MONEY IS BROKEN;

ITS FUTURE IS NOT

CAMERON WINKLEVOSS @winklevoss
TYLER WINKLEVOSS @tylerwinklevoss
 PART I
UNDERSTANDING MONEY
Money is the most widely used yet misunderstood
technology in the world.

“One reason why money is a mystery to so many is

the role of myth or fiction or convention...the money
around us, the money that we grow up with, appears
the only “real” money to us.”
-Milton Friedman, Money Mischief
ORIGIN
Why do we have money anyway?

The Context: Before money, all trade relied on barter, a

system of trade, whereby one individual exchanged
his or her goods and services for the goods and
services of another (i.e., in-kind transfer or swap).

Example: I’ll trade you my two bushels of corn for

your wheel of cheese.

The Problem: What happens if I want what you have,

but you don’t want what I have? The answer is,
nothing.
Trade Problem
Why do we have money anyway?

This trade deadlock is known as the Coincidence of

Wants Dilemma, whereby two people must want what
each other have, otherwise a trade will not occur.

Other limitations of barter are portability (difficult to

transport 10 oxen to the marketplace); divisibility (cannot
trade half of a horse); measure of value (no common way to
measure the value of goods against each other); and
storage (perishables like fruit do not last long).

The Solution: Invent a common “medium of exchange”, or

what we colloquially refer to as money.

The Answer: We have money because money solves a

trade problem.
MINIMUM VIABLE PRODUCT
What does money need to be?

1 Scarce 2 Divisible 3 Storable

4 Durable 5 Fungible 6 Verifiable

Difficult to
7 Portable 8 Counterfeit
9 Widely Acceptable
WHAT COULD WE USE FOR MONEY
IN A PRE-INDUSTRIAL WORLD?
FAILING FAST

• Money cannot be a gas,

otherwise, it would leak
out of your piggybank.

•Disqualifies 11 elements
including the noble gases.
FAILING FAST

• Money cannot be reactive

or corrosive, otherwise, it
would spontaneously
explode in your hand
(ouch!), or rust.

• Disqualifies 38 elements
such as pure lithium,
which ignites when
exposed to air or water, and
iron, which rusts.
FAILING FAST

• Money cannot be
radioactive, otherwise, it
would radiate away or
eventually kill you (yikes!).

• Disqualifies 38 elements
such as promethium and
einsteinium (i.e.,
lanthanides and actinides).
FAILING FAST

• Money must be rare, but

not too rare.

• Disqualifies 26 elements
such as copper, which is
too abundant and osmium,
which only comes to earth
via meteorites (i.e., too
rare).
FAILING FAST

• We are left with rhodium,

palladium, platinum, silver
and gold (5 of 8 noble
metals).
FAILING FAST

• Rhodium and palladium

weren’t discovered until
the 1880’s.
FAILING FAST

• Platinum’s melting point

(3,000 degrees Fahrenheit)
would have been too high
for pre-industrial furnaces.
FAILING FAST

• Silver and gold both seem

like strong contenders,
but...
FAILING FAST

• Silver and gold both seem

like strong contenders,
but...silver tarnishes easily.
Text
•Silver also has too much
industrial application (i.e.,
usefulness outside of being
a currency is a bug not a
feature), whereas, gold does
not; it’s just useless
enough.
FAILING FAST

• This leaves us with gold as

our best bet for money in
pre-industrial times and
silver as our only runner-up.

•Both metals have enjoyed

an ~8,000 year first-mover
advantage .

•Insight: If we were to replay

history over and over again,
gold would always emerge
as beta money, version 1.0.
OPTIMIZATION
Why don’t we use gold for money today? We’ve built better money.

Portability: Good Better Best

Divisibility: Good Better Best

Storability: Good Better Best

Fungibility: Good Better Best

Difficulty to Good Better Best

Counterfeit:

Physical Less Physical Digital

As we’ve made money less physical or “real”, we’ve optimized its parameters.
MONEY MATRIX
Originally hardware-only, today, money is primarily software and starting to become “smart” or
programmable.
TAKEAWAYS SO FAR

Your money is primarily digital, and has been

1 Money is a 10,000 year-old technology. 5 for over 50 years.

Government-backed paper money (i.e., Bitcoin is the world’s first-ever programmable

2 fiat money) is a 40 year-old iteration on 6 money or smart money.
this technology.

Money made of precious metal is no more Crypto-currencies like bitcoin have unique
3 “real” than money made of paper or 7 technological intrinsic value when compared to
computer bits. all previous money technologies.

The idea of money being something These unique qualities give crypto-currencies
4 physical is almost entirely a fiction.
8 unprecedented money potential.
 PART II
THE PROBLEM WITH MONEY TODAY
THESIS
Money is, and always has been, a technology that
facilitates trade.

It does so by helping people exchange value more

easily (i.e., reduces friction). But today...

Money is no longer facilitating trade; it’s holding

it back!
INTERNET

Since the early 1960’s, This network, which today we These protocols work in
technologists have been call the Internet, transfers tandem and can be thought
building the largest data packets of data back and forth of as the first, middle and
exchange network in the using specific communication last miles of data transfer.
world. protocols developed over time.
PROTOCOLS
The Internet protocol suite (TCP/IP) is typically divided into four layers:

1. Link Layer 3. Transport Layer

Puts packets on the network Establishes routes on the
(e.g., Ethernet, DSL, ISDN) network (e.g., TCP, UDP)

2. Internet Layer 4. Application Layer

Routes packets over the Delivers packets as web pages,
network (e.g., IPv4, IPv6, email, files, voice, etc. (e.g., HTTP,
IPSec) SMTP, FTP, RTP)
DILEMMA

The Problem The Solution

This network has become As a result, all components Create better money.
very good at exchanging of trade have become truly
data, but has no way of global, except for money.
exchanging value.
MONEY OVER IP

The Internet needs a value transfer protocol (VTP)

that can transfer digital value between users. In
other words, the Internet needs Internet money!

Good news: The Internet already has a value

transfer protocol, it’s called “Bitcoin” with a
capital “B”. It also already has a digital asset that
can be transferred over this protocol, it’s called
“bitcoin” with a lowercase “b”.
APPCOINS
Better news: A new proposal called pegged sidechains
could allow for other value transfer protocols to emerge
and run parallel to the Bitcoin protocol, harnessing its
security and growing infrastructure.

Entirely new application-specific coins or AppCoins

would traverse these parallel protocols called
sidechains, “backed” or secured by the Bitcoin protocol.

Bitcoins would become the global reserve crypto-

currency, from which users could jump into and out of
these distinct AppCoins and their protocols depending
on their value transfer needs.
 PART III
THE FUTURE OF MONEY
FUTURE OF TRADE

Soon, money will no longer hold By allowing cryptographically-proven nano

trade back; it will begin to propel it transactions, AppCoins will open new vistas of
forward! trade, previously unimaginable.

Not only will they facilitate trade between humans, they will
enable it between machines.
SMART INTERNET
Computers will interact intelligently to reduce network congestion and allocate
scarce resources accordingly.

A router being flooded by

traffic might require DDosCoin OpenCoin would be rewarded
in an effort to shut down a to developers based on their
denial-of-service attack. contributions to open-source
projects.

This new ability to transfer

StorageCoin would be value will fundamentally
A server might require
rewarded to computers change the neurological
a sender to include
b a s e d o n h ow m u c h pathways of the Internet
EmailCoin in an effort
storage capacity they forever!
to weed out spam.
dedicated to the network.
AUTONOMOUS AGENTS

In the future, AppCoins will enable the first forms

of artificial life and usher in a ‘Second Machine Age’.

Computers, machines and things (e.g., refrigerator),

which today cannot open a bank account, will be
able to plug into these protocols and behave like
rational economic actors.

A new Trade Network will emerge, on which

these computers or “autonomous agents” will bid
for work and be hired.
AUTONOMOUS AGENTS
Agents will be anything from a self-driving car that picks
you up and takes you to the office, to a drone that delivers
you a tube of sunscreen on the beach, which it just
purchased from an autonomous kiosk.

On your trip, your self-driving taxi will negotiate with

roads for road-space using RoadCoin and pay other self-
driving taxis with SpeedCoin to get out of the way.

Agents who are profitable will be able to purchase more

software and hardware in order to spawn children. Soon, a
fleet of agents would arise to form an autonomous
corporation led by the parent agent.

Agents and autonomous corporations will be subject to

supply and demand and market competition. Ones that
provided poor services would become unprofitable and
shut down, or be reformatted and sold-off in a
bankruptcy proceeding to other agent bidders.
TRADE SINGULARITY
A Trade Singularity will be occur, whereby trade
between computers, machines and things, will exceed
trade between humans.

Uncreative tasks, both blue-collar and white-collar,

will become primarily automated.

Goods and services will become much cheaper and

living standards will be much higher.

Long-Term Trend: Humans who are creative will

win the day.
SMART CONTRACTS
Agents can be viewed as public goods because no one will
profit directly from them, but everyone will profit indirectly
(e.g., lighthouse, highway). As a result, there will be a funding
dilemma or free-rider problem.

So, how will we fund these public goods? Taxation is too

inefficient, but lightweight digital assurance contracts are not.

People will send PledgeCoin to a pre-defined digital escrow

address that will only use the funds when a certain target is
met, otherwise, it will return the PledgeCoins to their senders.

In the future, entire sectors of public goods will be built out by

these digital assurance contracts, which will come to replace a
lot of taxation. Want a better taxi? Create a smart contract!
 IF WE FIX MONEY,
THE COMPUTER BITS ARE THE LIMIT

THANK YOU
REFERENCES
NPR | A Chemist Explains Why Gold Beat Out
Lithium, Osmium, Einsteinium…
Mike Hearn | The Future of Money
European Central Bank | Virtual Currency Schemes
IMAGES
Slide 1: FamZoo | Flickr
Slide 2: Nicki Mannix | Flickr
Slide 3: Omer Wazer | Flickr
Slide 21: Tax Credits | Flickr
Slide 22: Joanna De Silva | Flickr
Slide 27: Dustin Gaffke | Flickr
Slide 34: Museum of Photographic Arts | Flickr
Vectors: The Noun Project & FlatIcon