TED@BCG Paris
Neha Narula: The future of money
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What happens when the way we buy, sell and pay for things changes, perhaps even removing the need for banks or currency exchange bureaus? That's the radical promise of a world powered by cryptocurrencies like Bitcoin and Ethereum. We're not there yet, but in this sparky talk, digital currency researcher Neha Narula describes the collective fiction of money -- and paints a picture of a very different looking future.
Neha Narula - Currency futurist
Neha Narula is helping redefine the future of money by researching cryptocurrencies and providing clarity on how digital currencies will transform our world. Full bio
Neha Narula is helping redefine the future of money by researching cryptocurrencies and providing clarity on how digital currencies will transform our world. Full bio
Double-click the English transcript below to play the video.
00:12
I want to tell you
about the future of money.
about the future of money.
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Let's start with a story
about this culture
about this culture
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that lived in Micronesia
in the early 1900s, called the Yap.
in the early 1900s, called the Yap.
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Now, I want to tell you about the Yap
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because their form of money
is really interesting.
is really interesting.
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They use these limestone discs
called Rai stones.
called Rai stones.
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Now, the Yap don't actually
move these Rai stones around
move these Rai stones around
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or exchange them the way
we do with our coins,
we do with our coins,
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because Rai stones can get
to be pretty massive.
to be pretty massive.
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The largest is about four tons
and 12 feet across.
and 12 feet across.
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So the Yap just keep track
of who owns part of what stone.
of who owns part of what stone.
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There's a story about these sailors
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that were transporting a stone
across the ocean
across the ocean
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when they ran into some trouble
and the stone actually fell in.
and the stone actually fell in.
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The sailors got back to the main island
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and they told everyone what had happened.
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And everyone decided that, actually, yes,
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the sailors had the stone
and -- why not? -- it still counted.
and -- why not? -- it still counted.
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Even though it was
at the bottom of the ocean,
at the bottom of the ocean,
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it was still part of the Yap economy.
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You might think that this
was just a small culture
was just a small culture
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a hundred years ago.
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But things like this happen
in the Western world as well,
in the Western world as well,
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and the Yap actually still use
a form of these stones.
a form of these stones.
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In 1932, the Bank of France
asked the United States
asked the United States
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to convert their holdings
from dollars into gold.
from dollars into gold.
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But it was too inconvenient
to think about actually shipping
to think about actually shipping
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all of that gold over to Europe.
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So instead, someone went to where
that gold was being stored
that gold was being stored
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and they just labeled it
as belonging to France now.
as belonging to France now.
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And everyone agreed
that France owned the gold.
that France owned the gold.
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It's just like those Rai stones.
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The point I want to make
with these two examples
with these two examples
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is that there's nothing
inherently valuable
inherently valuable
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about a dollar or a stone or a coin.
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The only reason these things
have any value
have any value
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is because we've all decided they should.
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And because we've decided that,
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they do.
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Money is about the exchanges
and the transactions
and the transactions
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that we have with each other.
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Money isn't anything objective.
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It's about a collective story
that we tell each other about value.
that we tell each other about value.
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A collective fiction.
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And that's a really powerful concept.
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In the past two decades,
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we've begun to use digital money.
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So I get paid via direct deposit,
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I pay my rent via bank transfer,
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I pay my taxes online.
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And every month,
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a small amount of money
is deducted from my paycheck
is deducted from my paycheck
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and invested in mutual funds
in my retirement account.
in my retirement account.
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All of these interactions
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are literally just changing
1's and 0's on computers.
1's and 0's on computers.
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There's not even anything physical,
like a stone or a coin.
like a stone or a coin.
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Digital money makes it
so that I can pay someone around the world
so that I can pay someone around the world
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in seconds.
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Now when this works,
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it's because there are large institutions
underwriting every 1 or 0
underwriting every 1 or 0
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that changes on a computer.
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And when it doesn't,
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it's often the fault
of those large institutions.
of those large institutions.
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Or at least, it's up to them
to fix the problem.
to fix the problem.
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And a lot of times, they don't.
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There's a lot of friction in the system.
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How long did it take
the US credit card companies
the US credit card companies
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to implement chip and pin?
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Half my credit cards
still don't work in Europe.
still don't work in Europe.
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That's friction.
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Transferring money across borders
and across currencies
and across currencies
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is really expensive:
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friction.
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An entrepreneur in India
can set up an online business in minutes,
can set up an online business in minutes,
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but it's hard for her
to get loans and to get paid:
to get loans and to get paid:
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friction.
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Our access to digital money
and our ability to freely transact
and our ability to freely transact
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is being held captive
by these gatekeepers.
by these gatekeepers.
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And there's a lot of impediments
in the system slowing things down.
in the system slowing things down.
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That's because digital money
isn't really mine,
isn't really mine,
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it's entries in databases
that belong to my bank,
that belong to my bank,
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my credit card company
or my investment firm.
or my investment firm.
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And these companies
have the right to say "no."
have the right to say "no."
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If I'm a PayPal merchant
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and PayPal wrongly flags me for fraud,
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that's it.
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My account gets frozen,
and I can't get paid.
and I can't get paid.
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These institutions are standing
in the way of innovation.
in the way of innovation.
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How many of you use
Facebook photos, Google Photos,
Facebook photos, Google Photos,
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Instagram?
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My photos are everywhere.
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They are on my phone,
they're on my laptop,
they're on my laptop,
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they're on my old phone,
they're in Dropbox.
they're in Dropbox.
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They're on all these different
websites and services.
websites and services.
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And most of these services
don't work together.
don't work together.
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They don't inter-operate.
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And as a result,
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my photo library is a mess.
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The same thing happens
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when institutions control
the money supply.
the money supply.
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A lot of these services
don't inter-operate,
don't inter-operate,
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and as a result, this blocks
what we can do with payment.
what we can do with payment.
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And it makes transaction costs go up.
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So far, we've been through
two phases of money.
two phases of money.
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In an analog world, we had
to deal with these physical objects,
to deal with these physical objects,
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and money moved at a certain speed --
the speed of humans.
the speed of humans.
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In a digital world, money can reach
much farther and is much faster,
much farther and is much faster,
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but we're at the mercy
of these gatekeeper institutions.
of these gatekeeper institutions.
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Money only moves at the speed of banks.
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We're about to enter a new phase of money.
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The future of money is programmable.
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When we combine software and currency,
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money becomes more
than just a static unit of value,
than just a static unit of value,
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and we don't have to rely
on institutions for security.
on institutions for security.
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In a programmable world,
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we remove humans
and institutions from the loop.
and institutions from the loop.
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And when this happens,
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we won't even feel like
we're transacting anymore.
we're transacting anymore.
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Money will be directed by software,
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and it will just safely and securely flow.
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Cryptocurrencies are the first step
of this evolution.
of this evolution.
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Cryptocurrencies are digital money
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that isn't run by any government or bank.
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It's money designed to work
in a world without intermediaries.
in a world without intermediaries.
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Bitcoin is the most ubiquitous
cryptocurrency,
cryptocurrency,
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but there are hundreds of them.
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There's Ethereum, Litecoin,
Stellar, Dogecoin,
Stellar, Dogecoin,
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and those are just a few
of the more popular ones.
of the more popular ones.
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And these things are real money.
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The sushi restaurant down my street
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takes Bitcoin.
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I have an app on my phone
that I can use to buy sashimi.
that I can use to buy sashimi.
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But it's not just for small transactions.
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In March, there was a transaction
that moved around 100,000 bitcoins.
that moved around 100,000 bitcoins.
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That's the equivalent
of 40 million US dollars.
of 40 million US dollars.
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Cryptocurrencies are based on
a special field of mathematics
a special field of mathematics
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called cryptography.
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Cryptography is the study
of how to secure communication,
of how to secure communication,
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and it's about two
really important things:
really important things:
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masking information so it can
be hidden in plain sight,
be hidden in plain sight,
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and verifying a piece
of information's source.
of information's source.
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Cryptography underpins
so many of the systems around us.
so many of the systems around us.
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And it's so powerful that at times
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the US government has actually
classified it as a weapon.
classified it as a weapon.
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During World War II,
breaking cryptosystems like Enigma
breaking cryptosystems like Enigma
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was critical to decoding
enemy transmissions
enemy transmissions
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and turning the tide of the war.
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Today, anyone with a modern
web browser is running
web browser is running
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a pretty sophisticated cryptosystem.
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It's what we use to secure
our interactions on the Internet.
our interactions on the Internet.
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It's what makes it safe for us
to type our passwords in
to type our passwords in
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and to send financial
information to websites.
information to websites.
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So what the banks used to give us --
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trustworthy digital money transfer --
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we can now get with a clever
application of cryptography.
application of cryptography.
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And this means that we don't
have to rely on the banks anymore
have to rely on the banks anymore
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to secure our transactions.
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We can do it ourselves.
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Bitcoin is based on the very same
idea that the Yap used,
idea that the Yap used,
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this collective global
knowledge of transfers.
knowledge of transfers.
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In Bitcoin, I spend
by transferring Bitcoin,
by transferring Bitcoin,
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and I get paid when someone
transfers Bitcoin to me.
transfers Bitcoin to me.
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Imagine that we had this magic paper.
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So the way that this paper works
is I can give you a sheet of it
is I can give you a sheet of it
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and if you write something on it,
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it will magically appear
on my piece as well.
on my piece as well.
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Let's say we just give everyone this paper
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and everyone writes down
the transfers that they're doing
the transfers that they're doing
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in the Bitcoin system.
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All of these transfers get copied
around to everyone else's pieces of paper.
around to everyone else's pieces of paper.
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And I can look at mine
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and I'll have a list of all
of the transfers that are happening
of the transfers that are happening
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in the entire Bitcoin economy.
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This is actually what's happening
with the Bitcoin blockchain,
with the Bitcoin blockchain,
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which is a list of all
of the transactions in Bitcoin.
of the transactions in Bitcoin.
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Except, it's not done through paper.
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It's done through computer code,
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running on thousands
of networked computers
of networked computers
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around the world.
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All of these computers
are collectively confirming
are collectively confirming
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who owns what Bitcoin.
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So the Bitcoin blockchain
is core to how Bitcoin works.
is core to how Bitcoin works.
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But where do bitcoins actually come from?
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Well, the code is designed
to create new Bitcoin
to create new Bitcoin
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according to a schedule.
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And the way that it works
is that to get those Bitcoin,
is that to get those Bitcoin,
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I have to solve a puzzle --
a random cryptographic puzzle.
a random cryptographic puzzle.
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Imagine that we had 15 dice,
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and we were throwing these dice
over and over again.
over and over again.
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Whenever the dice come up all sixes,
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we say that we win.
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This is very close to what these computers
are all actually doing.
are all actually doing.
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They're trying over and over again
to land on the right number.
to land on the right number.
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And when they do,
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we say that they've solved the puzzle.
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The computer that solves the puzzle
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publishes its solution
to the rest of the network
to the rest of the network
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and collects its reward: new bitcoins.
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And in the act of solving this puzzle,
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these computers are actually
helping to secure the Bitcoin blockchain
helping to secure the Bitcoin blockchain
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and add to the list of transactions.
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There are actually people
all over the world running this software,
all over the world running this software,
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and we call them Bitcoin miners.
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Anyone can become a Bitcoin miner.
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You can go download the software right now
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and run it in your computer
and try to collect some bitcoins.
and try to collect some bitcoins.
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I can't say that I would recommend it,
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because right now, the puzzle is so hard
and the network is so powerful,
and the network is so powerful,
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that if I tried to mine
Bitcoin on my laptop,
Bitcoin on my laptop,
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I probably wouldn't see any
for about two million years.
for about two million years.
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The miners, professional miners,
use this special hardware
use this special hardware
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that's designed to solve
the puzzle really fast.
the puzzle really fast.
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Now, the Bitcoin network
and all of this special hardware,
and all of this special hardware,
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there are estimates
that the amount of energy it uses
that the amount of energy it uses
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is equivalent to that of a small country.
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So, the first set of cryptocurrencies
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are a little bit slow
and a little bit cumbersome.
and a little bit cumbersome.
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But the next generation is going
to be so much better and so much faster.
to be so much better and so much faster.
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Cryptocurrencies are the first step
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to a world with a global
programmable money.
programmable money.
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And in a world with programmable money,
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I can pay anyone else securely
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without having to sign up
or ask permission,
or ask permission,
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or do a conversion or worry
about my money getting stuck.
about my money getting stuck.
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And I can spend money around the world.
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This is a really amazing thing.
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It's the idea of permission-less innovation.
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The Internet caused
an explosion of innovation,
an explosion of innovation,
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because it was built upon
an open architecture.
an open architecture.
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And just like the Internet
changed the way we communicate,
changed the way we communicate,
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programmable money is going
to change the way we pay,
to change the way we pay,
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allocate and decide on value.
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So what kind of world
does programmable money create?
does programmable money create?
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Imagine a world where I can
rent out my healthcare data
rent out my healthcare data
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to a pharmaceutical company.
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They can run large-scale data analysis
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and provide me with a cryptographic proof
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that shows they're only using my data
in a way that we agreed.
in a way that we agreed.
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And they can pay me
for what they find out.
for what they find out.
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Instead of signing up
for streaming services
for streaming services
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and getting a cable bill,
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what if my television analyzed
my watching habits
my watching habits
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and recommended well-priced content
that fit within my budget
that fit within my budget
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that I would enjoy?
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Imagine an Internet without ads,
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because instead of paying
with our attention when we view content,
with our attention when we view content,
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we just pay.
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Interestingly, things like micro-payments
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are actually going to change
the way security works in our world,
the way security works in our world,
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because once we're better able
to allocate value,
to allocate value,
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people will use their money
and their energies
and their energies
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for more constructive things.
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If it cost a fraction of a cent
to send an email,
to send an email,
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would we still have spam?
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We're not at this world yet,
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but it's coming.
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Right now, it's like we're in a world
that is seeing the first automobile.
that is seeing the first automobile.
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The first cryptocurrency,
like the first car,
like the first car,
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is slow and hard to understand
and hard to use.
and hard to use.
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Digital money,
like the horse and carriage,
like the horse and carriage,
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works pretty well,
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and the whole world economy
is built on it.
is built on it.
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If you were the first person on your block
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to get a car with an internal
combustion engine,
combustion engine,
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your neighbors would probably
think you were crazy:
think you were crazy:
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"Why would you want
this large, clunky machine
this large, clunky machine
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that breaks down all the time,
that lights on fire,
that lights on fire,
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and is still slower than a horse?"
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But we all know how that story turns out.
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We're entering a new era
of programmable money.
of programmable money.
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And it's very exciting,
but it's also a little bit scary.
but it's also a little bit scary.
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Cryptocurrencies can be used
for illegal transactions,
for illegal transactions,
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just like cash is used for crime
in the world today.
in the world today.
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When all of our transactions are online,
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what does that mean for surveillance --
who can see what we do?
who can see what we do?
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Who's advantaged
in this new world and who isn't?
in this new world and who isn't?
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Will I have to start to pay for things
that I didn't have to pay for before?
that I didn't have to pay for before?
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Will we all become slaves
to algorithms and utility functions?
to algorithms and utility functions?
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15:15
All new technology comes with trade-offs.
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The Internet brought us
a lot of ways to waste time.
a lot of ways to waste time.
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15:22
But it also greatly
increased productivity.
increased productivity.
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15:25
Mobile phones are annoying
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15:27
because they make me feel
like I have to stay connected to work
like I have to stay connected to work
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all the time.
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15:31
But they also help me stay connected
to friends and family.
to friends and family.
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The new sharing economy
is going to eliminate some jobs.
is going to eliminate some jobs.
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But it's also going to create
new, flexible forms of employment.
new, flexible forms of employment.
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With programmable money,
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we decouple the need
for large, trusted institutions
for large, trusted institutions
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from the architecture of the network.
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15:54
And this pushes innovation in money
out to the edges, where it belongs.
out to the edges, where it belongs.
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Programmable money democratizes money.
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And because of this,
things are going to change and unfold
things are going to change and unfold
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in ways that we can't even predict.
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Thank you.
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(Applause)
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ABOUT THE SPEAKER
Neha Narula - Currency futuristNeha Narula is helping redefine the future of money by researching cryptocurrencies and providing clarity on how digital currencies will transform our world.
Why you should listen
Neha Narula is director of research at the Digital Currency Initiative, a part of the MIT Media Lab where she teaches courses and leads cryptocurrency and blockchain research. While completing her PhD in computer science at MIT, she built fast, scalable databases and secure software systems, and she spoke about these topics at dozens of industry and research conferences.
In a previous life, Narula helped relaunch the news aggregator Digg and was a senior software engineer at Google. There, she designed Blobstore, a system for storing and serving petabytes of immutable data, and worked on Native Client, a system for running native code securely through a browser.
Neha Narula | Speaker | TED.com