumb than you can imagine. (Laughter.) MR RIZZO: But like that’s how innovation starts, right? People just make – MR CASEY: Yes, it is. I mean, the internet began with porn, right? We all know that. (Laughter.) MR RIZZO: Maybe your idea. (Laughter.) MODERATOR: So we’re officially out of time and we want to thank Michael Casey and Pete Rizzo very much for coming today. Today’s briefing was on the record. I will be sending out some information on how to get a press pass for Consensus, but Thomas Hannaford in the back as well can ask – can answer any questions. And again, thank you so much.