Kevin Garber: [00:01] This week on the "It's a Monkey Podcast."

Melanie Swan: [00:03] We could look at the whole of all of computing and Internet networks so far as being, one, first era of transferring simple information openly on the Internet.

[00:17] Now, this whole second era that we're heading into now with Blockchain as one of transferring value via smart networks so that we're starting to push more complexity through the Internet pipes and modulate information for signatures, and validation, and confirmation, and loading the information packets with value.

[00:41] We're heading into a smart network territory that's really a whole new form of computing that allows us the long tail of economics and governance. The only remaining sectors of the economy that haven't been completely re-engineered for the digital era are economics and governance. Blockchain, being a secure-value confirmation and transfer system, is the core functionality that allows this.

[01:10] [background music]

Kevin: [01:19] Good morning, good evening, hello, wherever you are in the world. It is Friday, August the 4th, 2017, and I'm coming to you live from downtown Sydney, Australia. I'm turning and looking out the window, looking out across of Atlassian's HQ, which we're right next to, and it is another beautiful, sunny, sunny winter's day.

[01:41] Wherever you are in the world, if you're not in Sydney, Australia, your weather's probably worse than ours. We are incredibly lucky. Thank you for joining us on the podcast. It is episode number 101. Now, before I get into this week's podcast, if you missed episode 100, you really got to go back and have a listen to it.

[01:59] Kevin Kelly, who is one of the founding editors of "Wired," and he's written a new book about the future of technology, I had a chat with him. He's an absolute super-smart, super-articulate guy, and we had a fantastic chat. It's been one of my favorite interviews. I say that a lot, it's hard to choose. They're like my children.

[02:21] They're all different, and they're all good, but Kevin Kelly was a real special one in episode 100, but we're going to get right into episode 101. As usual, I have Kate Frappell, who's with me from Whistler in Canada, working remotely. Kate, thanks for joining us.

Kate Frappell: [02:37] No worries, it's good to be back again.

Kevin: [02:39] We've got a fantastic interview now. Of course, everyone these days, in our industry, is talking about blockchain, bitcoin, cryptocurrency. I chatted with Melanie Swan who's the author of "Blockchain -- Blueprint for a New Economy," and also the founder of the Institute for Blockchain Studies. Boy, did we have an interesting chat.

[03:00] If you're interested in blockchain and bitcoin, and let's face it, who isn't? Let's face it, who totally understands it as well? I think, there's about three people in the world that totally understand it. [laughs] We all got so much to learn about it, and I had a fantastic chat with Melanie about that.

[03:17] Remember, you can follow us on MonkeyPodcast and Twitter. You can subscribe to receive an email when we release a new podcast. Please share the word about the podcast. We really love to hear from everyone. Let's get straight into a couple of news items before we go to the interview.

[03:34] Kate, interesting to see there was something that popped up on my Facebook feed that hackers are now able to...If you share a photo, like a peace sign, they are able to extract your fingerprints and use that to hack any biometrics that use your fingerprint. Tell us a little bit more about this story.

Kate: [04:01] I guess all these people that have been putting up their peace sign fingers in their photos need to be a little bit more careful, because photos that are taken within three meters and that are particularly clear and well-lit, hackers can actually extract your fingerprint and use it to get into your devices, or anything where you've used your fingerprint as a form of security.

Kevin: [04:26] I think it's really a thing in Japan, isn't it? For some reason, it's a cultural thing to do the peace sign on every photo. I see them down at Bondi Beach and when I was in Japan. It's almost every single photo they do the peace sign. In some [laughs] cultures it's going to be more of an issue than others, I guess.

Kate: [04:44] Yeah, definitely. Interestingly, the people who have figured this out are the Japan's National Institute of Informatics. They've actually studied this and they've studied ways that you can actually get around it, which probably won't be accessible for another two years.

[05:02] The solution that they're working on is actually some kind of a transparent sticker that you wear on your fingerprint, on the top of your fingers. When you take the photo, it disguises your actual print.

Kevin: [05:18] What about the opposite, where you have a two-factor auth in the sense of the device actually checks if that fingerprint is from a live finger that's got blood or a pulse running through it?

Kate: [05:34] Yeah, that's the other solution is...I think there's a company called Goodix and they've got a live fingerprint scanner. It's like an infrared analysis of your tissue and your pulse. It's an extra layer there. It's not really relying on just the print. It's relying on the fact that it's a live print.

Kevin: [05:57] It's always a cat and mouse race, isn't it? Security is just becoming a bigger and bigger...I think the stakes are getting higher and higher as everything of ours is online. The stakes are so high that, if someone can penetrate the system, they've got access to your entire life.

Kate: [06:19] Yeah. Even in Japan right now you can register your credit card and your fingerprint together and make purchases that way.

Kevin: [06:28] Interesting. Do you use any biometric fingerprints on your iPhone or any other device?

Kate: [06:36] Yeah, on my phone I do, but interesting, I got a new bank account here in Canada when I arrived. They actually allow you to set up instead of logging in with a code or two-factor, or else you can use your fingerprint to get into the app and make purchases, transfer money, and stuff like that. Yeah, I actually use it quite a bit getting into that particular banking app.

[06:57] Otherwise, yeah, some signing things like when you clock in for some jobs. I've seen people who are really big on it. In America, they're big on fingerprints and stuff at the airport.

Kevin: [07:10] I saw another video of a company in the States that's offered employees to embed a tiny little...Looks like a little piece of rice in their finger. It's like a smart chip and that's used for the vending machine. It's used for the security access. People, they actually inject it and embed this little chip inside their finger.

Kate: [07:31] It's not a bad idea. People are already injecting stuff, so...

Kevin: [07:35] Yeah, there's a chap in Sydney that's...In Sydney, we've got our smart card system for our transport and he embedded this smart chip for that card into himself. [laughs]

Kate: [07:44] Yeah, that's a bit much. [laughs]

Kevin: [07:49] Yeah, people have time on their hands. Definitely, you have to be aware of these things. I think the challenge is people who've done so many photos of ourselves and videos of ourselves online. People will be able to use that, all those biometric signatures for the wrong reasons.

[08:14] I had a Toshiba laptop many years ago that actually had a fingerprint scanner, too, instead of using a password. I started using it and it got a bit tedious. It was actually quicker just to type in a text password.

Kate: [08:26] My first laptop actually had facial recognition. When you sat in front of it, it would scan your face and then if it recognized you, it would log in.

Kevin: [08:38] I think it's really useful for two-factor auth. I think it's a nice two-factor auth. You put in your text password and then it switches on the camera, it says "I'm switching on the camera just to authorize you," and boom.

[08:52] I think as an only primary password, I think your access is [indecipherable] . It's a bit painful, but on odd occasion, as you said, for banking apps and things like that, it's better than tokens, and text messages, all those physical tokens. Some of the banks in Australia use the physical tokens, which are a royal pain as well, and the battery goes flat, and you lose them.

Kate: [09:17] Yeah, so fun. The only thing with biometrics is, if it becomes big enough and people hack it, it's not something you can change. You could change your password, you could change those things. You can't change your fingerprint.

Kevin: [09:33] They've got your fingerprint for life. Right?

Kate: [09:35] Yeah. Once you are hacked once, you'd basically not be able to use that form of identification again.

Kevin: [09:43] Interesting world. OK, what else do we have happening in our industry this week, Kate?

Kate: [09:49] Scientists in the US have successfully edited the DNA of some human embryos, which had previously been done in China. It was a bit of a legal issue in the US. What they're doing is taking DNA that has mutations or that carries a particular disease and then extracting those parts from the embryo so that the baby doesn't carry that gene.

Kevin: [10:22] It's an absolutely amazing story. They only decoded the human genome, what, ten years ago? I don't remember exactly. Fully decoded it. Now we're editing it? I read, though, that they destroyed these embryos. Is that correct?

Kate: [10:40] Yeah. They haven't actually gone through with it, but for the sake of the experiment it was fairly successful and they use a tool called CRISPR. Out of 58 edited embryos, 42 were mutation free, 16 had unwanted mutations, so they did pretty well. In this particular experiment, they did better than China in the sake of, I think they call it, mosaicism.

Kevin: [11:10] As usual, though, the common theme of the force for good and the force for evil. It's absolutely fantastic to remove problematic genetic mutations, but I can see people wanting designer babies -- give them blue eyes, give them red hair, make them run like an athlete. The ethical issues are just...I can't even begin to wrap my head around the ethical issues in how you manage all of this.

[11:40] Where is the line? What is a genetic mutation? There's some very clear ones. If you're born with a congenital heart defect, absolutely that's quite clear, but there's others that aren't as clear.

Kate: [11:50] Definitely. In this particular experiment, they did hypertrophic cardiomyopathy, which is also a heart condition that leads to potential sudden death. It was good that they can get rid of that.

[12:14] I guess there's just some legalities in the US at the moment around whether they can publish this research. If it gets in the wrong hands, yeah, you'll get these designer babies or, if they make a mistake, then you potentially change the human gene pool forever.

Kevin: [12:29] Wow. Kate, the world we're heading into is quite...Speaking to Kevin Kelly last podcast, what I loved about Kevin Kelly is he's an optimist about the impact that technology's going to have. Reading his book, or listening to his book in my case, it uplifted me, it got me excited.

[12:49] But sometimes, when I look at these technologies, boy, you can see, if they go wrong, they are just going to go absolutely, remarkably wrong. Especially in the wrong hands. Where are we going to be in 5, 10 years, 20 years? What are we going to be talking about on this podcast in 20 years, Kate? We'll probably have robot editors, an AI editor, who knows.

[13:12] My sister's got two young kids and we was just talking. She says, "You know, I can't even think about what their world's going to be like in 20 years, when they're in their early 20s and how I'm going to manage that because we're all going to be living in something that we can't even picture now." I hope it all works out. I'll leave it on that positive note. [laughs]

Kate: [13:33] Yeah, me, too. Me, too.

Kevin: [13:36] Anyway, you're listening to episode 101. We're in the hundreds now, Kate.

Kate: [13:40] Exciting.

Kevin: [13:42] Exciting. It's a Monkey Podcast. We talk about everything related to technology, start up, entrepreneurship. We try to find super smart and interesting people to chat with.

[13:52] We're going to take a short break, and after the break, we're going to play my interview that I had with Melanie Swan who's the author of Blockchain -- Blueprint for a New Economy. She's also the founder of the Institute for Blockchain Studies.

[14:04] Let's face it, you really want to know about the blockchain and about bitcoins so that you can sound smart at the next cocktail party and the next dinner where everyone is [laughs] talking about the blockchain and crypto, and everyone's too scared to say that they don't exactly quite know what it is. All right, so stick around. It's really a great chat.

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Kevin: [15:35] You're back with It's a Monkey Podcast. My name's Kevin Garber. I'm the CEO of ManageFlitter and soon to be ManageSocial, as well. We talk about everything relating to tech, start-ups, political economy.

[15:47] As you would know, if you listen to this podcast frequently, one of my new interests is the blockchain, bitcoin, cryptocurrencies, everything around that side of the next phase of...I wouldn't even call it the next phase of the Internet. I would almost call it the next phase of technological advancements.

[16:10] I'm very excited to say that I've tracked down, in New York, one of the authors of one of the best-selling blockchain books. A book called Blockchain -- Blueprint for a New Economy, and also a blockchain theorist at the New School for Social Research, amongst many other things. Melanie Swan, thank you so much for joining us on the podcast.

Melanie: [16:32] Thank you very much for having me, Kevin.

Kevin: [16:34] Melanie, before we get into the nice juicy bits and pieces, let's take one little step back because blockchain is the type of abstract technology that a lot of us are struggling to get our heads around. Let's try big picture, again, and we've revisited this many times in the podcast, but, blockchain, what is it?

Melanie: [16:58] Yes, thank you. Blockchain sounds very fancy and possibly confusing. Blockchain is software. It's a software protocol.

[17:08] Just like there's a software protocol called SMTP, simple mail transfer protocol, that tells your email application how to send email across the web, blockchain is similarly a software protocol that tells the web how to send money or assets and how to make sure that only one copy of that asset is transferred.

[17:34] It's sort of just like Gmail is the application, bitcoin is a cryptocurrency application, and then the software protocol that sits out there on the web and tells the application actually how to run is SMTP in the case of email, and blockchain in the case of bitcoin, which tells the software how to deliver value, record it in a ledger, and transfer it across the web.

[18:01] It's sort of just like having one giant spreadsheet or a register of bank balances out on the web that's a ledger. When I want to send money to you, I send a software command that tells the ledger software to transfer some of my coin over to your account.

[18:22] The reason that it's important to do this in a certain way with cryptographic protocols on the Internet is because we don't want the double spend problem. When I send you a copy of something in email, you can make as many copies as you want, but with money we only want it spent once. The additional cryptographic software makes sure that that ledger balance can only be spent once.

[18:47] Inherently, blockchain is just a payments method that's a software. It's a better version of a VPN. It's a way of securely transferring value over the Internet.

Kevin: [19:00] Now, you breakdown what you see as phases of technological developments on the blockchain as -- Phase one, which you call the cryptocurrency phase, I believe -- building cryptocurrencies on the block chain. Phase two, which is smart contracts.

[19:20] And phase three, which I actually find, by far, the most interesting phase, which is using a block chain for managements and transfer of intangible assets. Cryptocurrency, most people have already had some experience. Bitcoin has been in the press for quite some time.

[19:42] Phase two, smart contracts. Etherium has really gained a lot of press and a lot of interests, and ICOs has gained traction, so we're almost screaming through phase one and phase two. Talk to us a little bit about the phase two, phase three.

[20:00] Is it moving that fast that we can start looking at phase three? Are people already implementing interesting implementations of phase three of the blockchain for that intangible asset side of managements and transfer?

Melanie: [20:14] Yes, I think already what's been surprising is how quickly blockchain is starting to be adopted. That said, it will still be decades for it to roll out substantially. The initial Internet took 30 to 40 years to roll out, and 15 years alone for when corporate email was the main killer app.

[20:37] Right now, every different industry is starting to look at blockchain and trying to understand how to separate, how to decouple, the human decision-making parts of processes from the automatable execution parts of the process of doing business.

[20:56] This is true in financial services and digital payments, supply chain logistics, healthcare, Internet of Things. Every different industry has a variety of different kinds of blockchain applications in all of the phases I laid out, which is, number one, simple transfer of currency in the immediate spot market.

[21:17] Then smart assets or smart property having digital cryptographically-activated assets that can be registered and transferred on the blockchain, say in the case of a custom shipment tracking the provenance of the goods across the different ports they go through.

[21:35] Then, now, also the third phase, the intangible assets for advanced applications of really trying to bring in smart contracts and organizing more complicated programs for execution in the future. How we're going to, for example, do mortgage rate resets on an ongoing basis in securitized mortgaged contracts.

[21:56] This takes advantage of some of the proof of existence functionality where, with a cryptographic hash, we can confirm the contents of any digital asset and then book it to the blockchain with a time/date stamp so we know what that particular asset looked like at a particular time, and it can be validated at any future moment.

Kevin: [22:20] Now, Melanie, is blockchain this as a significant shift or as a significant technology as the printing press, the Internet, or is it just a lot of hype that the press is wanting to latch on to because they're always looking for hyped, interesting stories?

Melanie: [22:42] I think exactly like you said at the top of the call, we could really think about blockchain as a completely new form of technological advancement. To me, it's a core infrastructure for global smart networks.

[23:00] It's not as much a financial transfer instrument as much as it's just a heightened processing mechanism for our digital smart network infrastructure. We could look at the whole of all of computing and Internet networks so far as being, one, first era of transferring simple information openly on the Internet.

[23:27] Now, this whole second era that we're heading into now with blockchain as one of transferring value via smart networks, so that we're starting to push more complexities through the Internet pipes, and modulate information for signatures, and validation, and confirmation, and loading the information packets with value.

[23:51] We're heading into a smart network territory that's really a whole new form of computing that allows us the long tail of economics and governance. The only remaining sectors of the economy that haven't been completely re-engineered for the digital era are economics and governance. Blockchain, being a secure value confirmation and transfer system, is the core functionality that allows this.

[24:20] Just like we saw, the long tail of content with Amazon and eBay, where you could find that one book that you really loved or that one musical artist, and the two parties could meet across the Internet. Similarly now, we're starting to be able to give the power of the economic printing press, if you will, to everybody worldwide.

[24:43] We can have long tail economics and governance systems that were born into one economy and one government. We never really think about the possibility of having different frameworks for economics and governance, but now, with blockchain, there's nothing rooting us to the geographic territory or system we've been in.

[25:05] I don't see it as being conflictual as much as just having more, so there'll be multiple choices in the kinds of economic services we might like to design and participate in. Blockchain is an important leapfrog technology in the sense that, just like cellphones, we're a big leap forward in developing nations.

[25:31] Similarly, it didn't make sense to build out copper network, plain old telephone service to every last corner, every last mile of the world. Similarly, now, it doesn't make sense to build out brick and mortar bank branches to every last neighborhood in the world -- the four billion underbanked, and the two billion unbanked.

[25:53] It makes a lot more sense in this digital era to use wallet software on phones to be the last mile of banking. For financial inclusion, a blockchain is an extremely important leapfrog technology, the next one that we're now seeing after cellphones.

[26:11] The power of the printing press, in terms of anybody can participate in economic systems and realize financial inclusion, perhaps as a basic human right, is an important step forward, I think, globally, for our human society.

Kevin: [26:28] Do you think that the block chain could disrupt the fact that the nation's state is the geopolitical unit? Do you think it could actually disrupt the nation's state itself?

Melanie: [26:43] Certainly, that's the viewpoint of some blockchain supporters, the more libertarian-oriented group, and then as a potential implication. I think it will be a lot of things. For example, the major newspapers in the world did not go away just because we have blogs, and Instagram, and Twitter now, but it did force them to redefine their value proposition to their consumer.

[27:08] I think governments have had a monopoly so far, and haven't really had to think about the best way to deliver value-added services to citizens, and this is a completely new mindset. I think governments will become a lot more responsive, and efficient, and participative with citizens.

[27:28] I think what will happen is that, just like not everything becomes decentralized just because it can, that there'll be more natural efficiencies between some systems still are well-organized hierarchically, like the size of the firm, and other systems are more efficient in decentralized organizations.

[27:49] I think there'll be more of a better fitting process of what makes sense for a large federal government to provide, and what kinds of other services make sense to have other providers offering.

Kevin: [28:03] I found it's really interesting where you mentioned economics and governance are the two areas that the Internet hasn't really disrupted, per se. I think, indirectly, one could probably argue that things like Twitter have disrupted things like the Arab Spring, or it was a catalyst for the Arab Spring, and aspects like that.

[28:26] What I'm interested in finding out more about, you mentioned that blockchain could actually free millions of people from poverty. Now, this is where I really love technology as an enabler. I met someone recently who was one of the first Australians to receive a cochlear implant. She was born deaf and, now, she talks almost normally and can hear normally.

[28:50] I really get a buzz when I see technology having this grassroots impact. I'm not really a tinkerer for tinkerer's sake, but when I see an outcome like that, that's powerful, and when I read that statement in one of your presentations -- that the blockchain can free people from poverty -- that really spun my propeller, so to speak.

[29:12] Talk us through to uplift two billion people out of poverty overnight, for example, through helping with things like free remittances.

Melanie: [29:21] Right, exactly. Some of the different UN and World Bank IMF studies suggest that there are two billion of our seven billion people that are unbanked, don't have any kind of access to banking or credit services.

[29:38] Then another two billion that are underbanked, which are basically deemed unattractive, not really profit-worthy customers by the current brick and mortar banking system that tends to focus on higher value clientele. I think it's just because we haven't had an effective model for reaching more people.

[30:00] Exactly, like cellphones reach everybody worldwide on a practical basis, similarly, there can be banking applications on smartphones and traditional clam-shell flip phones via SMS. A whole suite of digital banking services can be rolled out effectively overnight to the two billion unbanked persons in the world, and also these other two billion underbanked.

[30:28] One of the most obvious kinds of services that there are several bitcoin startups working on is the international remittance market, which can take 10 to 40 percent commissions, and take days and weeks for one party to transfer money to a family member or another party.

[30:47] This is why transferring cell phone minutes effectively with using cell phone minutes as a currency with the MP-Cell system hit a big need in this transferring money back to your family in another region of the country or another country.

[31:04] This could just immediately make a difference in uplifting two billion people out of poverty overnight, and there are several bitcoin startups targeting this because it is such an obvious thing -- just the ability to transfer money to somebody at a different place in the world.

Kevin: [31:24] One of my passions is real cost economics, where the price actually reflects the cost to society, the nation's state, or the communities. Will the blockchain be able to, perhaps through Internet of Things, be able to, perhaps, do a better job of implementing real cost economics?

[31:44] There's so many distortions in the world today where some things are so cheap and they should be so much more expensive, and other things which are quite expensive should be a lot cheaper. We all know that capitalism is, in its current form, does wonderfully well at certain things but fails at many others.

Melanie: [32:03] Yeah, I think that's an important point. Blockchain or cryptocurrencies with pricing available on cell phones would be another channel for finding out economic information about the market, and so there could be arbitrage opportunities. Already people play the arbitrage opportunity between fiat government-based currencies and cryptocurrencies on different exchanges.

[32:27] Different exchanges might have different values around the world, but in terms of having access to better pricing information and being able to quote and participate in the global market on a better basis, that would be something that has been pointed out as a potential benefit of cryptocurrencies and blockchain.

[32:49] I think the transparency behind some of the market pricing could also be very helpful. For example, many countries don't have credit services, credit bureaus, and so we could have decentralized credit bureaus on the blockchain with open source FICO scores.

[33:09] Even how your credit score is determined is a black box mystery to most people worldwide, and unavailable to many people as well. Not just pricing of goods and services, but also how determinations are made in the financial services market about access to credit could be another big opportunity of blockchains.

Kevin: [33:33] I love the example. I think it was in your book of self-driving cars that communicate with each other and it's sitting...It has some blockchain software linked up and where, perhaps, one passenger in one self-driving car can let the network know that it's in less of a hurry.

[33:52] Another passenger in another car lets the network know that it's in more of a hurry, and the cars communicate with each other, have some sort of exchange. Of course, it's factored into the trip that perhaps the car that's in more of a hurry can perhaps move on through a lot faster to the...and perhaps pay a little bit of a premium for that to the cars that are in less of a hurry.

[34:12] I love that idea. I even find myself, when I'm in less of a hurry, I'll take public transport. When I'm more of a hurry I'll take an Uber. In a way I'm taxing myself in that way, but with the self-driving network that has some intelligence, boy, you can do some fantastic optimizations and cost transfers.

Melanie: [34:36] Yes, I completely agree, and that goes back to your last question as well, which is that I think the farther future is automatic markets. Smart resources price themself. You don't need the involvement of the passenger in the car. The smart resource knows the market for its services right at that moment and can negotiate with other parties on the network.

[34:58] This could be quite true in energy markets, in health...I'm working on a paper for quantized health care units on a global basis now where smart networks and smart resources will just automatically price themselves. You don't need human involvement. It's just another automated function that can happen, so we start to have more autonomous systems.

[35:24] Then what that also means is there can be much more fine-grained micro pricing of these different services that aren't worth, as Nick Szabo says, the human cognitive power to consider the transaction. These micro transactions conducted by automated smart resources can effectively grease the wheels in a much more unobtrusive and efficient way for all of us.

Kevin: [35:52] Melanie, last week I put a question to one of the senior members of the Reserve Bank in Sydney -- What's Australia doing about cryptocurrencies and blockchain? They said they only late last year put together a task group to look at what they can do and its impact etc.

[36:11] In New York City, New York State, the U.S., is there much going on on the government level around cryptocurrency and blockchain technologies?

Melanie: [36:21] Yes. In particular, the US lags in regard to digital payments, lags many other countries. For example, I just saw something about China -- that 40 percent of consumer payments are digital payments via smart phones, currently. Anyway, yes, the US has a couple of initiatives. One is for real time digital payments.

[36:45] This is something that the Federal Reserve Board and banking system is working on. The other big effort is with the US Treasury, which is using, essentially, the [indecipherable] key property of blockchains. Which is, you can have arbitrarily many levels of roll up of detail that you're tracking.

[37:04] A treasury official that I was speaking with was talking about how a US dollar bill, a single dollar bill, has 20 different levels of roll up to get to the whole economy.

[37:16] When the treasury's tracking the money supply, having some sort of system where they can immediately click and see different levels of detail is something that's very helpful to them for managing risk in the national financial system. Digital payments and fiat currency tracking are two principal applications that are being focused on in the U.S. Currently.

Kevin: [37:41] I know that the Winklevoss twins tried to get some cryptocurrency ETF through and the Securities Exchange authorities there just didn't want to let it through. I'm not exactly sure what was the motivation for not letting it through there, but I think that the currency community was a little bit disappointed around that.

Melanie: [38:01] Yeah, and it makes sense. The question I get most often when I'm speaking is -- "How can I start participating?" and, "Should I have investment exposure to cryptocurrencies? How can I get it?"

[38:15] The Winklevoss twins have an ETF -- an exchange traded fund -- that was rejected a first time. I understand it's a under another potential approval around right now, and so we would expect that there would be more market securities that track the crypto world.

[38:35] Why is there not a mutual fund of the crypto coin market cap, which has Bitcoin, Ethereum, Ripple, Iota, Dash, and etc.? We're really wanting securities-grade products for investing in the crypto markets. There's one company that allows you to invest your IRA, your retirement fund, in bitcoin and we would expect that there would be a lot more products.

[39:04] I think it's just that the traditional market regulators have been lagging in approving some of these products. The other thing that I would notice is, for example, another big opportunity that's missing that I expect to happen is some sort of market research securities analysis and ratings information like a Moody's or S&P rating agency for all of the initial coin offerings.

[39:31] When you look at the different pages to try to understand, there are a plethora of hundreds of offerings and there is no market provider in regard to how to qualify the different projects. I'd expect a Bloomberg page with ICO rating information.

[39:51] In fact, this is a great opportunity for the traditional financial services market to start offering these kinds of services in regard to the crypto economy.

Kevin: [39:59] It's also a great opportunity for the traditional financial marketed services to offer things like hosted cryptocurrency wallets, because they've traditionally been the source of trust -- probably more than any other institution in our nation state -- and cryptocurrency wallets are being hacked.

[40:18] I believe Tim Lea, who we've spoken to previously on the podcast, another block chain to expert, he says 30 percent of wallets have been hacked, so be careful where you store your cryptocurrency. They've been a little bit slower. I know the Australian banks have been looking at it. There's nothing that's happening yet. American banks, what's going on in the landscape there with respect to crypto?

Melanie: [40:42] Yes, also lagging. I think the British banks are, perhaps, in the lead here. HSBC in terms of at least a strategic plan for a crypto wallet to target new customer segments that aren't the traditional customer segments so in making their market larger, but yes, exactly.

[41:00] Until we see the Morgan Stanley crypto wallet that I can do some digital investing with or that Chase Manhattan wallet, exactly. I think the main way that blockchain will roll out to a very large adoption audience is via the consumer, and they're the trusted brand. Just like I didn't get an ATM card from some random website, I got it from my bank.

[41:29] When the trusted names of the consumer banks and the investment banks start to roll out crypto wallets and crypto solutions then that's when we'll really see a lot of adoption. Then at the technical, they're working out, I would characterize the phase of the industry adoption as exploratory at this moment.

Kevin: [41:52] Melanie, do you think the feds and the government, the US government are concerned about the US dollar losing its place as being the ultimate store of value in the global economy? I think, if I was them, going really deep into the crypto side of things so that they can have a strong finger in the pie and a say around that part of things.

[42:14] Bitcoin has become a store of value for people from countries where there's a lot of instability, and it seems to be doing an incredibly good job of holding that value better. At least a lot better than those unstable regimes.

Melanie: [42:29] Yes, definitely. I think, for any fiat currency, the idea would be to try to understand how to innovate within this new paradigm and offer a crypto version as a complement to the existing currency, not just to hide away from the possibilities.

[42:52] I think that successful countries will figure out how to conduct certain federal fiscal operations with crypto currencies. Maybe, first, it will be with crypto denominated bonds or other kinds of specific financial instruments, or implementing a guaranteed basic income initiative in a cryptocurrency.

[43:16] I think there could be...What we probably see from smart adoptable governments is rolling out crypto for their own purposes in limited market areas.

Kevin: [43:30] What I found interesting as well -- I think, again, it was in your book -- you mentioned that there is a use case, particularly now that blockchain technology can support it, for not buying assets but almost like assets as a service. Right?

[43:45] You mentioned we used to all buy music and now most of us use Spotify or some form there of Google music or Apple Music where we actually pay a subscription, but we get access to the benefit of the assets.

[43:59] I found that really quite intriguing, particularly in Australia where we essentially, for most part, got two dominant cities. We're a huge empty country and two little postage stamp pieces of land have incredible prices that most people can't easily access. Property is treated, for the most part, as a normal good, even though it's absolutely not.

[44:25] Yet, people all want to buy this asset because that's the way they can lock in the benefits of this asset. I was trying to get my head around, a little bit, how this could play out, particularly with something like property.

Melanie: [44:40] Right, because what you point out is a scarcity. We have a constrained market of lots of scarcity of one kind of asset and an abundance of another kind of open land asset that's in not as much high demand, and so the whole process hinges on uncertainty.

[44:59] The reason I don't have to own CDs or a car anymore is because I feel confident when I call an Uber or when I boot up Spotify, I can access that consumable market good. There's an abundance of that good.

[45:14] Land, and real estate, and securities in the future, we grip our investment funds in our hot little fists because we don't trust that there'll be a way to consume that good in the future if we don't own it personally.

[45:29] It's a huge transformation from a war era scarcity mentality and uncertainty about the future. This is why smart contracts can be so important -- because they lock us into different kinds of future consumable cash flow streams, and start to unshackle our scarcity mentality, and allow us to think more abundantly.

[45:55] I don't have to own a house, or I don't have to own securities for the future. I can own securities as a service that are blockchain based and that will deliver me an income stream with a smart contract so I don't have to worry about my future.

[46:10] This could really unlock, I think, a lot of human cognitive worry and energy towards a better quality of life for all of us if we start to think about...if we felt more secure about the financial future.

Kevin: [46:27] It's interesting. I think Airbnb is almost like a quarter of the way there. Right? There are some people...I think James Altucher, who's in your part of the world, he does a podcast. He says he doesn't get into long term leases. He doesn't own property. He just stays in Airbnb properties. In a way, that is property as a service. Right?

Melanie: [46:47] Yep, absolutely. Now we just need to do it with securities as well.

Kevin: [46:52] He's guaranteed access to property because there's always supply there, and he doesn't have to worry about the availability. Melanie, how did you get into blockchain and crypto? What was your path into this interesting area?

Melanie: [47:08] I've always been interested in emerging technologies. I have a Genomics startup. More and more things in the world have started to become a math problem with software technologies, and I have a background in optical networking and interoperation of global Internet networks.

[47:28] To me, I knew of bitcoin. It's, "All right. OK, it's a better version of PayPal. It's a digital payment thing. Yeah, OK, that sounds interesting, sounds valid, sounds useful."

[47:43] Then when I heard about smart contracts, I realized that we can really reinvent not just economics for this current spot market but the future obligations of securities market as well as the entire legal services market by putting contracts online and doing our voting online in, finally, a way that might work.

[48:03] I realized this is just a transformational global network infrastructure technology. It allows us to get into a much more heightened, high performance, smart network, automation era, and that this is going to be important because we have humans and machines in much tighter integration and collaboration.

[48:26] When I really realized it's a transformative network technology, that's when I got really excited about it.

Kevin: [48:33] Have you been inspiring other women to get into the work? This can be a little bit of a geeky, sort of... [laughs] At the moment, it's very experimental, geeky, enthusiast type environment and encouraging more diversity in that scene.

Melanie: [48:52] I have no idea. I think blockchains are an exciting technology and when I've seen anybody hear about it and think about how it might work in an area they're familiar with, they tend to get excited about it. That's women and men. That's people from every different kind of country. That's different age groups. I think it's like the Internet. It's a technology for everybody.

Kevin: [49:19] It is. Melanie, thank you so much for joining us on the podcast.

[49:22] Melanie Swan is a blockchain theorist and also the bestselling author of the Blockchain -- Blueprint for a New Economy. I've got the Kindle version. It was only $11 and I saw...I don't know if this is new or it's been for a while, but you can actually rent books on Kindle, so they offered to rent me your book for five bucks or buy it for 11 bucks. I bought it for 11 bucks.

[49:43] I didn't know you could rent books on Kindle, which is interesting and fantastic as well. We really are moving to the everything as a service economy.

Melanie: [49:53] Yeah, fantastic. Thank you so much, Kevin. I really appreciated being on the podcast and chatting with you.

Kevin: [49:58] Really enjoyed it. Thank you, Melanie. Bye-bye.

[50:00] [dog barking]

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[50:35] [dogs barking and howling]

Kevin: [50:35] Now, Kate, there was quite an important event this week where the blockchain forked, which I spoke to Melanie a little while ago, so we didn't chat about that. There was a new bitcoin blockchain that was created 1st of August.

[50:54] It's almost the equivalent of a new federal reserve printing at some new US dollars with a different set of rules, and you have two different sets of US dollars. I haven't actually followed up what's actually gone on with that, but the point I wanted to make is there's a lot going on. It's still early days. It's still crazy. It's still iterating like mad, but a lot of food for thought in that chat.

Kate: [51:18] Yeah, definitely! She makes a good point, saying this is the next era. Blockchain is the era of value transfer. The Internet, as we know it, was the first era of information transfer. It's just an interesting thought of a new phase.

Kevin: [51:38] I love the point she makes that one of the few areas that has not been disrupted by technology is governance. Right?

Kate: [51:47] Yeah, and economics.

Kevin: [51:49] And economics. Governance and economics. That was just such an interesting and such an important, important point. I think that's why people are so excited about the promise of the Blockchain and they're still removing the middle man, the middle person. There are still industries where they have a middle person that can still be removed.

[52:12] The block chain is, hopefully, going to be the technology that can do that. On the government side of things, it could even lead to different forms of political units, not the nation state necessarily.

[52:23] Even the last, I don't know, 20 years or so wars have stopped being fought along nation state lines. They're being fought along different lines in terms of ways of viewing the world, groups that view the world differently are not necessarily different nation states.

[52:41] Wars have already long been not happening along nation state lines, so maybe we will organize ourselves differently again, not along nation state lines, potentially.

Kate: [52:54] Potentially. It's also just an interesting reflection on society that all these industries have been disrupted by the digital era, but the last two would be economics and governance. Does that say that that's the most important thing to us, or the most uncertain about it in the sense that we're clinging to our older ways, I guess, and we're not letting it change?

Kevin: [53:23] Could also be they're complex systems, incredibly complex systems, systems that are formed over hundreds, if not thousands, of years. For better or for worse -- at least in the West -- the liberal democratic, deliberative democracy-type systems have actually been incredibly successful.

[53:44] They've actually led us to this world that we're in today, of all this fantastic technology. As I mentioned before, it's unfortunate that our dear colleague and friend, Jimmy's, been in hospital after a bad car accident for a while. Hanging around in a hospital, you really see the technology that's at play in little and big ways.

[54:05] From the surgeon that's patched him back together, to the technology of a high-tech air mattress that pumps in air in different ways that prevents bed sores. You just see the impact of technology everywhere in the medical system. The spirit of technology is to make a better world. A world where we have more quality of life, more peace of mind.

[54:34] That's a whole other philosophical debate. The liberal democratic system has given us actually a lot. Women generally don't die in childbirth anymore. We generally don't die from colds and flu. There's a lot that we've achieved through this liberal democratic framework.

[54:52] I'm not an expert in this. I'm not a political economist. I'm just a lay person, so maybe we should get someone on the podcast sometime to talk a little bit about political systems and technology.

Kate: [55:06] Yeah, definitely. The idea, piggy-backing off the hospital thing, which I think you also discussed with Melanie, is technology as an enabler. She had a really good example of how the blockchain -- more in economics and banking -- can actually free millions of people from poverty, just by opening up banking opportunities to people that don't have them currently.

Kevin: [55:33] Fascinating. Kate, funny enough, I've literally just received an email from Coinbase, which is one of the online trading platforms and digital wallets, the bitcoin ones. I'll just read part of it.

"[55:45] We wanted to give our customers an update on the recent bitcoin hard fork. You can read more about what a digital currency fork is here. Forks enable innovation and improvements to digital currency and we believe that we will see an increasing number of forks in the future. We expect this to be a vibrant and innovative community.

"[56:03] When a digital currency forks, it creates a new digital asset. Adding new digital assets to Coinbase must be approached with caution. Not every asset is immediately safe to be added to Coinbase from a technical stability, security, and compliance point of view."

[56:17] It's interesting. If you're interested in that, have a look at the hard fork on the bitcoin and how it's essentially created a new cryptocurrency. I keep on saying this. What I would really love is a city or a country, preferably ours, to take the lead and create their own cryptocurrency. Even as an experiment, with its own features and characteristics for our own benefits.

[56:45] I think once the first country does it -- I believe Estonia, Dubai are looking at it -- I think it may inspire the others to do it, but it's going to be very interesting when the first ones come out.

Kate: [56:57] Definitely, definitely, and I actually can't wait to see the use cases in separate industries, especially self-driving cars, and just any smart technology that you referenced is quite fascinating.

Kevin: [57:11] That's episode 101. I hope you enjoyed it. I love talking with smart people, and we're going to keep this podcast coming for you. Got a couple of interesting guests lined up. If you want to be a guest on the show, you can email us at

[57:27] Also, we haven't had one for a few episodes, but if you're a new startup or an existing startup, a small business, and we're happy to give you free promotion. All you have to do is a send a 30-second audio file. Tell us a little bit about your business. It won't cost you anything. It's our way of giving back, and you'll get the link on our show notes as well.

[57:48] You literally just have to send us an audio. It also exposes our users to interesting new companies, so it's a win-win-win, as they say. Thank you so much for listening to the podcast. We'll catch you next week, and yeah, hope you're well, wherever you are in the world. Thank you.

[58:03] [background music]

Kate: [58:04] See you.

[58:04] [music]