Unchained - Why Tyler And Cameron Winklevoss Fell In Love With Bitcoin

Episode Date: September 6, 2016

Tyler and Cameron Winklevoss, CEO and President, respectively, of cryptocurrency exchange Gemini, talk about the importance of regulation in a sector once associated in popular culture with illicit activity. The twin brothers, who were the first to file with the SEC for a Bitcoin ETF, recount how they went from competing in the Olympics to launching a cryptocurrency company, explain why they believe private blockchains are really just distributed databases, and discuss why we've seen so many hacks of Bitcoin exchanges. They also touch on an emerging trend, app-coins or new cryptographic tokens being used to run, say, peer-to-peer versions of Dropbox or Reddit. Learn more about your ad choices. Visit megaphone.fm/adchoices

Welcome to Forbes Podcasts. Hi, everyone. Welcome to Unchained, a Forbes podcast produced by Fractal Recording. I'm your host, Laura Shin, a Forbes contributor covering blockchain, digital currencies, and fintech. Thanks for tuning in. Before we begin, I just wanted to give a quick thank you to those of you who have been rating and reviewing the show in iTunes. Every vote of confidence boosts the podcast rankings. And if you've been enjoying Unchained but haven't yet reviewed or rated it, I'd so appreciate it if you could take the time now. For today's episode, I'm speaking with Tyler and Cameron Winklevoss, who serve as chief executive officer and president, respectively, of cryptocurrency exchange Gemini.

They also run the private investment fund, Winklevoss Capital, which has made a few cryptocurrency and blockchain investments, such as in Bitcoin VaultZopo and Bitcoin Hardware and Software Firm 21. Back in 2013, they were the first to file with the Securities and Exchange Commission for a Bitcoin Exchange Traded Fund, or ETF, which they proposed calling the Winklevost Bitcoin Trust, to be traded under the ticker symbol coin. Unfortunately, for listeners eager to hear more about the Bitcoin ETF, while coin awaits SEC approval, Tyler and Cameron are not able to speak about it publicly, so we won't be able to address it in this podcast. However, for those interested,

the most recent filings were made at the end of June and it's entered a public comment period. Welcome to the show, Tyler and Cameron. Thank you. Thanks for having us. So, Tyler, why don't you tell us a little bit about what you guys have been doing since the 2008 Olympics. I think most people may be aware of the trajectory of your careers before then.

As chronicled in the movie, The Social Network, you were both tied up in the early development of Facebook, and you've also enjoyed careers as rowers on the US Olympic team. For listeners who last knew that you competed in the 2008 Olympics, what happened after that? And how did you end up in Bitcoin? So after 2008, we decided to continue to train.

But at the end of the day, we decided, We actually wanted to get back into entrepreneurship. So we hung up our oars in about 2011. During that period, we actually went to Oxford University and rode in the Oxford Cambridge boat race and also achieved our MBAs. And then we decided we had been rowing for about 15 years at that point. And we could have kept going, but I think we always sort of saw rowing. It was a little bit of a detour.

It was like one day when we're 15, walked into a boat house. said, let's give the sport a try. And next thing we know, we were on the, you know, made the junior national team. And then we said, hey, maybe we can do this in college and, you know, became a refreshment at Harvard. And then all of a sudden, you know, four years later, we were national champions. We said, hey, maybe we should just keep doing this a little bit more. So rowing was one of those things. It wasn't like we walked into a boat house the first day and we're like, hey, we're going to be Olympians.

It was it was each day, each year, let's try, let's go a little harder. I think we can go a little bit faster. And next thing we know, we're pretty much almost 30, and we'd been doing this for 15 years and had an incredible journey. As you said, we went to 2008 Olympics. We're NCAA champions undefeated in college, rode in the Oxford Cambridge boat race. And we decided we had, we'd climb this mountain enough, and we could have kept going, but we decided that, you know, now was a time to climb another mountain.

So we decided to, we wanted to get back in entrepreneurship. Our dad's a serial entrepreneur. We had always grown up looking up to guys like Steve Jobs, Bill Gates. We didn't really grow up in a jock family in the traditional sense, and that we talked about, we didn't talk about the Yankees at dinner time conversations. It was really talking about business and ideas. And my dad was always bringing home the newest computer, and we were thinking about those kind of thoughts.

So I wanted to get back into that, and the most natural way to do that was as investors. So we set up Winkledas Capital, a private investment firm, in 2012, figured it's a great way to network with fellow investors, meet a lot of entrepreneurs, look at a lot of cool ideas, and just get back into it. During that year, actually, when we set that up, we went on vacation in 2012 in the summer in Spain and Ibiza. And on vacation, we learned about Bitcoin.

And so that's how that all started. And so we started... Well, how? How did that happen? So a mutual friend came up to us, introduced himself to us. We realized we had mutual friends in common. He was from New York. And then said, hey, have you thought about digital currency or Bitcoin?

We said, no, we just pretty much retired from elite athletics and starting a investment firm. And we're actually on vacation, not really looking for the next big thing. But obviously that's always how it works in life. It's very serendipitous. You don't predict when you're going to fall in love or you can't force that kind of thing. You just sometimes you sit yourself up in the right positions you're aware, but oftentimes you stumble into it. Just like rowing was one in many sports we tried.

And, you know, in a way you sort of fall into it. You don't know you're going to be good at it. You don't know you're going to like it. You don't know you're going to want to do it for that long. And Bitcoin, like rowing and like a lot of things we've done, happen serendipiously like that. And then I think, you know, love is probably a great analog to finding your passion. You can't sort of will it or force it. But so we started learning about Bitcoin in the summer of 2012 and buying it.

And then next thing we know, it just sort of like sucked us in, you know, not even that slowly, but pretty quickly. this was a pretty heady romance. But next thing you know, we're looking to, you know, be entrepreneurs in the space. And I think we always wanted to go back and to be entrepreneurs at heart. But being investors was a good way to sort of test the waters and figure out what that idea would be. And then over time, we just, we identified the problem of a licensed regulated exchange in America and decided this was the problem we were going to put our efforts into solving and, you know, return and, you know, put our entrepreneurs cap on and start building something great. So that started about two and a half years ago, and we've been operational for about a year.

So right now we are both, we both invest, but at the same time, most of our time is on, is building. in Jebonite. So sorry if that was a very long-winded introduction, but that is, that is sort of the, that takes us from basically, you know, 2012 to today. Okay. So Cameron, as Tyler was mentioning, you know, you guys really fell in love with Bitcoin and have found that it's your passion. And I have noticed that through Winklebas capital, you made a number of different investments. But what was it about this technology that captured your imagination? It's a great question. I mean, there's so many different aspects to Bitcoin, I guess.

I mean, there's sort of the technological protocol aspect. There's the economic aspect of fixed supply, borderless money. I mean, we were both economics majors at Harvard, and I don't think we had truly thought about currencies beyond the Fiat world until we came into Bitcoin. And it was a big eye-opener that all of a sudden there's a huge, you know, alternative. It's almost like finding a new color and thinking about all the different aspects of it. And we figured, you know, this is either probably a pretty binary outcome. It's either a zero or, you know, an enormous new opportunity. And the interesting

thing about Bitcoin is that, you know, it's both disruptive from a technology standpoint, but there's a tremendous power of social good behind it. So you can both build a cool business or have a great investment return and you know there's the promise of potentially improving the remittance industry or banking the unbanked we're not there yet with bitcoin but it's certainly a possibility whereas the existing sort of legacy banking system it's not a possibility because if it was it would have happened already these are technologies like ach fed wire swift debit cards all those things have been around for many decades and they have not solved the problem. And if you step back, there's upwards of hundreds of millions, if not billions of people

that have no financial inclusion. And there's no path to that with the current technology. So where Bitcoin is right now, I think, is that it's most being looked at and it's most being talked at in areas where it's potentially least impactful. But that's generally probably the story of most technologies, is that you build all, you know, telecom and all these things. And then you basically export it to places that can leapfrog, you know, all of the pain points that we went through to get there. And it's really transformative. And when you sort of think about the way money, the way everything else works in the digital age and then the way money does, money really falls short.

And so as it happens, we learned about Bitcoin overseas. and actually we had to transfer additional funds for accommodation after we'd gotten there. Apparently, you know, not enough. We didn't pay the right amount, didn't get there up front. And so when you're sort of sitting there and you're trying to get money into Europe from America, you recognize that you have a better chance of overnighting a box of checkbooks or traveler checks or cash. So, you know, from here to London, you can do that overnight.

if it's Friday ends the bank holiday and Monday, it's not going to get there until Wednesday. So it might take five or six days, I mean, more than the majority of a week for money to get over there. And that's just not the way your email works. Your email doesn't, imagine if your email worked on bank hours and was open from 9 to 5 Monday through Friday and then on holidays not open. Some people might actually like that. Right. We sort of joke that that that might be a good thing. good thing, but for all of our sanity. But money is acting like pre-internet. And many of the forms of

money and payments were, as Cameron mentioned, were built by bankers before the internet existed. So they never contemplated the internet or how to work on that. So when you sort of step back and you stop accepting like, oh, this is how money works. This is what I learned in economics book. It is sort of at some point it's a little bit embarrassing because you're, you're Like you just accepted so much of what it was around. And because it was familiar, you thought that that's the way things are done. And money is just this, money has always been this, this green piece of paper with a, with a president's head on it.

And that's the way it is. When you start, you know, peeling back the onion, looking back into it, you know, money can be anything. It can be ones and zeros as long as the system has a certain scarcity built in. and ones and zeros are great because they're built for the internet. It's internet money that can work the same way as email as efficiently as frictionless and potentially as cheaply. So, and obviously 24-7 borderless. And then you start to say, oh, wait, like, you know, this is the kind of, this is how

it should always have been or this is how it would have always been, except for this guy, Satoshi Nakamoto, or Guy Gal group. hadn't figured out this breakthrough until 2009. So it really felt like, you know, this is the future. And we love the future. We love spotting it. We love being a part of it and trying to help build it. So I think that's why we got sucked in so quickly to it.

So I like how you describe kind of the long road, you know, about how it's most active now and kind of more developed countries. But that you see like how, you know, down the road it could have helped the and bank to could help in remittances. And you talked about how you identify this problem of like a regulated exchange. So why do you feel like that's the first

step in what differentiates Gemini from its competitors? It's a great question. So I think that the U.S. has some of the strongest financial regulation and consumer protections in the world and for very good reason. And it's

I think that because of that framework, we also have you know, some of the most liquid, amazing markets in the world. You know, try and imagine the world without the New York Stock Exchange or NASDAQ or the Basque Exchange. The equity markets wouldn't exist and the ability to fund public companies, which, you know, build these great products and then have capital to reinvest in themselves, and the economy and all that stuff. The starting point or the block of that is both, you know, in our opinion,

regulated venues where people can actually buy and sell securities and then also regulation around those securities. To build that confidence that exists in U.S. equities markets, there's no market in the world like that. I don't care what country you're talking about. Every investor around the world wants to invest in U.S. markets because they're regulated and they're licensed. They're trustworthy.

They have confidence. If you take that away, the global economy will take a hit like nothing else. So we want to recreate that for Bitcoin. And what we saw for many years was that was trying to create something away, running away from that, sort of a race to the bottom, anti-regulation offshore. And while I think that's important, and early adopters will have no problem and more risk appetite investors or technologists will have no problem interacting in that ecosystem. The majority of the world and the majority of the biggest pockets and the people who can make the biggest change will.

And so in order to get them in the game, which they're not even there today, you've got to build something, a gateway, a road, a bridge that's licensed, that speaks their language, that their chief risk officer, that their chief regulatory officer can get on board with. It's still going to be a hard sell. but when you start to do that, then all of a sudden you take this really cool idea that's isolated out here on an island and you connect it to the U.S. or the global mainstream, main island, or mainland, rather. And then you have a huge situation

where one hand washes the other. I mean, imagine, you know, gold is often, you know, Bitcoin is generally a lot of times referred to as like the digital gold. Well, gold is, you know, it's been a store of value for a very long time. But imagine if you had trouble vaulting your gold or if people didn't know that they were going to potentially lose their gold wherever they placed it or how to buy it in a safe manner. Gold would not look like a very attractive store of value and people would probably look for something else. And your gold in Venezuela, in a vault in Venezuela is much different than your gold in a vault.

in the US, New York City, or London for that matter. And so in order to eat for one of the most obvious use cases of Bitcoin, which is a store of value and borderless money to work, we need to have safe, secure, regulated places to store these stores of value. Without that, we can't even get the first building blocks. And so it's really exciting and fun to talk about the future of all the great other use cases that Bitcoin can do. But if we can't even secure it properly and people don't feel safe buying it or selling it and transacting and using it, then we can't get anywhere.

So speaking of security, there's been a lot of news recently about a major hack of a Bitcoin exchange called BitFinex. And I'm sure you've seen on the Reddit boards, everyone's saying, oh, you know, this is decentralized money. Why are we creating these decentralized exchanges? you know, I mean, it was a massive amount of money that was lost about, I think, 70 million at the time of the hack. So, you know, when you look at kind of that debate between a centralized exchange versus the power of this to centralized money, how do you, you know, make the case that like that really this is not only important, but then also that you can actually make it secure? Sure. Well, I'll start first by saying we don't know all the facts of that particular incident, though I think we've got the general brushstrokes, broad brush strokes there. And I think what's clear from that particular incident is that the majority, if not all the funds, were stored in hot wallets, which are internet connected and thereby accessible by a potential outside attackers through the internet.

I think the easy mitigation for that hack is storing a majority of your funds in cold storage, which is not internet connected. That's something that our vault design has had since the beginning. We currently employ and a number of other Bitcoin exchanges. That idea of cold storage is actually not particularly new. There's certainly going to be better implementations of it. But basically... It's older than, as far as I know, it's older than multi-sig technology, which should be more than... technology, which became popular after it.

So it's actually one of the oldest best practices. Yeah, and one of the biggest probably issues confronting, I think Bitcoin in some ways, at least in the security sector, is that what people use terms in very loose manner, when people sometimes say multi-sig and then you sort of kick the tires or look under the hood, it's not really multi-sig. Or there's a single point of failure where it effectively nullified the multi-sig aspect. of it and unfortunately a lot of people will throw out these terms like multi-sig insurance this or that and it's it's there's no real substance but beneath it in some

cases if you have like if you have a car right and you have it have airbags but no seatbelt I'd rather have my seatbelt than than just an airbag and that's just not preventing you from if you get into a head on or you say you have seat belts that but you forget to find print where but they only work up to 30 miles an hour and it's sick that seatbelt is as good as not being there. And so the way you solve for these problems is you have actually regulated into companies where the regulators have gone in and made sure that you're doing what you say you're doing. And so if you're unregulated and you're offshore or you're in an environment where there's no

requirements to that, you can basically say what you want. And the consumers know, no wiser or, you know, worse off. They don't know until it happens. And that's really, I think, one of the key points here is that what we say and what we, you know, what we're doing, we're saying not only to the consumer, but we're also saying it and having to uphold that to a regulator and getting checked and held accountable for that. Well, I have a question about, you know, the hot wallet versus cold storage issue. You know, at BitFinex, I think it was like a very active exchange. As you know, I think it has like the highest volume or some of the highest volume. So in that situation where people actively want to be trading it, then what's the solution, you know, in terms of hot versus cold?

Sure. So just the hot versus cold is, so basically as a custodian, as an exchange, you have, you've, and if you're fully funded exchange, you take customer deposits before allowing them to trade. But once you've taken custody of those deposits, it's up to the exchange of the custodian to determine, what how they want to actually hold their customer funds. And there's no, you know, customer funds. To the question more specifically is, funds don't have to be in hot wallet in order for them to be traded.

Because all of these trades are happening off blockchain. These aren't on blockchain trades. So it would be, it's a mistake to think that to have high volume, you would need a lot of funds in hot wallet. Because at the end of the day, all of these trades on Bitfinx on Gemini, back to your question, a few questions back, is that they're happening off blockchain. And we'd love to create a decentralized

exchange, but we don't know how to do it. People know how to do it yet at the scale and the speed that's required for the players in the legacy financial world. So when you think about the speeds that are happening at NASDAQ or NYC, they're microseconds. That's not, that's really, really fast. I don't know how many times you can. Probably a hundred times faster, if not more. Oh, maybe a thousand times faster than the existing trading speed of Bitcoin. So Bitcoin, even though it's like orders of magnitude. And a microsecond, I don't know how many times it would require you to blink your eye in a second, but it's a lot. It's like more than it's possible for a human being to do.

So these are trades that are happening at, you know, let's call it like light, like the speed of light. And they happen in matching engines all over the world. And that's what the financial world speeds. That's what they're used to. That's the speed times. That's the, you know, that's just the standard. And so to achieve that in trading Bitcoin, the only way you can do that is off blockchain and to do it in a centralized exchange.

There's just no way, you know, we see the block size debate and the arguments about that. Bitcoin transactions take 10 minutes approximately and best practices is waiting for six confirmations. So you can't wait 60 minutes when you're talking about doing with microseconds over here. And so 99.9% of all Bitcoin transactions actually don't happen on the blockchain. They're happening at exchanges. They're happening OTC. They're happening somewhere else. So the reality is it's just not feasible as we just, as we know it, to build a decentralized exchange that's performant to the standard that it needs to be in order for market makers and financial players in ethics markets, securities markets, whatever, to actually interact with.

So we're stuck with centralized exchanges. And back to what Cameron was saying is the implementation. of multi-sig and in cold storage is super important and they can be night and day you can do it really well or really badly um and when we think about um you know cold cold not all core cold storage systems are created equal and um you know often comparing them to each other is like apples and oranges and i think what we learned or what what the bitcoin ecosystem learned is that multi-sig alone is not necessarily enough. And multisig with cold storage is now you're starting to talk.

And I think we just saw we saw sort of implementations maybe that weren't quite ideal and people resting on things that maybe they shouldn't. I also think that decentralized, if you hypothetically could build a decentralized exchange that was fast enough and technologically, there. It solves for maybe one problem, but not for other problems in the sense that that may appeal to certain people who are okay, you know, taking custody of their own funds, but, you know, at least the existing financial system, most people want a custodian to hold their funds. They do not want to store or have the issue of storing their gold bars or cash under their mattress. And so,

but there's certainly people who want to do that. And there's people in Bitcoin today that would like to do that and solve for a certain attack vector that, you know, costs the money. But that doesn't really, you know, that probably creates another issue. I think centralized custodians that are regulated that, you know, have good best practices, controls and procedures in place. That's what every other market in the world looks like. I'm pretty sure Bitcoin's going to look like that too. It doesn't mean that Bitcoin itself will not be decentralized, just like gold is still borderless money. But when you, you know, you're not moving it around, you need a, you know, safe, secure custodian to hold it. Nobody would argue with that.

And so I think, you know, there's just, you know, fight it. You know, I think Bitcoin will look more and more in some ways like that. But it's never going to lose its true core, super, you know, hero power of being, you know, a decentralized, borderless digital asset. With Amex Platinum, you have access to over 1,400. Airport Lounge is worldwide. So your experience before takeoff is a taste of what's to come. That's the powerful backing of Amex. Conditions apply.

Okay. So one other thing that I was interested in is, you know, that especially in 2015, a lot of people in financial services were saying that what is truly revolutionary is not necessarily Bitcoin but blockchain. And yet, you know, you guys have stayed more focused. on the currency or asset aspect of Bitcoin and other cryptocurrencies? Why? I think that, well, so, right, so there's been a lot of, you know, buzz around the blockchain or it's not about Bitcoin, it's about the blockchain.

We feel, by definition, a true blockchain is like immutable, irreversible, decentralized and open source, and that the world can build upon in a permissionless fashion, similar to how the three of us can go and we can go build a website on the internet. We don't have to ask anybody for permission to go do that. And we can do that. And it's truly open source. We think that's the beauty and the strongest thing about actual Bitcoin and the blockchain. The blockchain is just one piece of Bitcoin.

It's the open public ledger. But Bitcoin, the open source decentralized nature of that, that is the strongest pillar of it. So taking one piece of it, sure. But I think a lot of technologists would argue that the same sort of things that can be achieved through private blockchains, which is what most of the discussion has been around, can be achieved with a distributed database. And that technology has been around for decades. So we've just been sort of focused on Bitcoin because we think that it's truly a, you know, it's something different. It's innovative. It's when you, when you separate the blockchain from Bitcoin, I think you're talking more.

about distributed database problems. And while certainly interesting and without a doubt, there's certainly financial institutions in other areas where they can improve that technology, but they can probably improve it with existing technology. They probably could have improved it a long time ago. It's just that they needed a bit of a kick in the pants from things like Bitcoin to say,

oh, wait, we've got to get our tech aim a little bit more in point here. It should be maybe a little bit less back office and maybe a little more front office. Maybe we're not so much a bank anymore, but we're a bank and we're growing into a technology company. We want to be cutting edge because we have to talk to consumers that are, you know, millennials and the people coming up that are doing bank through mobile apps and things like that. I mean, if I think of like the town where we grew up in, all of the major, the stores, like the toy stores and things like that, they're banks and their banks and their branches because they're catering to a population that's still. comes in and likes to do banking.

And I think banks were fixated on this aging population for a long time, completely like sort of trying to figure out how to reach the millennials, the younger kids and things like that. So I think, look, if Bitcoin has made their story and how they offer banking services better, that's great. But I think that it's, that is a different, we don't view that as competitive. It's sort of, we make the comparison. Okay, AOL and CompuServe, our,

they are a closed internet system. We're focused on the internet. And it's sort of a head scratcher when people are talking about, oh, the blockchain's the innovation. Because on its own, we don't feel like it's anything new. And we don't, we feel like these solutions have been there for a quarter century. When you start tokenizing a protocol and you talk about an open blockchain, now that's something completely new. That is a new color. That is something that a lot of people thought was impossible to do. And so as as Cameron mentioned, you know, I think it's great. Banks need to improve their

technology. We can tell you this firsthand dealing with a lot of them. And T plus three, unless it's, I mean, there's no reason it can't be T0. Your stock can settle immediately. You should be able to go of the ATM. Sorry to interrupt, but when you're actually doing a stock trade, let's say on your e-trade account, the trade says, oh, you know, you just bought your share of Apple. You think it shows you in real time. It's actually taking three days on the back end for that share to truly, you know, transfer. To clear and for the money to hit your brokerage account.

So all of these sort of, a lot of these things, they appear real time. And in reality, they're anything but. And I think, you know, that gap will be closed and continue to be closed and probably could have been for a long time. It could have been closed 30 years ago. And whether or not it closes because, you know, traders like delayed settlement or whatnot, that, you know, it shouldn't be, it should be a choice. It shouldn't be, oh, that's the way, that's the best we can do. And so I think Bitcoin opened a lot of people's eyes up to the fact that something can settle immediately. but we're really focused, as cameras mentioning, on the open blockchains, whether it's Ethereum,

whether it's Bitcoin, open blockchains, open protocols, similar to the Internet. We can all go away and build a company and, you know, harness TCBIP and Internet protocols and things without anyone's permission without the provision of a company. We're not going to go down to, it's much harder to go to JP Morgan, Merrill Lynch, say, hey, I want to build a startup on top of your bank chain and what you guys are doing. And if it goes really well in a year or two, promise you won't pull the rug out from underneath me and, you know, shut the API off. You don't need to worry about that when you're building on open blockchains.

And so we're much more focused on that internet side of things and the tokens. And that's what Gemini facilitates. We see ourselves as an infrastructure company, sort of like a Pixen shovels. type company, we're a platform, we don't take a position on, a notional position on Bitcoin or ether, what direction is going to go. We just want to help facilitate people to trade it, buy and sell it in a licensed and safe manner. And I think that the idea of like, you know, the blockchain tech stuff and the post-trade settlement and the bank chains, that's great, but it's, it couldn't be more different. And you might as well not even have them.

in the same conversation because they're just so unrelated. And so connect those dots for me between kind of like what you're doing with the exchange and then, you know, the value that you see in open blockchains. Like if you want to give people a place to trade this money or form of money, how is that going to facilitate these other things happening on these open, blockchain. Sure. So sort of going back to maybe one of my earlier points is that in order for, you know, if people can't buy and sell tokens of, let's say, Bitcoin or Ether or some other, you know, new digital asset and protocol that they want to build on top of and use, if you can't

find a safe and secure place to buy and sell and store that, then it's pretty, it's really hard to build application layers on top of infrastructure that. that is falling over or getting hacked or untrustworthy. And so basically we think that, you know, that infrastructure layers the sort of the core building block and that will hopefully facilitate developers to do all sorts of things and build all kinds of use cases and applications that, you know, we can't even contemplate today that we'll be around in the future. And on Newark Exchange, are you seeing kind of more like traditional

Wall Street traders and investors coming and wanting to trade there? Yeah, we see, so we see a combination of a lot of different participants. There's, there's everything from a individual user that is interested in Bitcoin, wants to learn more, and, you know, wants to buy their first Bitcoin. And then you have, you know, more sort of long-term investors or people who might have been in Bitcoin early or people who want to take big positions. today in Bitcoin that haven't been in it, but want to sort of start getting into it. And then we see market makers that are Bitcoin-centric, people who maybe came out of

traditional finance and have been focused on making markets in Bitcoin, generally, you know, smaller two to five-person shops. And then we do have a number of existing financial institutions that are sort of, you know, tiptoeing into Bitcoin and saying, what is this all about? we figure out and we'd like to trade and take on positions and things like that. So the spectrum is that it's quite diverse. And we have, you know, I'd say like a wide range of participants. We definitely do see the the blue chip Wall Street types starting to come in. And they're not easy to get involved. They ask a lot of questions. They do. They do due diligence. And it's hard, you know,

but we built a great product that they can get comfortable with. And I think that's in the long one going to be our differentiator, is that we can get through that difficult conversation. We have great answers to the questions on our security story, our licensing, our regulatory posture. And so that's happening. And our goal is to make that continue to happen. but these companies are not looking to do business offshore.

They're not going through wire their money overseas, and they may not even be able to. And so, you know, that's, we're building for that customer base. But like Cameron said, we can point to examples of just about any type of customer on our exchange from, you know, young to old to, you know, financially savvy to, hey, just getting involved. So we cater to pretty much everyone. Yeah, I mean, we specifically. say that, you know, we're building exchange for individuals and institutions. We care about both, both, you know, both types of participants. And we're building tools that, you know, the, the institutional trader who makes markets or trades in equities or currencies around the world,

you know, feels that has the power that they're used to. But we're also, we spent a lot of time building out our interface and the product side of Gemini for people who, you know, I'll say for lack of a better cliche, my mom can sign up and buy her verse Bitcoin. It's super clean, intuitive, and easy. That was the whole goal, I think, far too much with technology, fintech companies, or at least traditional fintech,

if you look at like a Bloomberg terminal or some of the brokerage platforms or softwares, they're very terminal-esque and wonky-looking, and they sort of make your head spin. And that might appeal to a certain type of kind of look like the certain internet in 1995. Yeah. We sort of joke about.

Yeah. Yeah. That's right. So do you feel like the trends that we've been seeing with Bitcoin will generally apply to other cryptocurrencies? I feel like I've seen quotes, you know, in other interviews where you talk about how you feel like there's going to be a future of multiple digital assets? We do think so.

And that's, you know, we've spent a lot of time obviously talking about Bitcoin right now. but we do believe, I mean, we built our custody system. Our vaulting system is built so that anything that uses like an elliptic curve algorithm, we can store. So when we added ether in, I believe, early May and started supporting that trading, it was a pretty minor change in our custody system, which involves our custody system. We have what's called hardware security modules, HSM computers that store the private keys and they're tamper-proof and tamper-resistant.

They basically are built so that you can't extract the private key. And we use those geo-distributed and located all around the country in a multi-sick configuration to store our Bitcoin. And when we looked at Ether and it started to develop and look really interesting and viable to support, it was actually a pretty straightforward upgrade to just our existing. It would almost be like putting a new application on your on your MacBook or something as opposed to building an entirely new MacBook And one Mac you know two computers know like this is a desktop. We just put another application on it And we've been building our custody system for two plus years and and we I fully anticipate there being sort of

More you know more digital assets that will come in the future I mean we ourselves are invested in in in in one day particular company called Filecoin, which is building basically, it's not, obviously, hasn't been released yet, but basically miners are rewarded for contributing storage to the network. And so it becomes a cloud sort of storage, almost like a, like a AWS distributed AWS. Yeah, a decentralized Dropbox. Exactly. So I don't think, I mean, you know, you can totally see the utility there. It's not something Bitcoin can do or will do. And so that would be awesome if there's a distributed Dropbox out there.

If there's a token for that, we would love to store, support it, and allow people to trade it. We're also seeing this with companies themselves. I haven't spent a lot of time looking at Steam it, but an example of a company that's actually issuing their own token. And that may or may not be a security, which is an interesting legal question. But it's not just people building protocols for certain utilities, but people are taking a protocol approach to their companies and basically issuing tokens, just like a share, a stock share. And so I think, you know, the zooming out without getting to in the weeds, cryptographic tokens are, seem to me like the future. It seems to me like all sorts of assets will trade via cryptographic tokens, whether that's me sending you a token that represents the keys to my car after you've paid me and Bitcoin for it, or a TV, or you sent the Internet of Things and your devices are interacting with each other via cryptographic token transactions to provide or buy or sell services.

that to me seems like the future. Assets will live on blockchains and be transferred from person to person, machine to machine to person via cryptographic tokens. And that is the future that we're building towards with Gemini. And I think it's going to be a pretty exciting one. Well, so this is actually a big topic of discussion amongst, you know, a lot of people in this space. And I, I, happened to be at this meetup last night and there was a debate about, you know, whether these are securities, whether they will be regulated, whether the SEC will put a stop to them. And then some people were saying, oh, you know, it doesn't make sense for most companies. It's just a way for people to try to make a lot of money.

And then there were others that were like, no, like, you know, you really need one of these tokens. And depending on the way that the network is set up, you could really need that in order to make the, you know, this file coin or whatever function the way that you want. want it to function. So I feel like there is a wide variety of opinions right now on this. Like do you feel like this is, I mean, it sounds like you don't think it's a fad, but then in that in that case, when does it make sense? When does it not? And when, and in what instances can we see this flourish where it's not going to be shut down by the SEC? Well, I think that it's a great question. You know, if something is more than a fad and it becomes,

just the way the world's moving. At some point, regulators have to, you know, accept that and adapt to that. Obviously, the SEC is some of the brightest regulators we have. So I'm confident that they will evolve and understand, you know, their mandate, which is to protect the consumer. And certainly these tokens are a super exciting idea, the cryptographic tokens that represent an ownership of a company. But they can also be really misused poorly.

And a lot of people could lose money with them. So just like we have regulated financial markets to protect the average Joe investor from getting swindled by boiler room type charlatans, we're going to need the same type of guardrails, whether or not this is considered a security or not. And so I think that, you know, time will sort of play out. And I think the demand of how the world, you know, the paradigm shift, if it happens, then it should be interesting. But at the same time, you know, the Internet wasn't always open, right? Wasn't it a project that was basically military, quasi-military government controlled and developed and then slowly released out?

And then it's regulated in some areas, but it's constantly. evolving. I think that these tokens, you know, very much may be the future. But I'm very, I'm an optimist at the end of the day with regards to regulation catching up and, and sort of technology finding the right path that makes things more efficient. But it is a really fascinating idea when you look at, you know, your phone and this idea that you could have all these tokens on it that represent, you know, your share of Apple, your Bitcoin, which is, we think is, you know, will be your future version of gold, is your future version of gold, but will disrupt gold. And, you know, I'm looking, the listeners can't see that, but I have my

iPhone and my leather wallet on the table right now. And I think that the leather wallet doesn't exist with plastic credit cards in it. I don't have, looking at it right now, I don't have any cash in it. So cash is getting, you know, is starting to go the way of the dodo in my life. And I think it's just a matter of time before credit cards and this nice leather wallet is gone too. And I'm just carrying my personal computing device, smartphone with all my, you know, assets on it, whether it's the keys to my car. And I just walk up to my car and it opens because it handshakes with my phone and knows that the cryptographic handshake that's happening is me.

I walk to my house. The same thing happens. I want to sell you a share of my stock. I can, you know, send it to you like an email and we can make some sort of exchange show. That's sort of the way I see the future in the long run. I'm sure there will be a lot of interesting, you know, ups and downs and learning. learning, you know, tails along the way, but that's kind of the way I see it inevitably going. Yeah, and just to be clear, I think Bitcoin, the CFTC in September of 2015, declared it basically an exempt

commodity similar to like gold. And so I don't think that there's much of a question at this point as to the characterization of things like Bitcoin. But when we're talking about tokens that are not, that are centrally issued and things like that, they send to fall a little bit more into the securities side of the field. And there's specific, there's a, there's a howie test and there's like, I think, three or four points that you can go through and see, you know, something fits more into a security. And in those cases, you know, it is, it's going to be a very interesting question of, how do we characterize these things?

Are they securities or do we, you know, does a regulation evolve somehow? These are some sort of safe haven area or market cap that you can experiment in that's that's that sort of cordoned off. Is there kind of like the Jobs Act for small companies or startups? Is there some certain amount of money that you can or filing you can do that's not super onerous like filing an S1 statement to make an IPO? You know, how does that evolve? But certainly that's. Yeah, all I know, I mean, I was flipping through the channels in between the Olympics on, on things Saturday or Sunday and did catch a bit of the Wolf of Wall Street. And I was sort of cringing and saying, thank goodness for financial regulation.

And so, you know, it is a tough, it is a tough balance. And I think that, as Tyler mentioned, we have tremendous forward-thinking regulators in the U.S. at the SEC, at the New York Department of Financial Services. And that's a big part of why we built Gemini in New York because the regulation was clear. And under Superintendent Lossky, they really blazed the trail there. And so to build a company and to get a banking relationship, you know, no bank was really going to bank something that was uncertain. And so having the ability to be regulated and licenses was a huge deal. But yeah, I think it'll be an exciting future to see where all this goes. Well, this has been a great discussion.

Thank you so much. Where can our listeners find more of your work or contact you in the future? So we have a, so Winkleboss Capital.com is the website for a private investment firm. Our portfolio is listed there. We blog on that website. We also are on Twitter. So I'm at Tyler Winkleboss, just the spelling of my full name. Cameron is at Winkleboss.

The reason he's not at Cameron, Winkleboss, people think he want to bet, but the truth is his actually full name won't fit on Twitter handles. It's too long. I think it's 17 characters, and Twitter has a limit of 15. So you can find us on Twitter at Tyler McWass, at Winkelboss. On Instagram, at Tyler &Covos, at Winkelboss. And then we're on Angelus, Winkleboss Capital.com. We blog.

It's our investment company website. And of course, last but not least, jemini.com is our, digital asset exchange, you can buy and sell ether and Bitcoin. And there's also email on both McQuast Capital.com and Gemini.com. There are email addresses for inquiries that you can find. So it's pretty easy to find some sort of channel into us. It's more about, you know, what do you have to say? And what's the content? Depending on whether we have the time to get back. But also, you know, Just lastly, you know, getting in the ecosystem, you know, getting into the Bitcoin ecosystem or getting into the startup ecosystem is step number one.

You know, just cold calling someone seems like you haven't done your work, you know, beforehand. You should be able to get to us. You should know an entrepreneur. We've invested in 50 portfolio companies in Silicon Valley, New York, and L.A., and each one of those companies has a lot of employees. And those employees have friends. And so it's not, when you start bringing out the social network rings, it's not too many hops to get to us if you're actually in the startup world. And so generally speaking, going through a friend who can vouch for you that we know or we respect somehow in our interaction is always the best way

to get to anyone, whether it's startups or, hey, I want to be coming. an actor, I want to become an athlete. Well, you know, get into the system. Get into, get around athletes and start going to regatta, start hanging out, you know, and, and you sort of, or meetups, you mentioned you were at a meetup last night, right? We, we were at YC Demo Day yesterday and, you know, a number of entrepreneurs were presenting, came up, said hello, you know, business card, hey, what are you working on, things like that. So we're around and, you know, and there's, there's so many.

that's the cool thing about Bitcoin and technology in general is that people are very giving of their time and want to be inclusive. And everybody remembers when they first sort of got in. So when they see people that want to learn and want to get in, they generally return the favor. Great. Well, thanks so much for coming on the show. Thank you for having us. Yes, thanks for having us. It was fun. Thanks for joining us today. If you're interested in learning more about Tyler and camera and check out the show notes, which are available on my Forbes page, Forbes.com slash sites slash Laura Shin. And if you like what you've been hearing, please review, rate, and subscribe to the show in iTunes. Every rating and review helps boost the podcast rankings.

Thanks again for listening.