LIBERTAS - prvý slovenský dokument o kryptomenách (2021)

LIBERTAS - prvý slovenský dokument o kryptomenách (2021)

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Money is the memory of society, which records everyone's good deeds, and thanks to this external memory, we can move the value of these good deeds within time and space. Most people don't know how money works, and if we were to go on the street and randomly ask people: "What are these hundred euro bills are backed by?" Most people would say by gold... ...or by something. It has to be backed by something. It can't be created out of nothing.

You might find it funny or surprising, but economists are not really clear, on what money really is. The reality of it is much more complicated, because when you go to the bank, and they perform all kinds of checks for whether you are the right candidate for getting a mortgage, in the moment they approve it, and decide to give you the mortgage, so they deposit to your account three million Czech crowns or half a million euro, by that act, the bank actually creates new money, The amount of money in the financial system is not fixed. It's not constant. It's a completely different concept of the core of the system than most people have. Most people think that the best financial system is the one, where the amount of money does not change.

Ideally it's this pile of gold and it is always the same. No. Over the years we got to the type of money that we use today, which we call "elastic". Money that isn't tied to any metal, money that isn't exchangable for any specific commodity, whilst still having the key characteristic, that it keeps its value, keeps the stability of purchasing power. Obviously the banks cannot create as much money as they want. They are bound to follow certain guidelines for capital sufficiency, reserve requirements, requirements for the interbanking system, which is regulated by the Central Bank by setting the basic interest rate, for example.

What gives today's money value is that the state demands this money, the state requires paying with this money, the state requires you to use that specific currency - the euro, or the Czech crown, to pay taxes, for example, to ensure that if you have the euro or the Czech crown, somebody else, like a merchant or a bureau, must accept it as payment. It's not a coincidence that not only do states control the common economic memory - the money, but they do it together with the financial system. It's a symbiosis. The first central banks were born from private financial institutions, which lent money to the monarch or the state, usually for warfare or something, that he wasn't able to collect taxes for, in exchange for security from the monarch. Like in the form of privilege to issue legal tender. States protect the banking system and give it privileges, which means you need to have a license, you have to fulfill certain requirements, it is usually very expensive to become a bank, and on the other hand, the banks are buying government bonds and help the state with financing.

The symbiosis of the state and the financial sector leads to the financial sector being subjected to different rules, and leads to the fact that the errors of the financial sector are not bared by itself, but by the whole society. Maybe some experts or economists of today believe that we might be able to supress the economic cycles, that we might be able to command the natural forces, as some people used to believe during the socialist regime, that therefore we could command the economic cycles. This notion was here even before the financial crisis in 2008, when we thought that we might have somehow succeded in exterminating the cycles. At the end we were astonished by the depth of the crisis.

To give the Greeks money from our own empty pockets? I don't like that at all, nobody likes that. In the end the Euroval will be approved, and whether the small part will be paid by us, the French or Germans, that doesn't really matter. The Euroval does not matter. It is like leaping out of the frying pan into the fire. Therefore I have announced to my coalition partners, that today's vote about our future in Europe, will be accompanied by a vote for trust in this government.

After the last financial crisis the central bankers realised that the system isn't as stable as they thought, so they started to take some radical measures. They printed a lot of new money, released it into the system. But after some time they realized that the radical measures have a lot smaller effect than they expected.

That is why in Europe we are still at 0% interest rate 10 years after the financial crisis. Low interest rates are just an incentive to borrow more. It's a big problem, and I think that it's the core of the crisis, which is developing, which will eventually come, and which will be huge.

If there would be a next crisis in the Eurozone, how low can they push the interest rates? Below zero. Negative interest rate means that not only do I have a hundred euro in my bank account, but I also have to pay it two euro interest for storing my money there. People will not succumb to this voluntarily, so they could try to escape the system and what's the way to do that today? It's to take it out of the bank in the form of cash, and stuff it inside a pillow. Big banks can take cash from the Central Bank, and put it into a vault in some hill, and the costs of maintaining the vault would be lower than the negative interest rate. The central banks' solution for this problem is to abolish cash.

To clog all the holes, through which people can run away from the system, prevent them from escaping the banking system using cash, and then you have total control over the system, and can then even make people pay the negative interest rate. The central banks, by manipulating interest rates, the amount of money in the system, and so on, can try to diminish the cycles or delay them, but they'll never be able to do it to such an extent, that they would completely erase them, and I am worried, that the price for flattening the cycles will be that a huge crisis will hit us at some point, which will be much deeper, than if we opened a way for smaller crises, which would gradually clear the financial market, because when everything will get cleared in one go, it will be incredibly painful. When we say "dirty money", most people imagine money that is obtained illegally, whether it's from selling drugs or illegal gun sales, human trafficking, pimping, organising some form of services, which border with slavery, and so on. Banks should be the strongest tool which stops the money laundering.

In the moment when someone receives money on their bank account, it's laundered. Unfortunately it does not work that way. There are many cases where banks failed. Whether it's the case of Wachovia Bank, which laundered money for Mexican drug cartels, whether it's the case of HSBC, or Danske Bank... The case of Danske Bank is a great example of how broken the system is.

Government elites who were connected to presidential family of Azerbaijan stripped a local bank of its assets, in which there were money for retirement, there was development aid, basically money that didn't belong to them, and they needed to transfer the money out of Azerbaijan. They wanted to have it in their accounts, and invested in their projects, and they used a branch of Danske Bank for that, which accepted the money and helped them clean it. It's very likely that they knew this money isn't regular, since it just came from offshore companies and they were passing it further. Part of the money ended up even in Czech Republic, where the deputy chief of the anti-corruption bureau, whose average monthly sallary is about a thousand euro, since he's been a civil servant his whole life, invested into real estate and property development in Czech Republic - in Prague and in Marianské Lázně, a total sum of a hundred million euro.

This case wasn't uncovered by the bank itself. They didn't do any investigation into why this branch has such a great outturn, but it was us - the journalists, who found out about it. The banks in fact do not have some sort of self-cleaning system which would correct the mistake, once it's discovered.

I find it quite amusing to give the banks a fine, when their profits from the laundered money exceed the fine. I don't think this will stop the banks so easily. Of course there is some sort of reputation problem, but on the other hand the states realize that if they closed the bank, it would be a problem for regular people, who have money there.

That's why they're very careful about this. I don't know what could work. I'm not sure what kind of tool, or what exactly should stop the money laundering.

Through the privileges and protection, the financial system really does have higher profitability than other sectors. When you're giving a state guarantee to a sector, that sector gains to the detriment of other sectors, because they are not subject to the classical rules of capitalism. They can't go to the capitalist hell, they can't go bankrupt, so they can shift the costs of their irresponsible behaviour onto the rest of the economy and thus increase profit. However, since they have a higher profit and want to keep it, they reinvest it. They reinvest it to the political class, which means that usually financial institutions are the biggest donors of political parties and candidates. Many people nowadays ask "why is the politics so polarized?" "Why do we have Donald Trump in U.S.A.?"

"Why do we have so many populists, and anti-systemic parties in Europe?" I think that a crucial role is played by the policies of central banks. It's a crucial part that money is created out of thin air, it's not supported by a real value, it enables uncompetitive companies to survive, it creates a kind of environment where the mechanism of profit and loss, which was the backbone of capitalism and its success in recent decades, can't be fairly applied. I'm saying that our current system of elastic money is maybe not ideal, maybe it's not perfect. My liberal instincts also lead me to be inquisitive of the power and responsibility of a single institution. But I arrived at the conclusion that it's probably the "second best" system, as we say, in which case I don't know what's the "first best". I view the only option to improve the money in the technological innovations.

It can be some technological innovation, which would make the banks redundant, because everyone will flee elsewhere. Dollar weakens, the Eurozone is collapsing. What to do? The currency of the future is perhaps called "bitcoin". The hacker money was invented by japanese Satoshi Nakamoto.

A genius - according to IT fans. Not only because the exchange rate of his currency against the dollar grew more than thirty times in the past six months. Virtual money - phenomenon of "The Horizon". Bitcoin is a global decentralised accounting book, to which all transactions within its network are recorded, and this book is distributed across thousands of computers around the world.

Bitcoin's source code is also "open-source", which means you can read all of it, and it isn't locked in some black box. Bitcoin transactions cannot be censored. That means nobody in the process of sending money between the two of us can stop the transaction. Also bitcoin is divisible. It's divisible into hundred million parts, so you can buy bitcoin even for a cent.

It isn't backed by any single company, there isn't any central server that can be switched off, you don't have to ask for a special permission, and the network itself is very resistant against any attacks or failures and so on. Bitcoin transactions are also immutable, which means that once I make a transaction from address A to address B, I cannot reverse the process. The recipient can only sends me back the funds. Using cryptocurrencies can be easily imagined as if we had cash: banknotes and coins, and we could roll them up and send them over the internet.

For the first time in history there can be money, which will, in miliseconds, without any mediation, in a completely decentralised manner, provide a payment system. Even without the oversight of a ruler, as it was in the old days, or the government, or the Central Bank. Lets be honest, I could also make new money and compete with the state money, except I would end in jail, because there is a law about the Slovak National Bank, which states that money in our region can only be issued by our central bank. Bitcoin cannot be banned, or cannot be switched off, or it would be extremely difficult, and therefore it already competes with the bad money of today. Safety of bitcoin is based in cryptography. Cryptography that is used in bitcoin isn't used only there, but is used on the whole internet infrastructure.

And if there came someone who could break this encryption, it would have fatal consequences for everyone who uses the internet. I came to Prague to study mathematical sciences and I finished my studies in 2008, and I still vividly remember how our teachers of distributed systems used to repeat that there is one problem: the Byzantine Generals’ problem, which in fact cannot be solved. And two years after I finished my studies, there came a certain Satoshi Namakoto, who was able to solve the problem in a quirky, but very practical way.

Decentralised networks without a central point have one big problem: when there are transactions or information running through it each node in the network gets the information at a different time. When it comes to money, we need to know which transaction happened first and which happened second, because if it weren't like that, the financial network can't work. Thus bitcoin needed to discover a way to incorporate a system which would sort these transactions, and that is blockchain. The way people usually use money nowadays is that they use internet banking, or go to the branch and make transactions there. There is not much difference, the only difference is in the form of the ownership rights. With bank accounts it's either name and a password, or a plastic card, with the bitcoin network it's a cryptographic key, which is basically some random data that only I know.

If I lose the ownership right, it cannot be recovered, because noone else has it, which of course entails a certain risk, but it's also a big advantage. Private key, in cryptography, is basically a number. This number can be any random long series of digits, which does not need to have any attribute, it only needs to be within a certain scale, and the scale is from one to 2 to the power of 256, which is such a huge number that we cannot even imagine it. In fact, if we took number of all the atoms in the universe and multiplied them by number of all the atoms in the universe we get this kind of number. The cryptography is based on the fact that if I came up with a random number of this scale, the chance that somebody else will create the same number is so astronomically small, that it will never actually happen.

This whole cryptography is based on the fact that from this big random number I can derive another number using a simple mathematical operation, which I can then use as a public key, and this public key I can use with other people. These numbers are called a "key pair". There is whole branch of cryptography dedicated to this, which is called "assymetric cryptography", and the assymetry comes from the fact that for signing and verifying or for encryption and decryption, we use different keys. There is private and a public one. What's most problematic for a lot of people is the mental shift in how bitcoin works in comparison with technologies they already know.

With freedom comes responsibility, and there is a major problem when a person approaches it with the mental model, that it works the same way he already knows, like with a bank or with email and so on. Therein lie the most misunderstandings and big disappointments. People are often surprised when they buy bitcoin, leave it on an exchange, the exchange gets robbed, and then they blame bitcoin itself. But it's not about that. They just want to get rich quick, speculate on the price, but don't want to educate themselves to better understand what it is they are actually dealing with.

The astronomically huge number - the private key is not conceivable to remember. Perhaps there are a few people in the world who can remember a number, which has a hundred digits, Usually most people need to store that number somewhere. The way it was done in the beginning was that a person had to download a bitcoin wallet directly from the website. It generated the keys, and the keys were stored on a hard drive. It scales only to a point where a person can secure his or her computer.

That's how we realized a necessity, which was to invent a hardware wallet which in our case was the Trezor. The idea was to build a totally simple hardware device, which would be simple on both hardware and software side, and which would be auditable thanks to being open-source and free for people to look into. At the same time it would solve the fundamental problem that the private keys - the random numbers, are exposed to environment which can be attacked from outside. So this hardware or USB device with a display basically stores the private keys inside, and using a USB cable connects to the software wallet, which runs on the computer, but the keys themselves are removed from this environment which is not humanly feasable to completely secure. The security which is in bitcoin today, supplied by various companies and startups, is on an extremely high level, much higher than people outside of bitcoin are accustomed to. Although I had worked in the financial business for 10 years, after the crisis I realized I have no economic education, and I don't really understand what's happening in the markets and why it's happening.

So I decided to go study diplomacy in Prague with specialization on international economic relationships. I realized that money is a tool of power and whoever controls the money controls everything else. I started doing a research on the topic of international currency system in the context of global inequality and I think I got really lucky that bitcoin had already functioned for a year. During the research process I stumbled upon bitcoin and realized: oh, this is actually a tool for people to become independent, to be self-sovereign, and not to depend on the will of central bankers or other institutions.

Everyone is talking about merchant adoption: when will the merchants finally start accepting bitcoin, I can't pay with it anywhere. Well, they won't start until people will come and demand to pay in bitcoin. But the people won't demand to pay in bitcoin, because they expect its price to rise. Great dilemma.

The solution is that if we want people to use bitcoin, it's not that the merchant must first accept it as payment, but the people need to have a regular stable income in bitcoin. We experienced historical situations when we lost all of our property in 1948, in 1953 we lost all our money, and we have the historical experience, in Venezuela very recent with hyperinflation. These are the things that are actually based in the substance of our understanding of wealth. If you don't know how to explain bitcoin to ordinary people, one thing I would point out is that it has limited monetary supply, which means that there will only ever be 21 million bitcoin, and never more. Why is it important? Because that always drives the value upward. If you have something very scarce and limited it has immense value.

Gold is a bit similar in this regard. Its supply is also relatively limited. Not completely though, as there can be a lot of gold in the ground, which we haven't dug out yet, but basically it's hard to obtain it and that's why it has retained its value throughout the years. Other parameter which is incredibly interesting is that it's uncensorable.

It's incredibly important for refugees and dissidents, who don't agree with their regimes. We live in our western bubble. We have the credit cards and bank accounts, and who knows what else, lots of financial products, but the majority of the world doesn't have that privilege. And bitcoin enables this. All it takes is to open a smartphone, install an app, and you're good to go.

That's incredible. The main thing about bitcoin and why it's interesting to me is a combination of a unique technology on one hand, that's a very important aspect, and the second thing is the social impact that bitcoin has. The fact that by coming across bitcoin, one has to look at a things a bit differently than is common in society. The fact that holding bitcoin means having absolute responsibility and also a certain freedom, is the second aspect which makes this thing really something unique. If a person imagines blockchain like an accounting book where each block is a page with a list of transactions: Anne sent some money to Joe then mining can then be best imagined as preparing and adding a page into to this book. If I want to send bitcoin to somebody I'll make a transaction, send it to the network, and the miners will record this transaction, and add it to the page that they try to mine, or put it in the accounting book - the blockchain.

When we talk about bitcoin being decentralized, who maintains its blockchain? Who has the right to add transactions to it? The right only belongs to a winner of a competition for this process. Imagine there are twenty people in a room and everyone has a large bowl containing strips of paper with numbers written on them. The numbers range from 1 to 10000. And I would tell you: raise your hand if you find a number between 1 and 100. You would then start picking out the strips of paper, and the first one to find a number between 1 and 100, would raise their hand and get the right to add the transactions.

The act of picking the paper out is the result of the so-called one-way hashing function that bitcoin uses. What is it? It's a cryptographic function that works in only one direction meaning it can't be calculated the other way. The best analogy for this are colours. Imagine I gave you two colours, and you can easily combine them, mix them together and create a new colour. But if I only gave you this new colour and asked you: "How did I create it?" "Combination of which colours did I use?" Only option for you is to try. Take two colours, combine them, look at the result and see.

If it's not the same, you try again. How does it actually work? I take all the transactions that happened in bitcoin within a certain amount of time, and I combine them with a random number. I run it through the one-way function and look at the result. Then I ask: "Is this result satisfactory for bitcoin requirements?" If it's not, I go back, change the one number, and run it through the function again.

This is what the machines do millions of times a second. This is the work, and the result of the work which would satisfy bitcoin's requirement, that's the proof of work. If there came twice as many miners, there would be twice as much computing power, the network can automatically adapt by doubling the difficulty of finding the right page. Therefore bitcoin generates a new block once in every ten minutes.

People think that mining is about producing bitcoin, which is true to a certain extent, but it's only an incentive for people to participate in the mining process, in generating new blocks, ensuring that everyone has the same transaction history. In order to do that, bitcoin cointains an algorithm which releases new bitcoins, and these bitcoins are given as a reward to the miners for participating in this activity. Currently we have about 130 kW of power supplied here. Around 80 various computing units. The return on investment is quite speculative and volatile. It depends on many factors.

Of course there is the cost of electricity, the cost of the hardware. Among other factors is certainly the price of the mined cryptocurrency. Then there is also the difficulty within the network, which means how many machines are mining at the same time. The miners constantly compete with each other.

Someone whose electricity costs significantly less, by connecting more computing power, he can economically thwart his competitors. So someone who has higher cost of electricity, when there are a lot of miners in the network, he basically breaks even: what he pays for electricity, he gets back in mining bitcoin. If there will be enough miners in the network with low cost of electricity, for someone with higher cost of electricity mining seizes to be profitable.

That systematically pushes miners towards looking for cheap sources of electricity, which as matter of circumstance, and thankgod for that, are typically renewable sources of energy. Today's number is about 80% of world bitcoin mining runs on renewable energy, because the water runs continuously, and if there is hydroelectric plant built on a dam, it's an extremely low source of energy. If we compare it to some card payment institutions like Visa or Mastercard, they definitely consume more electricity than the world bitcoin mining. If we include all the employees, the buildings, all the moving parts and everything together, I think it amounts to about the same. The energy consumption is the price we pay for having immutability of the transaction history, so we can be sure that when we make a transaction within the network, the transaction cannot easily become invalid one day.

In order for someone to conduct an attack on the decentralized network, he would need to control the majority of the computing power. Since the miners earn from it, it doesn't make economical sense for them to do that at any time, since they would lose all their rewards. The system is economically set up in such a way as to not motivate anyone to do that.

In fact it's for the first time in human history when we have something digital that is also unchangable. I'm glad that the ATMs are sort of advertisements for bitcoin, that the ATMs are like totems of freedom. It's good that it promotes itself, but also in the shopping mall you suddenly have something, which will remind you of freedom. That is also one of the reasons why I enjoy it. It's evolving not only on the tech front, but the social one as well.

We started as two people - me and Mr. Desort. I write software and he does hardware. Then we gradually expanded. We deliver ATMs all around the world, probably to like 50 countries. Most of it goes to America, around 70% goes to North America.

The goal is for it to work effortlessly for the end user in front of the ATM. So it's easy to use, so it works with any wallet. My brother and I founded Cryptodiggers on September 9th of 2014.

In the beginning there was just a payment gateway. Later came the ATMs. Before I came across bitcoin I worked in the banking sector. This offered me an inside look into the many banking technologies, so that I could see that bitcoin offers something so completely innovative and different, that my passion was immediately flipped from the banking world to the bitcoin and blockchain world. The resistance came at the peak in 2017, especially in the beginning of 2018, when the banks started to close down accounts of almost all of the biggest crypto businesses. Since then the problems have been going on until present day.

Regulation is practically non-existent, and banks, as regulated subjects, are still not willing to open bank accounts for crypto companies. It's sort of like playing dumb terrorists. If you're a terrorist and you know you're on a blacklist, you probably won't use your real name, and so on. The Czech National Bank gives clear signals to the commercial banks not to allow cryptocurrency businesses as their clients. The commercial banks didn't want to open the accounts precisely because they said: who is the final recipient? Who is that person? So that we can safely say before the face of financial bureau, the financial analytics bureau and the ministry of finance, that there is no money being laundered. Tell us the final recipient.

And if not, we are risking a fine. The amounts that they try to verify against money laundering are completely irrelevant, when compared to the amount that they laundered. Not one of these subjects lost their license, which for me, as a regular bank user, is quite the mystery. They only care about their current system so it's working and stable.

And it would be most stable if there were only one or two banks. Anything more is risky to them, so that's that. A common cryptocurrency when the user doesn't do anything or doesn't care, practically isn't anonymous.

Bitcoin is so-called "pseudonymous", which means it is anonymous until you tie your address or your transactions, to your real identity. That usually happens at an exchange. Theoretically it is possible to track the bitcoin to the payment gateway. The gateway knows which merchant it was paid to, and the merchant knows what you bought and where it got sent. There are only few people who are actually trying to be anonymous. But since there are only few, they are quite visible, and when they're visible, the anonymity is useless.

Virtual currencies first got into European legislation this year, when government approved the guideline of the so-called "5th anti-money laundering directive". Business entities that work with bitcoin will have the same conditions and obligations as for example a bank. They will have to identify their clients, confirm their identity, and watch their transactions. The state's stance is: we currently don't plan to regulate it, we are waiting for some guidelines from the EU, but if there aren't any, we don't see the need, but on the other hand, another part of the state, for example executive bodies like Czech National Bank, Financial Analytics Bureau and Financial Management Bureau. They are of course aware that it involves them, but I think they work with it in a correct and appropriate manner. In Slovakia, the only way virtual currencies are currently regulated is by tax regulation.

It is mandatory for the investor to keep records of all the transactions for purposes of accounting and taxes. All the transactions made against fiat currency, or if he bought any goods or services with the virtual currencies. From the transactions he needs to calculate his income and subsequently pay the taxes. If you're asking whether there could be an instance of double taxation... I think it would be considered only as an income tax... I don't really know how to answer this.

Even if there are clear rules set, another thing is the high level of income taxation. It's about whether it makes sense to talk about regulation, because even if someone wants to invest in cryptocurrencies, he will typically avoid Slovakia. First of all we have nobody to contact, legislation makes it difficult, even though we want to cooperate but we don't have the opportunity and we don't know where the line is. So that nobody can say that we broke the law. Which law? Nobody wanted to talk to us and we wanted to resolve it.

This is what ties to everything. If we regulate it and won't succeed, what can probably happen is that we greatly simplify the situation for traditional businesses, with traditional approach, that will follow the paths they already know, for example in some other fintech field, but we restrict the way for all the innovators, or the so-called avantgarde, people who are more capable at carrying certain risks, which is the price for breaching new grounds. I was always very strict against any notion that bitcoin should be banned, that it sould be obliterated, and shouldn't be allowed and so on. When I worked in the central bank, we summed up our policy simply: do not help, do not protect, do not harm, do not babysit. In 2017, bitcoin attracted a lot of attention, whether it was from media or from general public.

The reason was that many new crypto projects were born. These promised huge profit to the investors and many of them incorporated crypto into their business without any sense. There are many different cryptocurrencies that are trying to bring something new by modifying the bitcoin source code or other, in a way that brings something new, and typically bring for example more anonymity, or faster transactions, and many other things. When investing into cryptocurrencies, you have to be extremely careful.

There is many fraudulent websites and crypto projects, which promise huge profits, but as soon as you send them money, you never see it again. It's important to remember that the transactions are irreversible, meaning you can't get the money back. At the same time the whole cryptocurrency environment is still not regulated. So there isn't any insurance, and you won't find any court of law, that would give you your money back.

So whenever you see a site that promises you profits, be very careful and better keep your hands off. Existence of so many different cryptocurrencies certainly doesn't make as much sense as people think. Maybe there are cryptocurrencies, which are important, but I view it similarily to traditional currencies.

We don't know what they pay with in Zimbabwe for example, or what currency they use on some unknown small land. We know the main currency pairs and most people are interested in those. It goes similarily for cryptocurrencies. There are projects that are more significant and projects that will go extinct.

In Elis Technologies we use the blockchain technology. We emit digital vouchers on the Ethereum blockchain, which client uses to pay for our services. That way we achieve that nobody can operate or misuse our robots and drones, without using these tokens. Blockchain brings us many advantages. When we have to do a measurement for our client, which could be on the other side of the world, the result is recorded into the blockchain. That means it is indisputable we have done the measurement, and didn't forge anything, because blockchain is immutable.

Without it, it's only about people and possible corruption, it's about buying the approval for false measurement, which actually does happen today. Every new technology, that the general population doesn't fully understand, is met with a lot of scepticism. I think it was the same with cars when people used to find them odd and amusing.

It seems very similar to me. We live in a sort of post-monarchist, post-socialist society, which carries with it all the historical ailments, which means the people here got used to getting free stuff: schooling, education, healthcare. But at the same time they want the perks of western society, which are based on responsibility, economic responsibility. So in this regard the current era is subversive and quite schizophrenic.

I think the Ztohoven group underwent three large phases: our goal in the first phase was... grab attention. The second phase was during the Media Reality project, when we hacked the live broadcast of the Czech National Television, and broadcasted a fake atomic blast. They caught us by surveilling our telecommunications movement.

They found out who was on the spot based on the location of our mobile phones. However, we took this as an opportunity to explore this topic further. The next topic was that we knowingly hacked the ID cards, when we put morphed photos in them, and we knowingly started to disrupt the tools for control and surveillence of citizens.

In that spirit we then made the project Moral Reform, which was based on our meeting with Palo and Juraj, who are elite hackers, ethical hackers. The moment I met Palo in a cultural center "Stanica", in Žilina I think, I was invited on behalf of Ztohoven to a discussion on the topic of freedom on the internet. There was some geek who spoke about how there is money not controlled by any state. How there is a place on the internet not controlled by the states or any search engines. Then I found him at a cafe and asked him whether he would like to collaborate with us. He said: "Sure, why not?! Give me your number!" So I gave him my number, my colleague from Ztohoven who was with me gave him <i>his</i> number, and instead of him giving us his number, he kept tapping at his phone and said: "I'll keep in touch, bye guys!" and walked away.

And I got a SMS message, in that moment I pull out my phone, but the message came from my colleague who was standing right next to me, and he definitely didn't write the message. It said: "Fake SMS. Take care guys, I'll get in touch". Cryptoanarchists believe that cryptotechnologies can provide to people a new kind of personal and economic freedom.

Cryptoanarchy is a school of thought that was born in USA in late 80s, early 90s. In 1992 or 1993 Timothy C. May wrote "The Cryptoanarchist Manifesto", where he developed the idea of cryptoanarchy, and that it's cryptotechnologies, which enable the birth of a new parallel decentralized society. And in his own way predicted an anonymous cryptocurrency, anonymous money like bitcoin. Suddenly there is a set of tools for retention of your own personal digital freedom.

But in this day and age when digital freedom is closely tied to physical freedom, and thanks to the internet, the public space gained another immeasurable dimension, then the moment we will, in a sophisticated way, be able to use the tools for retention of digital freedom, there is high probability, that we will be able to retain our physical freedom as well. The state still has control over the physical world and will maintain control over the physical world for a very long time, but it loses control and I think to a wide extent will lose it in the virtual world, thanks to anonymization technologies, thanks to decentralization. By the end of 1970s there was a period of strong normalisation in Czechoslovakia, and the "Chartists" realized the inability to make a revolution, protest or a strike, or change the society in any way.

Václav Benda, one of the active members of "Charta 77" who realized this dispair wrote "Parallel Polis Manifesto" where he declared a need for a parallel society. He said that truly free society is one that accepts and tolerates the existence of parallel society. He talked about building a parallel society with parallel culture, parallel free markets, where we would trade. They even thought about creating a parallel justice system for people to use outside of the traditional system.

We presently have in our disposal the crypto tools, the technologies, which make the original vision of Václav Benda - the parallel society, technically feasible to implement, here and now, and we were so excited by this that we launched Parallel Polis. Parallel Polis is a crypto think-tank. The mission of Parallel Polis is to educate people in matters of digital freedom. The vision is: to support, develop and represent Parallel Polis, which means a parallel cloud society, which is in competitive relationship with the state.

People here on such a trivial occasion like having a coffee, or meeting at a cafe, can experience such a radical thing like purchasing cryptocurrencies so that we can have a coffee. Thanks to that, when people will read in a newspaper that cryptocurrencies are for money laundering, buying guns, child pornography and drugs, they will understand that that's bullshit, because they have the experience, that it can buy excellent coffee. One floor above is a co-working space and it's another trojan horse. We create a kind of service here for a shared office. We don't tell the people what to do, but they definitely have to pay rent for that shared office once a month in cryptocurrencies. The third and most important level is the place of residence of the Institute and that's basically a lecture hall.

We organized the Congress during the launch of Parallel Polis in order to attract people to the house, in order to state that we have much higher ambitions. We wanted to show that we are able attract people in the cryptoanarchy field, freedom, digital freedom and so on. We started with cryptocurrencies and ended with the largest program in Parallel Polis being: growing salads. In the end you realize, that the biggest responsibility of any society, even the parallel one, is sustainability and environmental themes.

Parallel Polis is a great example of how the Czech Republic is a liberal country. It's one of the very few places in Europe that I know of, where you can pay only with bitcoin, only with the alternative to traditional money. When I say to my friends from London, that there you can buy coffee with only bitcoin, they say that it's not possible but I tell them "yeah". I would basically say that the state or public institutions tolerate it, because why not.

Why play the role of, for example from the point of a central bank, saying: "You don't uphold the law of currency circulation, and don't accept Czech crowns here." It's the same as with the bitcoin ATMs. I think that some form of common sense is required. It's like a cute curiosity. But even thanks to the tolerance the state and the central bank make it clear, that it's not the real alternative.

It's something like a nice oddity. Bitcoin is quite a young technology, it's only ten years old. It's basically where internet was in the 1990s. We didn't know how we would use it. We didn't know we would trade there or use social networks. I view bitcoin as if it's a ticket to a payment ecosystem, which isn't yet formed, but there is a great hope that it once will be.

I principally warn of calling bitcoin "currency" or "cryptocurrency". The agreed definition from 2018 by international organizations like The Financial Stability Board, is that it's a crypto asset. It's not another currency in the sense that it's a different currency.

It's a different concept, a different system. Yes, I think with bitcoin or cryptocurrency it's not possible to control the economy. But lets leave that for the fiat money. Let them have at it. Let them control the economy, the employment rates with the fiat money, it's fine. But there has to be an option to go with the global currency which would serve for exchange, trading, and maybe some store of wealth.

The cryptocurrencies are still being used only by a few people, it's still a relatively small market, and that's why the price rises or falls so violently. When someone wants to buy it can rise. When a lot of people sell it falls. But if the cryptocurrencies managed to truly compete with the bad money which means: if they would enter a lot of transactions in the economy, it's possible to predict that the price would stabilize. The larger the market, the smaller the jumps in price. Today bitcoin is uncensorable money, which by itself is very valuable with regards to the evolution of the banking world, and how the world of KYC, AML, and all these abbreviations develops, I think it will rise in importance.

What can help with the adoption of cryptocurrencies is when the governments will take the wrong steps. As long as the state will print more money, which will diminish its value, the higher the demand for people to switch to the alternative and use it on daily basis. It sounds crazy, but we need to be a lot worse off in order to generate the demand of people to cross over to the parallel crypto world.

Send a tank to the bank! Okay, the bank will freak out. Send a tank to the blockchain! Where? The progress will lead to the states being a lot more hostile towards this innovation, since it does threaten its principal competences. How will the reaction of the states look? I think the bigger the success of cryptocurrencies, the harder the response. We are not talking about whether we will live in a world where these technologies will be or won't.

These technologies exist. And if someone wants to use them today, they can use them today. The cryptocurrencies will secure the people the same properties as today's cash, and that is the retention of personal financial freedom. It's a change of mindset. We're in the beginning. Who knows what's going to happen?

2022-01-14 08:49

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