We met with Elizabeth Stark in Helsinki where over 17 thousand people gathered for the major two-day Northern European startup event. The Slush conference, aptly named after the weather conditions that couldn’t prevent startup enthusiasts and investors from coming, was held in the biggest exhibition space in the Finnish capital city but at some panels you didn’t even have any elbow room. Bitcoin evangelists and Blockchain practitioners drew out record-breaking crowds, with Elizabeth Stark, a recognized leader on the future of technology, always in great demand.
Elizabeth Stark is a friendly person but also a fiery speaker who has lived all around the world, from Singapore to Berlin to Rio. She also is an entrepreneur, co-founder and CEO of Lightning.
Next big thing
I caught up with Elizabeth in the relative quiet of the backstage behind a water wall and asked her what next year’s big disruption will be.
“I’m really excited about the potential for smart contracts, said Stark. “First came Bitcoin, then Blockchain, then distributed ledger technology, and for the next I don’t know what the name is going to be, but I see so much potential for smart contracts. For example, most people don’t realize this but Lightning even itself is a smart contracting system. It uses the Blockchain as its arbiter. We can debate the merits of a complex smart contracting language but I do think 2017 will be much more the year of smart contracts and the narrative will be around all the possibilities that are present there.”
But can’t it be that smart contracts will turn out to be just another buzzword with too much media hype around it? Early this year, banks moved in droves toward exploring “Blockchain,” but it seems they cooled off somehow lately, with some banks dropping out of the R3 Consortia…
Faster payments
Stark thinks it doesn’t mean the end of the banks’ Blockchain experiments:
“R3 is one example of a consortium in the space, but there are other venues. To me, having been involved in Bitcoin from fairly early on, there was a point at which banks wouldn’t have even thought of going into Blockchain. The fact that so many did realize it is a big deal, and they got involved, which is encouraging. I don’t have any insider information but it seems some of them are going their own way, building their own versions of their own technology so won’t need to be a part of R3 or any preferred consortium.”
The cold and dark December Helsinki was obviously ready for Lightning, a decentralized network that uses smart contract functionality in the Blockchain to enable instant payments.
“A group of us started working on Lightning last year,” says Stark, “and one of the things I’m really excited with Lightning is its ability to connect different Blockchains. Lightning can work to scale Bitcoin, but it also can work to scale or connect chains. You could have two different assets, and they can be swapped in a decentralized fashion. I could foresee a world in which there can be different assets, equity, issued by various financial institutions and banks, and they could go clear through Bitcoin’s Blockchain, the public decentralized chain. Because there can be liquidity between those two assets and Bitcoin, and you could have decentralized atomic swaps between those chains.”
But how would you put assets on the Blockchain? Will it involve legal entities anyhow?
“Let’s say I’m a bank and I start issuing USD. I’ll have to be a custodian. The consumer will have to go back to me in the end if they want a physical currency. There’s an amount of trust involved. Some corporations can issue shares on a chain, and then you still have to trust corporations will give you the shares that they’ve said you had. But you could also have a legal framework to have it enforced.”
War on cash
The crisis of 2008 gave us not only the Blockchain, but also stricter banking laws and KYC legislation. Now when trust in fiat currencies is melting, central banks are waging cash wars. What is the significance of it?
“From country to country, banks are trying to get cash out of circulation,” explains Stark. “In the early days of Bitcoin – and I was really into Bitcoin, but I wasn’t in the community yet – many were concerned that governments would clamp down and declare Bitcoin illegal. Now Bitcoin still has different statuses, in some countries it’s illegal, but by and large it’s legal. It’s not that there’s legislation in the US that declares Bitcoin illegal, no one can run it, no. And how do you stop people mining? I was not happy with the legacy of the BitLicense. I think New York got it wrong, and they had to suffer the consequences when lots of companies either blocked New York or moved away. We still don’t know the full legal landscape. This is familiar to me because of a lot of work I’ve done previously on copyright and Internet law. It’s going to take time for the law to catch up, but my hope is we’ll craft policy that enables the expansion of this technology, and no one gets to stop it.”
“There were good examples in the history of the internet. In the US, early internet policy by and large got it right – for example, enabling people to create the Googles of the world. Had they created a different law, it might not have been possible.”
But back in 1997, everyone thought everything on the Internet should be free. The major problem was how to earn money with the Internet. And now we have Google and Facebook that have larger market caps than British Petroleum. Can’t we end up with some big corporate totalitarian Blockchain?
“I disagree,” says Stark. “First we had smaller proprietary networks, then things turned more towards the world wide web, and anybody could build on top of that whereas no one could build on top of proprietary networks. It was the web that won out.”
“There were times before when AOL didn’t even have a web browser, and they added it. Then in the 2000s it was more about recentralization, the cloud, Facebook …things recentralized and I really do see Bitcoin and broadly, its protocol Blockchain as an opportunity to re-decentralize. I still see the Internet as a decentralized network, it really is, if you look at its map, it’s not centralized.”
Corporate control
“About control of Bitcoin from corporations like Google - it’s not built that way. We can debate which Blockchain will be the biggest in 10-20 years, but I think Bitcoin has so much potential still. We are still in the early days. People want us to be in 2010, but we’re still in 1994-95. Back then, the Internet was a totally different place. We hadn’t seen a huge amount of the applications that were built on top of it. The fact is that in an open decentralized network anyone can build on top of it whereas if you have a corporation that controls it you may have access, but they are going to decide what is permissible, and they can change it in a heartbeat.”
“I’ve done a lot of work on the issue of copyright policy, and how it intersects with Internet freedom, and with Lightning one of the most exciting things is that you can have small value payments on the internet that you were never possible before. So with Lightning you could pay a couple of cents every time you read an article or watch video, and you have new means for remunerating people who are creating on the internet. This model can take us away from advertising model that inevitably wants to track people because they want to target people to make the most money out of that ad. To me, Bitcoin provides a lot of opportunities for different kinds of models on the internet where we don’t have to be reliant on advertising.”
Role of governments
Now governments are trying to reign over Bitcoin, but could it be the way around? How could Bitcoin change the government?
“What Bitcoin does is it provides us with a protocol that is decentralized and the means of exchange of value that we don’t rely on one single entity, a government or a financial institution. In the wake of a lot of potential instability I think Bitcoin is only going to rise in importance. It’s global, it relies on cryptography and math. Will it change the government? If anything, it’ll provide a means of not having to rely on government. We don’t know what’s going to happen next in the US, it’s anyone’s guess at this point, because so much is changing, but what I see it doing is it shifts the balance of power. And it distributes it decentralized in a way that is going to be extremely valuable.”
Decentralization of the internet
What drives Elizabeth who as in Lightning is on one side of the world today and on the other tomorrow?
“I have a background at the intersection of science and technology and a lot of the work I did was related to open source and decentralized tech. I was into the decentralization of the internet, way Bitcoin was around so when I first heard about it I was teaching at Yale and Stanford University about the future of the internet. In 2010, I read an article about ‘open source money.’ I heard about it and thought it was cool but didn’t think it was going to work! Many of us weren’t sure. And as I started hearing more about it, and learning more about it, I then got excited about Bitcoin as a protocol. You just read everything, and you get addicted. And here I am today.”