1:04 Before Bitcoin, the only way to make electronic payments over the Internet was via your bank. However, over 2 billion people in the world do not have access to a bank account.Sure, but why is Bitcoin the best solution for this problem? Nobody was connected to their bank accounts electronically prior to the Internet. The solution was to get people connected. Most people are now connected. Why is the solution not to remove the barriers that prevent the rest from getting connected?
1:35 And even those who do have a bank account aren't exactly free to send money to anyone anywhere online (Fidel Castro graphic). If two governments don't get along, money simply doesn't flow across their borders. Digital cash would connect people economically in a way never before possible.First, just to be clear, electronic money does not "flow" across borders. Electronic money lives in a ledger. The question is who gets to use the ledger. Not being able to "send money" from the U.S. to Cuba means that Cubans (living in Cuba) are not permitted access to the ledgers created by U.S. banks and Americans are not permitted access to the ledgers created by Cuban banks. There is a communication barrier.
1.59 Antonopolous remarks that Bitcoin can do for banking and finance what cellphone technology did for communications and empower billions of people around the world. Brito remarks that Bitcoin for the first time makes possible P2P transactions without the aid of intermediary.I have a lot of respect for both these guys. But I'm still not sure how Bitcoin (or blockchain technology more generally) is supposed to facilitate banking and finance (I elaborate here). As for the contention that Bitcoin does not need a third party to clear transactions, this is, strictly speaking, not true. The third party in Bitcoin consists of the miners--no P2P transaction can be cleared without their help. So, no, Bitcoin is not "just like cash" (which truly does not depend on any 3rd party).
5.16 Within a small trusted group like a family, you really don't need money. Money actually starts as a shared memory.I'm really happy to see this key insight--known to anthropologists and economists for a long time--is starting to catch on. See: Why the blockchain should be familiar to you.
5.40 But this kind of written money works only if we trust the people we are making promises with.Well, this is not exactly correct. In fact, memory (e.g., credit histories) are a part of the solution to the lack of trust problem. Reputations rely on memory. And we expect cooperative play from noncooperative agents concerned about protecting their reputations. The need for conventional money arises because memory (the shared communal ledger) does not scale given the limitations of a network of human brains communicating verbally. Money permits anonymous agents to transact and can therefore scale beyond local confines. An anonymous person is someone for which we have no personal history. But we're still willing to grant them a favor if they show us the money. Money is a substitute for the missing record-keeping technology. (For more detailed and technical explanation, see here.)
11.50 This leads us back to the problem we face online. The Internet connects people globally, yet people are largely restricted to using local currencies. Who is going to make the digital "tickets" for the Internet? And who will we trust to be in charge of them?This is clearly leading up to the suggestion that Bitcoin is a natural global currency. The idea of a single global currency has a lot of appeal. The closest thing to this we have today is the U.S. dollar. But because not everyone has USD accounts, there are the usual inconveniences and inefficiencies associated with uncertain nominal exchange rates. How big of a deal is this? I do not know, but I suspect that among all the factors that contribute to the advancement of material living standards, having a common currency is not at the top of the list. We might get some handle on this issue by asking how much better off are the people of the EMU since the adoption of the Euro? (See: How Much Does the EMU Benefit Trade?)
12.22 The key to Bitcoin is the way Satoshi flips the traditional model of trust on its head. Instead of letting a bank control the ledger, you share it with everyone.This is subtly (and importantly) misleading. Control of a ledger does not map simply into whether it is shared or not. For any ledger, read and write privileges need to be separately specified. It is true that in today's banking system, banks possess both read and write privileges and that they limit the read privilege severely (you can only look at the account balances in your account and no one else's). Note that there is no technological reason for why conventional bank ledgers cannot be made open for public viewing. Doing so would effectively make the ledger "shared" and "distributed" (if it could be freely copied). That this does not happen reflects the preferences of bank customers. We don't want the world having full viewing privileges over our personal bank accounts. But there is nothing right now with current technology that prevents people from publishing their diary online (rendering is shared and distributed).
12.45 This shared file model is more secure than any bank ledger could ever hope to be.If every student in a classroom can see what the school teacher scribbles on the blackboard, then it'll be very hard for the teacher to later claim she did not write it. Say something stupid in public and you'll never erase the public record. This is the power of a shared ledger. But banks already have the power to share their ledgers. Their bank customers do not want them to. Perhaps bank customers wouldn't mind so much if their accounts were anonymous (like the old Swiss bank accounts). I'm sure that Paypal would love to offer Swiss-style bank accounts. If it was legal. Which it is not. But if this is what people truly want, then why not have them lobby their respective governments to reinstate the anonymous bank account? Bitcoin is a "solution" in this regard only insofar it circumvents the law (which it's very good at doing, since it's a decentralized autonomous organization).
12.50 Bitcoin is a piece of shared software that everyone runs together instead of having one trusted computer do it (Graphic shows bank with one copy of ledger and Bitcoin with multiple copies).First, there is nothing that prevents a bank from keeping multiple backup copies of its ledger (Fedwire has multiple back up computers, for example). Second, I'm not sure what it means for "everyone to run a shared software together." I presume it means that the agents or agencies that have volunteered to operate as miners collectively agree to follow the protocols laid out in a particular version of the software. Sure, and banks within the banking system collectively agree to abide by banking regulations. The software evolves over time in accordance with the wishes of the broader community--miners can "vote" on which version of the software to use--code patches that benefit the community are adopted. Banking regulations also evolve over time in accordance with the wishes of the broader community via choices made by elected representatives.
13.57 There is no center to the network, no central authority, no concentration of power. It's exactly how ant and bee colonies function.To say that there's absolutely no concentration of power is overstating things. The core developers likely have more say than others. Those agencies that have invested heavily in mining equipment have more say than others. Concentration of mining power is a concern. (Miners themselves have avoided overly concentrating power for fear of destroying the franchise value. This is, ironically, the same force we expect to discipline conventional banks.) And as for ant and bee colonies, they have hierarchical structures, including a queen. From outer space, humanity looks like an ant colony. So yes, Bitcoin functions just like an ant colony--governed by protocols--as does everything else.
14.44 Description of blockchain.This is done very nicely. There is something beautiful about the blockchain, to be sure. And while I have some quibbles with what is said in this section, let me step back and comment on the broader picture.