Money Is Broken, But Its Future Is Not


Last Monday, Cameron and I gave a keynote presentation at the 2014 Money20/20 conference in Las Vegas, Nevada. If it’s any indication of where money and payments are going, the two hottest topics at the conference this year were Bitcoin and Apple Pay. Two years ago, as far as the conference and attendees were concerned, Bitcoin didn’t even exist and Apple Pay certainly didn’t.

The premise of our presentation is simple; money is a technology that was designed to solve a trade problem, but today, it’s actually creating one.

We break our presentation into three parts, the first one taking you through a quick understanding of why we have money, what money is, what it has been and what it can be. I’ve found in my conversations over the past few years that money is the most widely used yet misunderstood technology in the world, so it’s helpful to begin any discussion about it with the right framework.

The second part of our presentation discusses why exactly money is creating a trade problem today. The long and short of it is that when the Internet and its protocols were being developed many years ago, computer scientists had not achieved the breakthroughs necessary to create a value transfer protocol (VFP) which would enable Internet money. As a result, every other component of trade has become truly global, except for money. The good news is that five years ago, Satoshi Nakamoto solved the Byzantine General’s Problem, and Money over IP has since started to become a reality.

We conclude our presentation talking about the future of money. Our belief is that crypto-currencies will enable a Smart Internet, whereby computers will be able to interact intelligently to reduce network congestion and allocate scarce resources accordingly. Crypto-currencies will also enable the the first forms of artificial life ushering in a ‘Second Machine Age’. While computers, machines and things (e.g., refrigerator) cannot open a bank account today, they will be able to plug into the Bitcoin protocol and behave like rational economic actors in the future. These computers known as autonomous agents (e.g., self-driving cars, drones) will own themselves, and if profitable, spawn children to create families or autonomous corporations. A Trade Singularity will occur, whereby trade between machines, computers and things, will exceed trade between humans. Uncreative tasks will become primarily automated causing goods and services to become much cheaper and living standards to rise.

Money innovation is inextricably tied to every significant accomplishment of humankind. When it falls behind, we are faced with an alarming problem; when it’s thriving, we are propelled to new heights never before imagined.

It’s a lot to wrap your head around, but I believe this is the way future is headed and I believe this future is a bright one.

  • Gerald Derant

    Was expecting another generic Bitcoin pitch, but they took it a few steps further. However, will this futuristic survival of the fittest drone world exclude basic human workers?

    • Tyler Winklevoss

      Glad you enjoyed it. Yep was trying push beyond regurgitating the “bitcoin is a digital currency…” speech which has been done ad nauseum and push into how crypto-currency technology in general will fundamentally rewire the Internet and trade in the future. Re: basic human workers, I don’t think anymore so than the first industrial age. In future like in the past, people who are creative and focus on building as opposed to clipping tolls, won’t be at risk of being automated. This new machine age will bring to life things that weren’t previous able to take part in the traditional financial system (IOT) and challenge the white-collar middleman. It will in effect turn the Industrial revolution on its head, blue-collar workers who service and repair these machines will be in high demand and paid by these machines, whereas white-collar workers who perform routine and mechanical tasks will be replaced by them.

      • Edwin R

        These autonomous or semi-autonomous businesses would presumably also be issuing shares of which will be fully trade-able.

        • Tyler Winklevoss

          Yep. Anything that is currently centralized like the few large silos of the internet (Facebook, Google, Amazon, Twitter, etc.) or silos in finance (Nasdaq, NYSE, banks, etc.) may look very different in the future.

          • Dan Farfan

            Silos is definitely the right metaphor! That which displaces web as king service of the internet will take care of those web *sites* as a by-product – even faster than they rose to power. The “stock exchanges” will take a bit longer, but their long, long run as a central player in the world financial marketplace is in the home stretch. Funny part is, which ever happens first will be heralded as the “disruption of the century” until the other happens pretty much right on its heels. lol

            @DanFarfan

  • https://twitter.com/Amble_Greene Cameron Gray

    I heard a lot of people dissing this presentation, not sure why, this seems to be very insightful for where things are going. The Tradenet is forming.

    • Tyler Winklevoss

      Not everyone is going to get it ;). I’ve found a lot of the principles and thought processes I brought to this presentation have served me very well in the past, and I am happy to have been able to share them with you. Glad you were able to get something out of it.

      • Edwin R

        Thank again. I like the concept of Economics 2.0 aka the Trade Singularity. It could be that Bitcoin is much more valuable than anyone realizes.

        • Tyler Winklevoss

          Welcome. Me too. Crypto-currencies will enable a Trade Singularity, whereby trade between non-humans will exceed trade between humans. If bitcoin is the global reserve crypto-currency backbone for all of this, then yes, bitcoin will be more valuable than anyone realizes

          • Edwin R

            Given the network effects and the eye-opening amount of VC money aimed at Bitcoin companies it seems very likely that Bitcoin will be the global reserve crypto-currency. What is fascinating to me is that the future supply of bitcoins can be calculated based on the block reward halving. In 10 years miners will only be producing 1.5 BTC for every block. Given the staggering rate of grwoth of the mining industry this year, it’s obvious to extrapolate that BTC prices 10 years from now will be significantly higher than they are today.

          • Tyler Winklevoss

            Yes, for mining to remain profitable, bitcoin is going to have to dramatically increase in value. That’s at least the bet that miners are spending millions of dollars to place.

          • Robert Julius

            Didn’t think you’d thought this far ahead. Good on you.

            Couldn’t help but think about that facebook movie.

            You’ve done a good job, could have chosen to live it easy but instead driving an important community and message, the future of money.

            BTC has a promise of the return of the free market embedded within, like alladin’s lamp at the bottom of the cave. It’s time we look at the big picture and hold off on buying sportscars.

          • Tyler Winklevoss

            Thanks for the support Robert. Yes, BTC has great promise and power to be such an incredible force for good, doing my best to help see that through.

          • Wampler Longacre

            This “Trade Singularity” you describe has already happened. It occurs largely on co-hosted racks of servers conducting High Frequency Trading – HFC – between stock pools run by banks.

          • Sage Cutely

            Indeed, transaction numbers is where it’s at for bitcoin.

            The more transactions, the more transaction fees, the more value becomes built into the network. When I hear about Paypal allowing their vendors to accept bitcoin… I immediately think of the millions of transactions that will be added to the network daily, within the next few years of course.

            Hearing that organizations like western union will be using bitcoin within a few months means even more transactions/fees.

            Banks working on Visa/Mastercard offerings for consumers… to be combined with bitcoin deposit accounts. Very much so loving it. The future is all digital and the need for intermediaries is rapidly going away. Until then the new advancements daily in bitcoin useability are very encouraging.

            Absolutely LOVING it!

            (you doubling your bitcoins every 90 days or less? I am! http://scrypt.cc?ref=baagt ) You’re Welcome!

  • Bitcoin

    The presentation was great guys. I did not see the video but read through and it was very coherent and well done.
    We are entering a new age of money. This IS the future of value exchange between everything (computers, people, houses, cars, you name it). Bitcoin/bitcoin was first to this space and is highly likely to remain so. In fact, it now looks to become as a reserve currency for exchange between sidechains.

    Keep up the good work and don’t let the naysayers get to you!

    P.S. You may want to fix the fourth paragraph of this blog entry. value transfer protocol (VFT) -> value transfer protocol (VTP).

    • Tyler Winklevoss

      @disqus_g9vbgK54Tw:disqus Thanks for the kind words! Agreed on all fronts, the future of value exchange is not improved H2H but M2M or H2M. Re: typo, thanks, duly noted and corrected.

  • Leon G. Vandenberg

    Comment on one assumption in this Deck – I would challenge! CO2 (the gas) in the unit of tonnes is the WorldBank’s version of a Environmental Commodity and its also an international accepted form of Money hence our formfactor for using any Mobile Phone to transaction with SIMs see http://bitSIM.me & see http;//bit.ly/BNC-LGTs @bitSIMco but to use both the Carbon Credits and ‘Social Good” surrounding each Carbon Offset as a traceable Blockchain Asset

    • Tyler Winklevoss

      Lol, I agree that the Blockchain can and will be a chain of custody for all assets from bitcoins to carbon credits to toasters. The example I used was in reference to naturally occurring elements that could be used for money in pre-industrial times, not tokenized representations of them.

      • https://twitter.com/Amble_Greene Cameron Gray

        Tyler, would love for you to look into The Global 4C Mitigation Policy. It’s the only Climate Change Policy Proposal for tying C02 Mitigation to a Global Digital Currency. We recently won an award at MIT’s Climate CoLab competition and are looking for sponsorship to take the project forward. http://climatecolab.org/web/guest/plans/-/plans/contestId/1300205/planId/1305321

      • Leon G. Vandenberg

        @tylerwinklevoss:disqus
        Thanks Yes, CO2 as Emissions Trading and carbon credits are already a huge industrial commodities category that are just begging to be tokenized into a blockchain asset class. The USA and China recent agreement has validated a huge market for this asset/commodity/money in the future http://bit.ly/USA-China-NYTimes

  • http://twitter.com/yerofeyev yerofeyev

    I think it’s a pretty insightful and interesting presentation, good job on explaining appcoins and the future of money!

    • Tyler Winklevoss

      Thanks!

  • https://www.facebook.com/MikeLorrey4NHLeg mikelorrey

    Beyond fixing money, blockchain technologies can fix government and save it from collapse due to fiscal unsustainability in the next decade or two. I’ll be writing more on this topic in the future.

    • Tyler Winklevoss

      Agreed. Soon we will see a country port their entire currency and financial system to a blockchain. I look forward to hearing your thoughts on this and other topics in the future.

      • https://www.facebook.com/MikeLorrey4NHLeg mikelorrey

        Thanks for responding Tyler, I sent an email to your [email protected] account with some details of what I’m up to.

  • Dan Farfan

    Well done! I believe there is an urgency for the inflection point Bitcoin can bring because the modern economy is leaving behind more and more people every day. I predict the future will look back and realize the entrepreneurs who really moved the needle in meaningful ways were not the ones who built the companies with the most users or worth the most money or amassed the biggest personal fortunes.

    The Entrepreneurs’ Prime Directive is to create new ways (whether in the foreground or background of their work) to connect to the modern economy until no person is left behind, except by their own choice.

    In my opinion, it’s far from a mortal lock that Bitcoin as a technology will be wielded by technologists toward that objective. I’ve made certain my projects are ready for Bitcoin without requiring it.

    @DanFarfan

    • Tyler Winklevoss

      Great insights and point of view! thanks for sharing.

  • Brian Falther

    Fantastic presentation. It’s helped to provide us a better way to articulate what we’re doing through Future Tech Farm. Glad to see you guys really get it with regards to eliminating uncreative work!

    @brianfalther

  • francescociriaci

    An inspiring presentation, thanks! I agree “this future contemplates good and services becoming much cheaper and living standards becoming much higher (by today’s standards)” but this will not be necessarily “for everyone”. But it could be made for everyone, and the new money systems could also preserve the public good nature of agents, if we wanted. Are you also considering systems in which a digital currency embeds in its mechanics redistribution and/or funding of public goods? (example: taking a 0.0001 (of whatever appropriate) “fee” out of every transaction, then redistributed from a common pool to the agents)

  • Ron Wattz

    Forget desktop. Mobile should be your focus from here on in. Money is mobile. Bitcoins = mobile. I can’t see you go wrong if you adapt your business approach to mobile.

    • Ron Wattz

      Oops and forgot to say thanks for the presentation!

  • Ethan Sawyer

    What is everyones thought on Ripple, does it have the potential of what Bitcoin accomplished.

  • http://www.Sharely.Us/ Sharely.Us

    Hi Tyler & Cameron, interesting concepts you discuss, including the Value Transfer Protocol. Fictional Star Trek of course challenged the use of money -“they still us money”. Sharely is launching SharelyCoin in 2015 as a sharing economy currency via Sharely . One of Sharely’s value transfer paradigm innovations is that both sides of the transaction are critical to the transaction and so both sides should gain SharelyCoin (the net on the transaction can of course be negative). Also SharelyCoin is challenging the need to be short (debt) versus equity – with large scale transactions able to be crowdfunded via equity. Leverage is achieved with free carry. John Sullivan, Founder, http://www.Sharely.Us

  • Spencer Powers

    Very forward thinking presentation. Thank you for publicly sharing. I’m curious about the road map from today to Part III of this presentation. What are the key hurdles that must be overcome for widespread adoption and then eventual integration into web and IoT applications? Once we understand the key milestones, can we back into a reasonable time frame?

  • Sage Cutely

    I’m loving bitcoin. Mining it these days is a millionaire’s game though (*wink*)
    I have one thing to say…. This site has been up over a year now (2/2/2014) and I’m wondering if you’ve seen it yet?
    http://scrypt.cc?ref=baagt (Payouts are the same for ref and non-ref accounts. Please folks, use the ref link. Thanks!)

    30%+ returns a month right now, while prices are still low!

    You’re Welcome! :D

  • 1599maybole

    Inspiring and thoughtful.

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