The Pomp Podcast - #500: Jonathan Chester on Being Paid in Bitcoin

Starting point is 00:00:00 What's up, everyone? This is Anthony Pompliano. Most of you know me as Pomp. You're listening to the Pomp Podcast, simply the best podcast out there. Let's kick this thing off. Jonathan Chester is the co-founder and CEO of Bitwage, one of the oldest Bitcoin businesses helping employers pay their employees in Bitcoin. In this conversation, we discuss Bitcoin payroll, dollar cost averaging, remote work, stable coins, and why employees are so excited to receive Bitcoin as compensation. I really enjoyed this conversation with Jonathan, and I hope you do as well. Before we get into this episode, though, I want to quickly talk about our sponsors. First up is Exodus. Exodus is the leading the world out of the traditional financial system by building

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Starting point is 00:03:31 Go check them out, masterworks.io and use promo code POMP. All right, let's get into this episode with Jonathan. I hope you guys enjoy this one. Anthony Pompliano is a partner at Morgan Creek Digital. All opinions expressed by Pomp or his guests on this podcast are solely their opinions and do not reflect the opinions of Morgan Creek Digital or Morgan Creek Capital Management. You should not treat any opinion expressed by Pomp as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of his opinion. This podcast is for

Starting point is 00:04:02 informational purposes only. All right, guys. Bang, bang. I've got Jonathan here with me. Thank you so much for doing this. Yeah, happy to be here. Let's jump right into your background. How did you get started in the technology world and what did you do before Bitwage? Yeah, sure. So I started my work life working sales at Oracle. And it was not really that interesting of an experience. I would say it was more of a soul draining experience being there. So I spent a lot of my time learning about new technologies. And this is back in 2013. And I came across a TED Talk about the future of money. And Bitcoin was maybe half to a third of that piece. And I found it very fascinating. Concepts

Starting point is 00:04:50 like being your own bank and self-sovereignty, concepts like more efficient international transfers, and banking the unbanked. These were the points that I talked about. And I was excited. So I went deep down the rabbit hole. About a month later, I came out this obsessed Bitcoin guy. Right. And in 2013, an obsessed Bitcoin guy is kind of a weird, awkward thing to be. Right. Um, so being known as this guy, someone connected me to another obsessed Bitcoin guy who's at the tech side, uh, who's working on the tech side at Oracle. And we got together and we started Bitwage. So, so how we came up with the concept is we were looking at what existed in 2013. And what you got to remember is Ethereum didn't exist when we were first thinking about this.

Starting point is 00:05:42 The white paper came out a little bit after. and so the main thing to think about is what can we do with bitcoin bitcoin is going to be the future of money what doesn't exist that will have to exist and what existed back then were exchanges merchant processors wallets but there was really no system for getting money from merchants back to their employees or freelancers or even vendors basically merchants doing their disbursements And so we decided, let's be the first to do this. And that if this didn't exist, there would actually be no way for Bitcoin to exist within its own financial loop, right? Because there would have to be a cash out. So this was our way to close the financial loop and have Bitcoin essentially be able to live in its own ecosystem. So we did that. We launched in 2014. In July of 2014, my partner John and I quit our jobs about a month before that. And our first product was a company product. Companies would sign up and invite their workers and pay their employees through us. And you might realize that 2014 wasn't really a great time to go after companies for this.

Starting point is 00:07:06 This was just after a bubble crash, right? I think it crashed from like $1,000 to $400 during this time period. Trying to convince any company that this is a good idea, that Bitcoin is not just for hackers and drug dealers, was a pretty big challenge. Um, and that caused us to create our second product, which is, um, essentially a way to get a direct deposit account in the U S and the EU or the UK. And then you can get paid from any company that's paying you, um, essentially globally into those bank accounts. And then you get paid in, in, in crypto.

Starting point is 00:07:43 So, so now we have both of those two, two products, uh, which actually are each now worth about 50% of our business, both of them. And there's two different use cases that are going on. One is the person who wants to get a percentage of their wage in Bitcoin, 5%, 10%, 15%, essentially dollar cost averaging. And then there are the people who are actually using this to get their wages across borders. So we have a lot of people who are getting paid in East Asia, in South America, in India, these sort of places who sign up with us, and then they actually get their entire wage through our system, and they'll get it in Bitcoin or as a local deposit into their bank account or something like that. And that's BitWay today. So when you think about those two different

Starting point is 00:08:33 products, obviously, the companies is pretty well understood. Go a little bit deeper on why an individual would want to get paid in Bitcoin other than just price speculation, right? In terms So there's plenty of people who say, hey, this is cool. I'm going to hold 1% of my assets in Bitcoin. Maybe it goes up a lot or maybe it goes to zero. That's just pure speculation. But then it seems like there's people who actually are doing this from a store of value standpoint or a efficiency standpoint or censorship resistance standpoint. So talk a little bit about some of those use cases as to why people want to do this. Sure. Yeah. And I think in the US, that particular use case of the store value is like, I'm actually thinking about this as my savings account, right? The cash supply of dollars increased 25% last year, but my dollars didn't increase 25% last year, which means they're worth less. So I need to now have something else to store my value, right? So that is one use case for this. Another big use case is not just looking at it from the perspective of dollars, but from other local currencies, right? So you can be in like Brazil or Argentina or some other country in Latin America, and you realize that your inflation has been skyrocketing since the beginning of COVID or even beforehand, right? Or maybe there is a terrible local economic situation. Your president got caught for corruption. You just don't believe in your government and you don't believe that your currency can

Starting point is 00:10:04 hold its value. And these people are actually opting to get their salaries completely outside of their local currencies. So these people will get Bitcoin, especially if they're comfortable with it. I mean, these people know about Bitcoin. You're not getting a newcomer to get their entire wage in Bitcoin. But then you also get people who are getting their wages in stablecoins as well. And this is kind of like a stepping stone for these people because they're learning about private public key cryptography, but they're not dealing with the volatility of Bitcoin.

Starting point is 00:10:41 So it's sort of their stepping stone. They're doing it. They're getting away from the local volatility on their own currencies as well. And then finally, you have the people in these countries, where basically, what happens in these countries is because people don't believe in their local currency, the price of Bitcoin gets a premium when you're trading to the local currency. And that premium doesn't get arbitraged out, because these countries will often have capital controls that restrict your ability to transfer your local currency to dollars. So this premium exists because people understand the value of Bitcoin. But what this does is for our customers is they actually get to sell against that premium because they will, for instance, export services to a US company. They'll get the US price in Bitcoin and then they'll sell it in the other country. They'll get that premium and we can handle that for them so that they don't have to deal with any of that stuff. And in that case, the reason why they're doing this is so they can get a same-day transfer instead of a multi-day transfer from the US into their bank account. And they can get access to better rates because of the Bitcoin premium that exists in those countries. Yeah, it makes a ton of sense.

Starting point is 00:11:57 When you think through the company side, talk about some of the companies that are starting to adopt this and kind of how it's going for them. Sure, yeah. So I'd say that in the beginning of 2020, what we really saw were more use cases either for cryptocurrency companies coming on or companies that are doing the cross-border. And actually, it was interesting because even during the bear market, there were companies doing the cross-border coming onto our platform, maybe paying like Filipinos and Indians or things like that. But now what we're seeing in bull market is that companies are realizing what I was saying before, which is employees should have an ability to get paid in a way where they're saving their wealth instead of losing their wealth slowly over time by holding dollars. So companies are coming in and they're saying, we need a solution to help us do that. we are seeing companies, mostly startup tech companies. For instance, recently, we had Sequoia come up. There was Big Nose that were doing this. Sequoia was actually a cloud management company

Starting point is 00:13:14 with hundreds of employees coming on. So we have a lot of interesting clients from this side. But then we're also seeing really big names coming in looking for Bitcoin Payroll as a solution. You have Twitter, you have the Miami government that are both publicly talking about this, about offering it as a solution. And it's really coming down to the idea that people should have a way and an option to get paid in a deflationary currency where they can store their wealth forever. And companies want to support that. And so when these companies are talking about this, are they talking about whether they're using your platform or not paying 100% of the employee's salary in Bitcoin? Is it a percentage? Is it the employee's choice? How do you see them kind of adopting it? Yeah. So the ability to get 100% of your wage in Bitcoin, I think that not very many people want to do that. It's pretty scary. I mean, even I don't get 100% of my wage in Bitcoin. I still

Starting point is 00:14:18 do dollars. But I think that it's the option to do 5%, 10%, 15%, 20%. And usually, it's the employee's option. So in our system, the way that it works is you can go in and you can change your percentage between any payroll at any point that you want between dollars, Bitcoin, or maybe stable coins or some other cryptocurrency, right? So you can choose that percentage. And that's what's being offered. For the company, they don't want to actually touch Bitcoin at all, usually. They, there can sometimes be, you know, tax issues involved in like buying a Bitcoin and then sending it off almost immediately. And so we handle that process for them. They are funding us in dollars and then we are paying their employees in Bitcoin. There are cases where they do fund

Starting point is 00:15:10 in Bitcoin, but the majority cases, I'm a company, my admin doesn't know anything about Bitcoin. I don't want them to like accidentally lose Bitcoin. So let's have a service where we just send dollars And then the employees choose how they want to get their paycheck. Absolutely. And so when we think through kind of the employer receiving Bitcoin, it's essentially dollar cost averaging, right? They're just kind of over time receiving it. Talk a little bit about how much, are you guys educating people on that?

Starting point is 00:15:40 Is that just something that people naturally understand? Is that a selling point to people to take part of their salary in Bitcoin? How does dollar cost averaging play into this? Yeah, so dollar cost averaging is a very important concept. We actually created a dollar cost averaging calculator called BitcoinDollarCostAverage.com to help educate people about this. And the general concept is that as long as what you're investing in is going to trend upwards, you don't have to worry about the short-term volatility cycles that are occurring when you make the investment because instead of doing one bulk purchase, you do small ones over time. So a great example I'd like to think about, about a month ago, I was using this calculator and I wanted to see what would happen if I put $250 every paycheck, which was twice a

Starting point is 00:16:29 month, starting from the height of the 2017 bubble, right? And what would have happened is I would have invested a total of $18,500 into Bitcoin and I would have gotten two and a half Bitcoin by that time. But if I had taken all that money and bought at the very top of the 2017 bubble, I would have gotten less than one Bitcoin, right? So this is the concept of if you're afraid that you're about to buy at the very top, dollar cost averaging essentially removes the risk. Obviously, if you're buying at the very bottom, it's better than dollar cost averaging, but no one knows these things. No one knows the top. No one knows the bottom.

Starting point is 00:17:11 I don't know these things. So if you want to get in and get long-term exposure, but you don't want to worry, is it the top? Is it the bottom? Dollar cost averaging is the way to go. And getting your paycheck in Bitcoin is essentially the easiest way to do that, right? Because you're circumventing the process of having to essentially get dollars first before doing that. Absolutely. I completely agree. As you think through kind of the, you know, just massive surge of interest in this, how much of it has to do with COVID and the move to remote work versus this was just going to happen and it's less about COVID and remote work? Yeah, so where Bitwage stands, we are, I see ourselves as in the middle of the two sections of remote work and cryptocurrency, right? Because not only do we have this dollar cost average use case, but we have this international use case where people are getting paid internationally doing work for US, EU, UK companies. companies. And that whole remote work growth is really bringing that sector up. Additionally, we have the cryptocurrency sector. And what, in my opinion, is happening in the cryptocurrency sector is everything is being lifted by Bitcoin. And Bitcoin is being lifted by inflation, right? The dollar inflation. I was talking about this earlier. If you look at what happened in

Starting point is 00:18:36 in 2020, um, the, the monetary supply increased by 25%. If you look at how much real estate increased, I think it was, uh, around 15%. If you look at how much stock increased by the beginning of the year, it was, uh, it was in general, I think like S and P brew, maybe, maybe 30%. So it's, it's pretty close to the, the number of cash that was, that was, that, that, that was increased in that time period. And that's where cash has been going. It hasn't been going into everyone's pockets. And it hasn't been causing food to rise substantially, the price of food to rise substantially. But it's been causing all real assets to rise substantially. And that's causing the movement in Bitcoin. So both of these two things, COVID was the catalyst for both of

Starting point is 00:19:28 these two things, the remote work and the cryptocurrency industry. And that's why Bitcoin payroll is now really so hot because you have the interest in crypto and the understanding to essentially hedge against your dollar holdings. But also because there's the growth in remote work, this use case, this cross-border use case is very valuable, right? Because we all know that a Bitcoin transaction is not entirely cheap. If you're trying to buy coffee with Bitcoin, it's really not that easy to do. Right now, I think you're paying like $10 for that transaction. But when you're talking about a paycheck, maybe it's $5,000 or it's something like that, an entire paycheck across borders in Bitcoin, that transaction cost is actually relatively low.

Starting point is 00:20:20 And the way that we do the system, we're batching it all. We're doing batches of the transactions. So the cost is even lower to do a whole batch of Bitcoin transactions to everyone's paychecks around the world. So it makes sense to do this. The cost savings is there. It's real. It's relevant. And it's a real use case for Bitcoin. Absolutely.

Starting point is 00:20:42 When you think through kind of just the adoption of this, what numbers can you share with us in terms of whether it's the number of companies, the number of individuals, the amount that's being paid out? just any numbers that you can share with us so people can wrap their head around how popular this is? Yeah. So we've done about a hundred million dollars in, in, in payrolls. Um, we have 50,000 registered users, uh, on the platform. We have people in over a hundred different countries who are getting paid. What we saw from the beginning of COVID. Um, so in the beginning of COVID, we saw 25% dip in our, in our volumes, which actually made sense because people stopped getting paid during that time. Everyone was freaking out, didn't know what was happening. But since that bottom, we've actually grown more than 50%. And the growth line is looking

Starting point is 00:21:36 really spectacular right now. And I think that this trend will just continue because of this COVID catalyst for remote work and the cryptocurrency industry. Yeah, I tend to agree with you. One of the arguments that people will make is like, why do we have to do this with Bitcoin? Why don't we just do it with stable coins? Do you guys support just Bitcoin? Do you support other crypto assets? And then how do you think through the pros and cons of Bitcoin versus any other crypto asset? Yeah, sure. So we have Bitcoin, we have stable coins, and we have some other crypto. And if you think about how we're actually using these things. So in the US, we actually do see people diversifying from Bitcoin into other cryptocurrencies. On the

Starting point is 00:22:25 cross-border, you pretty much only see people doing stablecoins or Bitcoin. You don't see people diversifying in their cryptocurrencies so much. And so when they're getting paid in stablecoins, Again, the idea is they are being self-sovereign to a degree with owning the coins, although maybe the peg is not a totally self-sovereign concept. But they have more control of their money than they would otherwise. But they don't deal with the volatility of Bitcoin, which is like the stepping stone for people. Because a lot of people, they still want dollars.

Starting point is 00:23:04 A lot of people in countries all over the world still want dollars, and it gives them access to this. But when we are moving money from one country to another, and then we're depositing local currency into someone's bank account, we often are using Bitcoin and not stable coins or some other cryptocurrency to do that. People think, oh, why? Bitcoin is slower or more expensive. But actually, Bitcoin is not that slow, and it's not that expensive. And the reality is that it has the network effect of being really, really liquid. So if I wanted to go and sell a million dollars worth of Bitcoin into a particular country, I can easily do that. And it's not

Starting point is 00:23:42 necessarily possible to do that with other coins, with stable coins, all at once without kind of crashing local prices and getting bad rates. So that's why we use Bitcoin behind the scenes, because of that network effect that it has and the liquidity that it has. And then what do you see in terms of stablecoins versus Bitcoin, like the adoption? Like what do people want and kind of how do you see that breaking up? Yeah. So I always think of stablecoins as a stepping stone to Bitcoin because Bitcoin has two big barriers to entry.

Starting point is 00:24:19 The first is volatility, right? And there's a lot of focus on that. But the part that there isn't that much focus is the public-private key cryptography, right? How do you deal with that? How do you learn about that? I mean, if you're an average person trying to get Bitcoin, you've never even known about this concept before, right? And it's important for people to know because that is the true value of Bitcoin is owning

Starting point is 00:24:44 your own money. And thus, you have to understand how to protect your private keys. And what stablecoins do is they take away one of those barriers to entry while introducing the other so it becomes an easy way for people to enter the space right i know about dollars i you know if i'm in you know zimbabwe or you know venezuela i i i believe that dollars uh is more stable than my than my local currency so i would love to get access to dollars that i could use anywhere um and so uh stable coin so then they want stable coins and then they take those stable coins and they say, OK, how do I actually hold it? How do I actually use it? They learn about

Starting point is 00:25:33 wallets and private keys and public keys and all this stuff. And now they know. And so the next step is basically when stable coins stop being so stable because the dollar or some other major world reserve currency stops looking so stable. And when that happens, then it's a very easy switch to go from a stable coin to Bitcoin. So I think that stable coins are not going anywhere. I think they have a very important role to what's going to happen around the world because not everyone is ready

Starting point is 00:26:06 to get 100% of their wage in Bitcoin. Let's just be real. So, but people, you know, a lot of people are ready to get 100% of their wage in dollars. And this sort of gives people access to that. and um at some point at some point there will there will eventually be the move to to get into bitcoin from there absolutely uh before i let you go i was asking everyone the same three questions

Starting point is 00:26:32 and then when we finish up uh you'll get to ask me one question uh the first question is what is the most important book that you've ever read the most important book that i ever read huh most important one what's important one um i i really liked i really liked a a book by talo calvino called uh if on a winter's night uh if uh if um uh oh man i actually can't remember the the name of it off the top of my head if if uh let me look at this post-modernist writer um uh calvino uh if on a winter's night a traveler that's what it is if on a winter's night a traveler um and so i read i read this you know like a decade ago this book and it's basically a book about the

Starting point is 00:27:27 journey to to find uh the end of stories right um and and it it has two parts to it like a person who is uh looking for the story and then the story itself and right when it comes to the climax it disappears and it's this this ending search to try to to try to find meaning in the end of things and it sort of teaches you to appreciate the the journey uh and and not so much you know the the end so i love that it makes me uh it makes me remember um kind of uh the enjoyment is in the process right not the final result uh which i think that the greats always always align on so that's a great recommendation uh second question is more personal sleep schedule Um, I used to sleep like five or six hours, but, uh, our friends over at, uh, eight sleep,

Starting point is 00:28:25 uh, have me sleeping on this, uh, completely cold, uh, kind of thermoregulated bed. Uh, it is fantastic. I see that little baby now and get like eight or nine hours has completely changed my life. Uh, what's your sleep schedule and how has that evolved over time? Yeah. I mean, I, I started off doing six hours. Um, at some point, at some point, at some point in college, I, I switched to a nine hour schedule.

Starting point is 00:28:50 Um, and what that ended up making me do was I, I was so, so efficient in learning that two days before all my finals, I didn't need to study anymore because I knew everything. Um, and ever since then, that's, that's what I've been striving for is, is eight, eight to nine hours of sleep. And I, I, I tried to be very rigid about it. Right now, during all the chaos that's happening in crypto and at Bitwage, it's hard for me to find the time to do that. But when I have the time, I'm always trying to get eight to nine hours because then I'm

Starting point is 00:29:32 at full brain capacity for the next day. And I always feel better. I am a full convert to the sleep religion. I keep saying that cause, uh, cause it is definitely true. Uh, last question is more fun. Aliens. Are you a believer or a non-believer? Uh, I, I believe that the chances of there not being aliens is basically a, uh, non-zero, um, because, uh,

Starting point is 00:30:01 you know, the, the universe is so big. How can it be possible that this, this, this event of creating life only happened once. I think it's not possible. Have we ever had contact with Alien Life? That I don't know. I'm usually skeptical when I hear about people who think that we have had contact with Alien Life. I completely agree there, my friend. Before you get to ask me one question to finish this up, where can people go and find Bitwage if they want to use it either as a company or as an employee getting paid? Yeah, you can go to www.bitwage.com. You can follow us on Twitter

Starting point is 00:30:40 at Bitwage. You can also follow me on Twitter at John Chess or me on Clubhouse at Jonathan Chester. Ooh, we're getting the Clubhouse plugs now. You're the first person to plug Clubhouse on the podcast. I like it. I like it. What one question do you have for me to finish up? um what question do i have for you hmm i i wish you had told me i i was gonna have to come up with a question before so i could come up with something fun uh what's your what's your favorite animal my favorite animal and why uh probably a silverback gorilla just because ain't nobody fucking with him i don't know like i feel like i'm cool with a lot of animals but uh but the silverback gorilla just seems like uh you know he's one of those that just chills nobody messes

Starting point is 00:31:31 with and if anyone does they they get reminded quickly as to why they they shouldn't mess with nice awesome all right man listen thank you so much for doing this i'm a big big fan of what you guys are building and think that uh obviously everyone should uh should take some portion of uh of their salary in in bitcoin you guys are empowering people to do that so keep up the great work and we'll definitely have to do this again in the future. Yeah. Thank you. Thank you. Thanks for having me.

The Pomp Podcast - #500: Jonathan Chester on Being Paid in Bitcoin

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