a16z Podcast - a16z Podcast: Bitcoin, Greece, and What’s Next for Cryptocurrency

Episode Date: August 7, 2015

There are few things as old as financial catastrophe, except maybe finance. But in the latest fiscal meltdown in Greece, people started asking questions about whether newer technology -- bitcoin and the underlying blockchain -- could help. One of those was Wall Street Journal columnist Christopher Mims. In this episode of the pod, Mims and Coinbase CEO and co-founder Brian Armstrong talk about the current state and future possibility of bitcoin and the bitcoin blockchain. When it comes to Greece -- or the next financial snafu -- Armstrong and Mims think there is potential for bitcoin to help, but some education and UI mainstreaming needs to happen first. The views expressed here are those of the individual AH Capital Management, L.L.C. (“a16z”) personnel quoted and are not the views of a16z or its affiliates. Certain information contained in here has been obtained from third-party sources, including from portfolio companies of funds managed by a16z. While taken from sources believed to be reliable, a16z has not independently verified such information and makes no representations about the enduring accuracy of the information or its appropriateness for a given situation. This content is provided for informational purposes only, and should not be relied upon as legal, business, investment, or tax advice. You should consult your own advisers as to those matters. References to any securities or digital assets are for illustrative purposes only, and do not constitute an investment recommendation or offer to provide investment advisory services. Furthermore, this content is not directed at nor intended for use by any investors or prospective investors, and may not under any circumstances be relied upon when making a decision to invest in any fund managed by a16z. (An offering to invest in an a16z fund will be made only by the private placement memorandum, subscription agreement, and other relevant documentation of any such fund and should be read in their entirety.) Any investments or portfolio companies mentioned, referred to, or described are not representative of all investments in vehicles managed by a16z, and there can be no assurance that the investments will be profitable or that other investments made in the future will have similar characteristics or results. A list of investments made by funds managed by Andreessen Horowitz (excluding investments and certain publicly traded cryptocurrencies/ digital assets for which the issuer has not provided permission for a16z to disclose publicly) is available at https://a16z.com/investments/. Charts and graphs provided within are for informational purposes solely and should not be relied upon when making any investment decision. Past performance is not indicative of future results. The content speaks only as of the date indicated. Any projections, estimates, forecasts, targets, prospects, and/or opinions expressed in these materials are subject to change without notice and may differ or be contrary to opinions expressed by others. Please see https://a16z.com/disclosures for additional important information.

The content here is for informational purposes only, should not be taken as legal business, tax, or investment advice, or be used to evaluate any investment or security and is not directed at any investors or potential investors in any A16Z fund. For more details, please see A16Z.com slash disclosures. Welcome to the A16Z podcast. I'm Michael Copeland. There are few things as old as financial catastrophe, except for maybe finance. But in the latest fiscal meltdown in Greece, People started asking questions about whether a very new technology, Bitcoin, and the underlying blockchain, could help. One of those was Wall Street Journal columnist Christopher Mims. So it's just fascinating to me that you can take this underlying, the technology that is under Bitcoin and use it to represent literally any exchangeable good. And it can even, in the most extreme case, sort of be used as a mechanism for barter.

And so because Greece a few weeks ago was at this point where people were getting desperate, they're sending people I have used. I just said, you know, why couldn't you represent that with, you know, the blockchain technology? Obviously, we don't have the ability to do that now as a lot of infrastructure that has to be put in place. But could you do it at some point in the future when Bitcoin is more mainstream when people are used to paying this way when you have a generation of people who are used to paying for things with their phone? MIMS is joined by Coinbase CEO and co-founder Brian Armstrong. in this segment of the pod for a wide-ranging discussion about the current state and future possibility of Bitcoin and the Bitcoin blockchain.

When it comes to Greece, or the next financial snafu, Armstrong thinks there's potential for Bitcoin to help. But there's also some education that needs to happen. When I hear people talking about creating all sorts of other currencies and putting it on the blockchain, I'm always a little bit skeptical of that. I think what they're talking about really is like you can digitize any various types of assets and transfer ownership of those in the blockchain. So that could be like shares of a company or some asset like a piece of real estate or concert tickets or something like that. But in terms of what currency will actually be used, like if the Greek government is talking

about making some kind of their own currency and having on a blockchain, I think they don't really understand what blockchain means when they say that. And you can't have a discussion about Bitcoin without asking about its price and investment potential. You know, you shouldn't invest all your money in Bitcoin or something like that. But should every investor own maybe one Bitcoin? Yes, I think they should. And the reason is not so much as an investment. It's to start learning about this technology, which will be a major influence on finance in the future.

Bitcoin, Greece, and what's next for cryptocurrency on this segment of the A16, podcast. Christopher Mims kicks it off. Yeah, Brian, I just wanted to start with, you know, where your interest in Bitcoin is coming from. My interest is really as a technology entrepreneur. My belief of the world is that technology is this great force to improve the world and it's probably the most powerful force changing the world right now. And Bitcoin is a great example of that. It's an open standard or protocol for a global payment system. And I think it, when I read about it back in 2010, I realized it had the potential to have a big impact on the world. So over a period of time,

got comfortable thinking through all of the endgame scenarios of it and eventually decided to start a company around it. To give you a little more detail, I was actually working as a software engineer at Airbnb, and we were moving money to 190 countries around the world. And I sort of had a front row seat into how inefficient that payment network was all over the world. Usually in each country there's a proprietary system of a couple different payment systems there, each kind of is like a mini oligopoly, and so there's not much innovation happening there, usually high fees, delays and how fast money can move, and a limited geographic reach of each of those. And so when I read about that idea that the whole world could have an open

payment network, it immediately captured my attention. it's funny you should say that because that's my introduction of bitcoin as well i feel like people talk a lot about bitcoin in kind of a misinformed way to look at it as you know an asset like gold and so everybody pays attention to the fluctuating price but what caught my attention was i was talking to a remittance company in the philippines and they were using bitcoin as a super fast uh super low cost low fee way to transfer money between countries and the West and the Philippines, and of course, the reason they can do it is that they can get in and out of any given currency really quickly, and Bitcoin is just a conveyance.

And so I don't know what you're feeling is, but when I look at Bitcoin, I feel like the sort of minimum viable product for Bitcoin right now is remittances or money transfers. So my perspective is right now, it's not so much of a Bitcoin itself. It's that the technology simply allows you to transmit money. And then, of course, you have to have an exchange on both. but that's kind of where I see Bitcoin, and I'm curious, do you have what you see as a sort of minimum viable product right now, or do you see other things that people are doing that you think they actually are growing concerns right now?

Yeah, so I think that's a great example. It's actually one of several. So I kind of more broadly think of it as three major categories where Bitcoin could be the most useful. One of them is an example of what you cited, which is. is disrupting traditional financial services products. So in that case, remittance, it might allow it to be faster or cheaper, right? Other examples of traditional financial products, it might disrupt would be things like

credit card payments where now those fees are less, or instead of going to get a loan at a bank, you might be able to get a peer-to-peer loan through something like BTC Jam, which is a startup out there. So that's the first category would be disrupting traditionally what we think of as financial services. The second major category in my mind would be developing world use cases where people actually don't have financial services today. These are the unbanked of the world. And there's something like two to three billion people in the world who have a cell phone but do not have a bank account or credit card. And so they're living essentially with cash or they're using some kind of

primitive digital currency like a lot of people actually send cell phone minutes or cell phone credit, they can SMS it to each other in the developing world. Like, this is very popular in the Philippines and India and places like that. And there's actually some places where you can go in the Philippines and buy dinner with cell phone minutes and things like that, and you text it to the person across the counter. And so those are all early precursors of digital currency, types of digital currency that people are using there. And we think a whole generation of kids and people in the developing world will actually

grow up in their very first, quote unquote, bank account will actually be a digital currency wallet on their cell phone. So that's the second major category. The third one would be what I call brand new internet applications that are uniquely enabled by Bitcoin. So by that I mean that it's not disrupting the traditional financial services industry or something like that. It's actually creating something that the only way it works is with Bitcoin. So these are very small today, but I think in the future, some of these will end up being many multi-billion-dollar companies and systems. Some of these are things like distributed crowdfunding, which like the Lighthouse Project

is an example of that. There are prediction markets where you can use the wisdom of crowds to predict the outcome of certain events. There are, there's a lot of them have to do with microtransactions, actually, which is something Bitcoin uniquely enables. So there are things like tipping on the internet with things like change tip. So these are examples of kind of very new use cases that are uniquely enabled by Bitcoin, which are not big yet, but could actually grow in more of like a greenfield's idea.

Yes, I mean, one of the things, you know, there's been a lot, let's say, derision about Bitcoin. And the reason that I kept paying attention to was that there felt like this, burgeoning developer community, you know, it reminded me of iOS or Android in the early days. And I was wondering if you had a sense of how big that is. There is a lot of developer interest. You're right. Especially with younger people, like currently in college and things like that, we only have a few pieces of data on it. One of them is that we've had 7,000 developers sign up on Coinbase to create apps. And we have one of the more popular developer platforms out there.

The other is that we've seen some data around the number of GitHub repositories that are being created every month that have something to do with Bitcoin. And there's been about, well, let's see, there's about 6,000 total to date, which is outpacing the number of GitHub repositories for other common payment systems like PayPal. So I think that's a really interesting early indicator of the amount of developer interest. And if you look at traditionally things that have gotten a lot of developer interest like Linux or Android or whatever, it sometimes takes five years or ten years, but they eventually end up being massive platforms. Like Linux runs the majority of the Internet now, and it all started with a handful of really passionate developers who got excited about it. So in general, that's a really good predictor, I think, of where the future is going. You know, Chris, I know you wrote a lot about Greece recently with Bitcoin and everything like that. And I was just curious, how did you get interested enough to go do some investigation into that Greece aspect of it specifically?

Yeah, it's funny. There was a lot of chatter. I mean, I forget anything, but the guy who was rumored to be one of the inventors of Bitcoin wrote about it on his blog. Also, very focused, former Greece finance minister who's now, I guess, he's in criminal charges for talking about setting up an alternate. currency. I didn't know that. More than a year and a half ago. Yeah.

So he, you know, he said you could create this thing. He called it F.T. coin. And it would be based on future tax revenues. And sort of what's impressive about it and what got me excited was the possibility that Bitcoin could truly be this almost blank canvas for money. people talk about this mechanism of side chains and for anyone listening to this who doesn't know what those are

you just think of them as clones of Bitcoin that can be exchanged for Bitcoin to be the simple version of it but I know that's a gross oversimplification but anyway, this means that you know, things that people object to about Bitcoin like, oh, it's a deflationary currency

because there's a cap on how many bitcoins can be created become irrelevant because a central bank could say, hey, you know what, we want to place the dollar with a, you know, a dollar token that is represented on the Bitcoin blockchain, you can do that. You know, I talked to Michael Casey, who used to be the Wall Street Journal, he's not at the MIT Media Lab, advising them on cryptocurrency.

And one of the things he talked about was, you know, stores are starting to think about what if we represented our, you know, like, not coupons, but like store tokens, store credit through our own cryptocurrency. and they're, you know, they're totally earnest about this. So it's just fascinating to me that you can take this underlying the technology that is under Bitcoin and use it to represent literally any exchangeable good. And it can even, in the most extreme case, sort of be used as a mechanism for barter. And so because Greece a few weeks ago was at this point where people were getting desperate,

they're sending people I have used, I just said, you know, why couldn't you represent that with, you know, the blockchain technology. Obviously, we don't have the ability to do that now there's a lot of infrastructure that has to be put in place. But could you do it at some point in the future when Bitcoin is more mainstream when people are used to paying this way when you have a generation of people who are used to paying

for things with their phone? It seems entirely possible. So if you have this new ability to tokenize anything in your world, you know, it means that you can create currency just based on barter. It means that banks can decide to create currency. companies can decide create currency, I mean, as long as it's legal, right? There's always the regulatory dimension to it.

So that just seemed just so fascinating to me because, you know, nothing is older than currency crises, right, except for money. So there's probably never going to go away. So isn't it interesting that we possibly have sort of a way to kind of set the end off and does, you know, route around the damage? Brian, I mean, I just wanted to ask you, you know, given how far-fetched a lot of that discussion is, you know, what have you seen in terms of discussion related to that? And maybe you can bring us back there, you know, what's going on

now? What's the immediate future? So, I mean, there's a few things. One is that when I hear people talking about creating all sorts of other currencies and putting it on the blockchain, I'm always a little bit skeptical of that. I think what they're talking about really is like you can digitize any various types of assets and transfer. ownership of those in the blockchain. So that could be like shares of a company or some asset like a piece of real estate or concert tickets or something like that. But in terms of what currency will actually be used, like if the Greek government is talking about making some kind of their own currency and having on a blockchain, I think they don't really understand what

blockchain means when they say that. I think Bitcoin will be the currency that everyone ends up using on the blockchain. And they probably don't quite understand what they're saying when they say that. But I don't know, just from like a more broad perspective of what we think is interesting right now, a lot of the focus historically has been on Bitcoin, on the price of Bitcoin. And it's because the early adopter use case of Bitcoin is all around it being a speculative asset. People are buying it because it's scarce.

They think it'll be useful for something in the future. And in that sense, it's kind of like a better version of gold or a better version of money. So there's a lot of people buying it and trading it like a stock or something like that. Now, about, that's 80% of activity, let's call it roughly. 20% of activity is people actually using it now as a payment network on some of these new types of applications, like the ones I mentioned, or doing peer-to-peer payments, or paying their contractors and their countries, things like that. And I think over time, what will happen is that those two percentages will shift.

The 80% will end up becoming the 20% speculative asset, and it'll be 80% payment network actually happening. And the reason is that the speculative investment aspect is a bootstrapping mechanism, if you will, for the payment network, which I think is the eventual long-term potential of Bitcoin. And the much more interesting metric to focus on other than price is actually a number of daily transactions on the Bitcoin network. And that's gone from about 50,000 a day to 100,000 a day in the last 12 months. A lot of people don't realize that.

That graph is actually just pretty slowly and steadily marching up, roughly. doubling every year, whereas the price is just wildly fluctuating all over the map, where people are trying to extrapolate, you know, if there'll be a million dollar Bitcoin eventually or something like that. So my hope and belief is that you'll see the number of daily transactions become more of a focal point. That'll continue to double every year, roughly, and you'll see this payment network emerge where that becomes the primary use case of Bitcoin. And the speculative investment use case will actually diminish a bit more into the background. It'll end up being something much less volatile.

We've seen volatility drop every year for the last three years that ends up being a little bit more like a commodity like gold. But does the average person really care about commodities markets or FX trading? Probably not. They do care about how they're going to send money and pay for things. And they want to do that cheaply and efficiently. So are you, I have to ask, are you one of these, you know, Bitcoin to a million dollars folks? Is that where you see it going? Because, I mean, it seems like inevitably, if it becomes more useful,

Bitcoin do become more valuable, right? If you're right, that this does become the default mechanism, default use for Bitcoin is as a means of exchange. I never want to make predictions about the price of Bitcoin because it's a good way to, I don't want to be in the business of giving people investment advice, right? It's just an easy way to disappoint people. But personally, yes, I'm long Bitcoin. I buy Bitcoin. I'm not too concerned about the price day to day. I tend to. Dollar cost average it

over a long period of time. And what I do tell everyone is, you know, you shouldn't invest all your money in Bitcoin or something like that. But should every investor own maybe one Bitcoin? Yes, I think they should. And the reason is not so much as an investment. It's to start learning about this technology, which will be a major influence on finance in the future. It's almost like if you went back to the 80s or the 90s and you said, well, do we need a desktop computer in every home? Maybe not. I mean, there's not really that many things you can do with it yet, right? Like, there's no AOL and there's no email where my grandmother can't get the family photos or whatever on Facebook or whatever they need to do. But there was a lot of people who went out there and

they got a desktop computer because they believed that this was going to be something important in the future and they wanted to start to learn about it and participate in that revolution. And so that's where I think people are at more. And I encourage everyone to go out there and buy one Bitcoin, not for the price or the investment aspect of it, but just to learn about it and have a piece in the game. You know, one of the things I talked about in my article for the journal was, look, you know, Bitcoin doesn't make, you know, like a difference to people in Greece right now. Yeah. And I think the ongoing challenge for Bitcoin, it reminds me of like, you know, let's say encryption technologies or communications. I mean, they've been

around a long time and they're still hard to use and they're only just sort of becoming invisible on the default. But, you know, where, the thing I always ask myself is, what's the breakthrough? Like where, it really is going to be slow. But how does, how do we get Bitcoin into the hands of everyday people? Does it need to be in Google wallet? Does it need to be in Apple wallet? Do I need you know, one-click access to an exchange? How are we going to get Bitcoin beyond the realm of people who are reading message boards about, you know, how to faithfully store it on a thumb drive and a fireproof box and all that? Well, I mean, certainly our approach has been to try to make it easy to use for the average person. So it wasn't that long ago that pretty much

every Bitcoin site out there talked a lot about private encryption keys and all these complicated things. You needed a computer science degree to try to understand it. And I'd like to think we were helpful in making Bitcoin a bit easier to use for the average non-technical mass market person. Making it secure also was a big deal. I mean, if people forget their password and all their money's gone, that's kind of a non-starter for a real financial revolution to happen. There was also a lot of websites out there being hacked and there's a lot of security breaches. I mean, that happens in traditional financial services too, but Bitcoin as an industry has really had to mature in the last couple of years, and companies like Coinbase are now storing hundreds of

millions of dollars of Bitcoin and doing it securely with lots of checks and balances that are happening in traditional financial services as well, like security audits and financial audits and all sorts of things. So I think those things will all help, but is there going to be some moment where Bitcoin just suddenly is mainstream? No, I don't think so. I think it's going to be a series of lots of small things that happen over time. People will, there'll be some game they want to play online. It turns out the only way to play it is with Bitcoin. And so they'll go out and get some. Or it'll somebody, they'll be in a foreign country and somebody will remit money to them like $50. And the fastest and cheapest way for them to get it was in Bitcoin.

So now they'll have to go figure out a way to cash that out. their local country, and that'll be another way, right? So I think you'll see it bit by bit in these areas grow in different ways. And like we've seen with the number of transactions per day, it's roughly doubled in last year, but it's been a pretty steady thing. There wasn't a moment where suddenly it just doubled in a week or something like that. The one counter example to that I can think of would be countries that are going through periods of financial crisis, like Greece, which you wrote about recently, where, like, for example, when the Greece situation happened, we saw roughly 3x, our 300% growth of our normal buy-sell volume

across all of Europe, not just in Greece, because, of course, the Greek bank accounts were frozen, and people, there was really people in the rest of Europe who wanted to go find out about Bitcoin, the number of Google searches went up dramatically for it. So certainly, I mean, every year in the world somewhere, there's some kind of financial crisis. And I think those will be periods where people start to look out, look for other options and start to really think about what it means to have their money in a bank account. Is that trusted and things like that? Chris, I'm curious what you've seen on the usability challenges around Bitcoin. I mean, I feel like it's still a very unapproachable topic for some people and that they feel like

it's complicated or they still don't quite understand Bitcoin. I mean, what have you seen as ways that the average person out there has gotten their head wrapped around this new concept or started using it. Yeah, it feels like the usability challenge for Bitcoin, honestly, is magnified by the fact that we have this usability challenge that's yet to be solved in terms of digital money. So, I mean, David Woolman, this amazing writer who wrote a whole book about the end of cash. And, you know, he and I talk about this regularly. And I'm like, you know, I'm like, that's crazy.

cash is not going away because it's so incredibly useful. And I mean, especially in the U.S. you have this problem of, you know, we have Apple Pay coming in and nobody's quite sure about the adoption figures there. Google Wallet has been mostly a failure to date.

You know, it's just so easy to pull out a credit card. Yes, there's a structure there, but because of the history of that, you know, the cost gets eaten by the merchant. You know, they had deals with decent MasterCard, but they're not even allowed to, you know, give you a discount if you use cash.

So we have this pretty good payment system in place. So the usability problem is, I mean, this is what people always say about your product of option. If something is painful, if you solve a difficult, painful problem, the doctor will be very rapid. If you're merely better than something that's good, adoption is going to be slow and it can even be non-existent. So, I mean, I would kind of throw that back to you. I think that, you know, the reason I talked about Greece was, you know, people in Greece are in a really painful situation. I heard a radio interview recently with a mechanical engineer in Greece who had literally kind of seen this coming and I had withdrawn something like 50,000 euros and had bundles of euros in cash stored in the back panel of his refrigerator. The fees would be able to find it.

And I thought, wow, here's the guy who could use a store of value that could be more easily transmitted and is more liquid, you know, even if the price is fluctuating, like Bitcoin, if he'd known about it. But, you know, outside of these crises or countries where people are really unbanked, you know, I would ask you, you know, why is it that Bitcoin is going to give me the average user that is going to, make me say, wow, that's really a difficult problem I have. Bitcoin solves it, or this app solves it. Yeah, I totally agree with that. I think if you're talking about winning on usability, the easiest place to go is people who have high pain points around their current options,

or another way to put it would be, their next best alternative is dramatically worse, not just a little bit worse. So I kind of think of it as a spectrum of how frustrated people are with their current options, right? So if you think of it like a one to ten scale, one being the least frustrated, you have things like people swiping their credit card at Starbucks for a copy. It's very painless. Sure, the merchant has to pay two percent plus, which is a bit frustrating for them, but not too bad. And then you go up the ladder a little bit, maybe like a three or four

on the scale is online shopping, right? You have to put your credit card in a website. It's a little bit scary you think it might get hacked like Target did or you have to type 16 characters and a four for the date and five for your zip code and a three digit security code it's kind of frustrating or they expire every every couple years but still not the end of the world right now if you go up to scale a little bit more you have people who let's say I want to send a hundred dollars to my family in Mexico and it cost me twelve dollars now that's starting to be a little bit more of a pain point right now maybe like a six or a seven on the scale and I'm starting to feel like the pricing is predatory even

or something very inefficient, right? Now you can keep going up that scale quite a bit further, right? So to your point about the person in Greece withdrawing $50,000 in cash, that's a good example. There's also people who are trying to remit money from the UK to Somalia, for example, and all of the banks have shut down that service. So literally people have resorted to flying suitcases of cash to Somalia. And you could argue they have a very high pain point there. Their next best alternative is very much dramatically worse.

Now, at the top of that scale, you have things like people in the developing world who don't have any financial services whatsoever. The whole banking model really doesn't work in those demographics with like a checking a checkbook and like a bank branch in the corner, you also have things like micro transactions which just aren't possible in the existing financial ecosystem, right? Or if you want to build a global crowdfunding site or a prediction market or something like that, where people all over the world without having to register can, within a couple seconds, put money into this thing or see it tip. It's like literally the only way to build it is with Bitcoin. There is no

next best alternative. And so you could argue those people have the highest pain point and they're willing to tolerate the biggest usability challenges to get something, anything going. There's other examples of that too. Like if you're in Nigeria and you want to buy an iPhone, pretty much every website will reject you. If you're selling some kind of high risk service or you're in the adult industry or whatever this is, people find themselves in very difficult situations to accept payments. But that's how I'd like to think about it is there's like a spectrum of options. Now, someday, if Bitcoin becomes more and more popular, like we all think it will, then yes, even the Starbucks across the street will be accepting Bitcoin because they still don't want

to pay 2%. They'd rather pay a fraction of 1%. But that's going to be the last group to adopt it. And the usability can help us get there faster, but I think it's better to focus on people with the highest pain point. Chris, we touched a little bit earlier on side chains. I thought it might be interesting to talk about that just for a couple of minutes because I think it could have a big impact. You know, as I understand it, there is this kind of this technical trickery that means that you can create an unlimited number of independent blockchain that are still linked to the main Bitcoin blockchain such that any token on these quote unquote side chain can still be exchanged for Bitcoin.

I think on a one-to-one basis. And the idea is if you can have these side chain, you can have a lot more experimentation. So you could have something that's just kind of like another Bitcoin, but it has new protocol that, for example, allow it to be transmitted a lot more quickly because as I understand it, the more transactions there are,

there are challenges in fulfilling this dream of Bitcoin being a transaction that instantly resolved. And then, you know, they're just, people have other ideas, and then like I said earlier, you know, people might want to put other things on the side chains. I mean, let's not forget, I think it's Ecuador recently banned Bitcoin and said, we're going to create our own cryptocurrency. That's how our entire financial system is going to work, which to me is wild, but it feels like, you know, as much as Bitcoin is, it's important that you have this very solid main means of exchange. You know, my perspective

is giving people the ability of the experiment is good. The same way that, you know, letting people build all of the new protocols on top of the original protocols enabled the Internet is what gave us everything from the web to YouTube. I mean, so my perspective, of course, as an outsider's perspective, is that you're not going to realize the full potential of Bitcoin unless you get something like side chain. But I'm like you're somewhat skeptical of that.

So I'd love to hear your view on sidechains, how they work, and where they might go. No, I'm actually pretty positive on side chains. I think they're great. I am skeptical of countries like Ecuador saying they're going to create their own digital currency, since if you centralize a digital currency, it seems to miss the whole point in my book. I do think there'll be other countries who try to do that, but I don't think they'll be successful. But sidechains generally, I think, are great. I mean, it's essentially a way to allow experimentation, just like you said, and you can have a one-to-one peg, they call it. So if you have a Bitcoin on the main blockchain, you can transfer it over to this side chain and experiment with different things.

The main thing, there was a lot of experimentation before side chains. These were alt coins, people called it. And that worked somewhat, but the downside of it was that it was difficult for anyone to get a large amount of traction on any of these alt chains. And so, because they all needed separate mining computers that would run each one. The beauty of the sidechains is that they can all use the one Bitcoin blockchain's hashing power. And if there's a side chain that runs out there in the world for some period of time and it demonstrates that it's viable, there haven't been any bugs found in it, that could actually be elected to be the new main Bitcoin blockchain with better properties like these faster confirmation times or

whatever it ends up being. And so the great part about that is that it means Bitcoin can evolve over time. It actually has a mechanism built in to do upgrades, just like your phone gets upgrades downloaded from Apple or Google or whatever. And so other protocols that are out there, like TCPIP, which is a foundational protocol of the internet, or SMTP, which is out there for email, They can't really update or change that often because it requires massive amounts of infrastructure to be upgraded. It's a very high risk upgrade because a lot of those things haven't been tested at scale before. And so it's really awesome to see Bitcoin have a mechanism for upgrades essentially built into it, which gives me a lot more confidence that it will survive the test of time.

Well, Brian, let me just take an opportunity to say thank you for your time and your thoughts on this. I'm, as a journalist, I'm a little sad that this is going to be public because I feel like there were two or three columns or the material in this conversation. But I hope people listen to it. And I just kind of, as a closing thought, I hope to anybody who listens to this kind of understand that. Bitcoin is something that is easy to be derisive about because of its fluctuating price and good association with things like gold, but I think we're really at a turning point where even people like me who are fairly non-technical should start paying attention to it because there are some really interesting opportunities cropping up here and there.

and I see a lot of early adopters, especially among banks. And that, to me, is always a sign that this is going somewhere real because they're not going to spend all their money and analyst time on things that aren't going to make the money. I agree. It does feel like Bitcoin is at a bit of a turning point. And a lot of that is due to the excellent coverage that's out there from journalists like yourself, who are starting to really dive in one level deeper and look beyond

just the basic headlines around what the price is doing this week or something like that. So I really appreciate you taking the time as well and it's been great to chat. Thank you.