I find this truly fascinating. In June 2011, as part of an interview with Julian Assange of WikiLeaks, Google CEO Eric Schmidt, was talking to Assange about new age technology. What his thoughts are, on the future of tech. All of this was part of the discovery phase for Schmidt in publishing his book, The New Digital Age: Reshaping the Future of People, Nations and Business, which came out earlier this year.
However, since Bitcoin has recently become so popular, this piece of the interview must have gone unnoticed for the past couple of years. There is a specific segment of the interview, where Schmidt is asking Assange, how people can publish information which we can validate, that the content published, was indeed published from trusted parties and not compromised. Assange later asked Schmidt, “[do] you know about Bitcoin?” When Schmidt answers no, Assange explains Bitcoin to him.
It’s a wonderful explanation for anyone to understand, with a small bit of the technical side to it. And shows, back in 2011, that Google was just beginning to hear about Bitcoin. At the end, Schmidt said that Google will have to “research” Bitcoin further. Schmidt seemed very intrigued by the concept of hashing signatures, using bitcoins.
Here’s the part of the transcript, where Assange talks about Bitcoins.
Bitcoin is something that evolved out of the Cypherpunks a couple of years ago, and it is an alternative… it is a stateless currency.
And very important, actually. It has a few problems. But its innovations exceed its problems. Now there has been innovations along these lines in many different paths of digital currencies, anonymous, untraceable etc. People have been experimenting with over the past 20 years. The Bitcoin actually has the balance and incentives right, and that is why it is starting to take off. The different combination of these things. No central nodes. It is all point to point. One does not need to trust any central mint.
If we look at traditional currencies such as gold, we can see that they have sort of interesting properties that make them valuable as a medium of exchange. Gold is divisible, it is easy to chop up, actually out of all metals it is the easiest to chop up into fine segments. You can test relatively easily whether it is true or whether it is fake. You can take chopped up segments and you can put them back together by melting the gold. So that is what makes it a good medium of exchange and it is also a good medium of value store, because you can take it and put it in the ground and it is not going to decay like apples or steaks. The problems with traditional digital currencies on the internet is that you have to trust the mint not to print too much of it.
And the incentives for the mint to keep printing are pretty high actually, because you can print free money. That means you need some kind of regulation. And if you’re gonna have regulation then who is going to enforce the regulation, now all of a sudden you have sucked in the whole problem of the state into this issue, and political pushes here and there, and who can get control of the mint, push it one way or another, for particular purposes. Bitcoin instead has an algorithm where the anyone can create, anyone can be their own mint. They’re basically just searching for collisions with hashes.. A simple way is… they are searching for a sequence of zero bits on the beginning of the thing. And you have to randomly search for, in order to do this. So there is a lot of computational work in order to do this. And each Bitcoin software that is distributed. That work algorithmically increases as time goes by. So the difficulty in producing Bitcoins becomes harder and harder and harder as time goes by and it is built into the system.
Just like the difficulty in mining gold becomes harder and harder and harder and that is what makes people predict that there is not going to be a sudden amount of gold in the market, rather…
[It] enforces scarcity, and scarcity will go up as time goes by, and what does that mean for incentives in going into the Bitcoin system. That means that you should get into the Bitcoin system now. Early. You should be an early adopter. Because your Bitcoins are going to be worth a lot of money one day. So once you have a… and the Bitcoins are just… a Bitcoin address is just a big hash. It’s a hash of a public key that you generate. So once you have this hash you can just advertise it to everyone, and people can send you Bitcoins, and there is people who have set up exchanges to convert from Bitcoin to US dollars and so on. And it solves a very interesting technical problem, which is how do you stop double spending?
All digital material can be cloned, almost zero costs, so if you have currency as a digital string of numbers, how do you stop me… I want to buy this piece of pasta.
Here is my digital currency and, now I take a copy of it. And now I want to buy your bit of egg. And then you go… and now I want to buy your radish! And you go, what? I’ve already got that! What’s going on here? There’s been some fraud! So there’s a synchronization problem. Who now has the coin?
So there is a point to point.. a spread network with all these problems, some points of the network being faster, some points of the network being slower, multiple paths of communication, how do you solve this synchronization issue about who has the currency? And so this is to mind actually the real technical innovation for Bitcoin, it has done this using some hashtrees and then a delay time, and then CPU work has to be done in order to move one thing to another so information can’t spread too fast etc.