by Michael del Castillo , Upstart Business Journal Technology & Innovation Editor April 19, 2013 | 3:44pm EDT
Last Modified: April 20, 2013 | 5:57am
Buried in the transcript of an interview with Julian Assange for Eric Schmidt’s book due out next week, the two tech icons shared these interesting insights on what was then a little known currency called Bitcoin.
In June of 2011 the founder of WikiLeaks, Julian Assange, was holed up in Norfolk, England, awaiting word on his possible extradition to Sweden for rape charges, which he denies. While there he took a rather interesting house guest, Google Chairman Eric Schmidt, who interviewed Assange on tape for his forthcoming book The New Digital Age, due to be published, April 23.
WikiLeaks today published the “majority” of a “verbatim” transcript of the five-hour-long conversation, including the first time Schmidt ever heard of Bitcoin, and an ensuing lesson from Assange that we would have loved to have seen for ourselves.
Incidentally the “cypherpunks” Assange said are at the genesis of Bitcoin, are a group he himself is often associated with, and also happens to be the name of his book.
The actual origin of Bitcoin is still quite a mystery, with its mysterious inventor, Satoshi Nakamoto, still unknown, though the New Yorker claims to know the person’s identity.
Here is what an excerpt of what WikiLeaks called the “secret” interview:
There’s also a very nice little paper that I’ve seen in relation to Bitcoin, that… you know about Bitcoin?
OK, Bitcoin is something that evolved out of the cypherpunks a couple of years ago, and it is an alternative… it is a stateless currency.
And very important, actually. It has a few problems. But its innovations exceed its problems. Now there has been innovations along these lines in many different paths of digital currencies, anonymous, untraceable etc. People have been experimenting with over the past 20 years. The Bitcoin actually has the balance and incentives right, and that is why it is starting to take off. The different combination of these things. No central nodes. It is all point to point. One does not need to trust any central mint. If we look at traditional currencies such as gold, we can see that they have sort of interesting properties that make them valuable as a medium of exchange. Gold is divisible, it is easy to chop up, actually out of all metals it is the easiest to chop up into fine segments. You can test relatively easily whether it is true or whether it is fake. You can take chopped up segments and you can put them back together by melting the gold. So that is what makes it a good medium of exchange and it is also a good medium of value store, because you can take it and put it in the ground and it is not going to decay like apples or steaks. The problems with traditional digital currencies on the internet is that you have to trust the mint not to print too much of it.
And the incentives for the mint to keep printing are pretty high actually, because you can print free money. That means you need some kind of regulation. And if you’re gonna have regulation then who is going to enforce the regulation, now all of a sudden you have sucked in the whole problem of the state into this issue, and political pushes here and there, and who can get control of the mint, push it one way or another, for particular purposes. Bitcoin instead has an algorithm where the anyone can create, anyone can be their own mint. They’re basically just searching for collisions with hashes.. A simple way is… they are searching for a sequence of zero bits on the beginning of the thing. And you have to randomly search for, in order to do this. So there is a lot of computational work in order to do this. And each Bitcoin software that is distributed.. That work algorithmically increases as time goes by. So the difficulty in producing Bitcoins becomes harder and harder and harder as time goes by and it is built into the system.
Right, right. That’s interesting.
Just like the difficulty in mining gold becomes harder and harder and harder and that is what makes people predict that there is not going to be a sudden amount of gold in the market, rather…
To enforce the scarcity…
Yeah, to enforce scarcity, and scarcity will go up as time goes by, and what does that mean for incentives in going into the Bitcoin system. That means that you should get into the Bitcoin system now. Early. You should be an early adopter. Because your Bitcoins are going to be worth a lot of money one day. So once you have a… and the Bitcoins are just… a Bitcoin address is just a big hash. It’s a hash of a public key that you generate. So once you have this hash you can just advertise it to everyone, and people can send you Bitcoins, and there is people who have set up exchanges to convert from Bitcoin to US dollars and so on. And it solves a very interesting technical problem, which is how do you stop double spending?
All digital material can be cloned, almost zero costs, so if you have currency as a digital string of numbers, how do you stop me… I want to buy this piece of pasta.
[Assange using lunch table objects]
Here is my digital currency and, now I take a copy of it. And now I want to buy your bit of egg. And then you go… and now I want to buy your radish! And you go, what? I’ve already got that! What’s going on here? There’s been some fraud! So there’s a synchronization problem. Who now has the coin? So there is a point to point.. a spread network with all these problems, some points of the network being faster, some points of the network being slower, multiple paths of communication, how do you solve this synchronization issue about who has the currency? And so this is to mind actually the real technical innovation for Bitcoin, it has done this using some hashtrees and then a delay time, and then CPU work has to be done in order to move one thing to another so information can’t spread too fast etc. OK, so, once you have a system of currency that is easy to use like that, then you can start to use it for things that you want to be scarce. What is the example of some things that we want to be scarce? Well, domain names. Names. We want names to be scarce. We want short names to be scarce, otherwise if they are not scarce, if it doesn’t take work to get them, as soon as you have a nice naming system, some arsehole is going to come along and register every short name themselves.
Right. That’s very interesting.
So this Bitcoin replacement for DNS is precisely what I wanted and what I was theorizing about, which is not a DNS system, but rather short names… short bit of text to long bit of text tuple registering service. Cause that is the abstraction of domain names and all these problems solved. Yes, you have some something that you want to register that is short, and you want to couple that to something that is unmemorable and longer. So for example, the first amendment, that phrase, the “US first amendment”, is a very short phrase, but it expands to a longer bit of text. So you take the hash of this text, and now you have got something that is intrinsically coupled to that which is unmemorable. But then you can register “US First Amendment” coupled to the hash. And that then means you have a structure where you can tell whether something has been published or unpublished, you can… one piece of human intellectual information can cite another one in a way that… can’t be manipulated, and if it is censored the censorship can be found out. And if one place is censored, well you can scour the entire world for this hash, and no matter where you find you know it is what you wanted precisely!
So that, in theory, then permits human beings to build up an intellectual scaffold where every citation, every reference to some other part of human intellectual content, is precise, and can be discovered if it exists out there anywhere at all, and is not dependent on any particular organization. So as a way of publishing this seems to be the most censorship resistant manner of publishing possible, because it is not dependent on any particular mechanism of publishing. You can be publishing through the post, you can be publishing on conventional websites, you can be publishing using Bittorrent, whatever, but the naming is consistent. And same is for… publishing is also a matter of transferring, you can… all you then have to do is, if you want to transfer something anonymously to someone else, one particular person, you encrypt the information with their key, and you publish it.
Are you worried.. basically this entire system depends on basically irrevocable key structures. Are you worried that the key structures would fall apart?
Well the hashing, in terms of the naming part, going to patterns—it doesn’t depend on the key structure at all. In terms of Bitcoin has its own key structure and that’s an independent thing, there is all sorts of problems with it. Hackers can come in and steal keys etc. And the same problems that you have with cash. Armored vans are needed to protect the cash etc. And there are some enhancements you can use to try and remove the incentives one way or another. You can introduce a subcurrency with fixed periods of expense. So you retract for one week or one day and a merchant will accept or not accept.