Does crypto have a future?
with Bill Bardhyt
Does crypto have a future?
with Bill Bardhyt
In this episode we ask one of the OG’s of crypto, Bill Bardhyt, to join us on The Futurists to talk the 2022 crypto collapse, the merits of crypto and blockchain for the future-world, and how crypto, stablecoins, tokens, NFTs and CBDCs will ba battle it out for the emerging monetary rails of the 21st century. We also debate who Satoshi Nakomoto was, why ‘he’ created bitcoin, and what the collapse of FTX and other exchanges mean for the principles of decentralization that the crypto community holds so dear. Follow @billbarhydt & linkedin.com/billbar
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[Music] this week on the futurists bill bahad you have two people in the United States that make the vast majority of the decisions on what your money is worth tomorrow that’s insane okay and by the way they’re getting it wrong Time After Time
[Music] welcome back to the futurists this week we are going to get into the whole crypto stuff I’m joined of course by my uh a wonderful intelligent co-host Rob turse okay Rob hi how you doing Brett uh you know it’s I’m actually in Dubai as we’re recording this today and uh which is it’s uh it’s pretty you know it’s a big crypto Hub of course um you know the the um it particularly Abu Dhabi has really sort of doubled down on the sort of crypto community and there is a big crypto Community here um in Dubai a lot I’ve actually got friends that have you know crypto friends that have moved here relocated to Dubai because they see it as very pro-friendly um a space so um but uh you know I’ve been here uh working with some of the big Banks and talking to Sama in in in the kingdom and stuff and um there’s a lot of really interesting energy and stuff going on here so um cool they’re trying to Pivot away from some oil right oh yeah yeah I think uh generally speaking I mean um you know MBS uh you know on the Saudi side has this big 20 30 plan that is pushing you’ve got neon um you know the city of the future the line of course um but you know as well as that you’ve got Qatar who’s invested a ton in infrastructure for the World Cup of course Dubai in Abu Dhabi um you know have have done some incredible things over the last few years but there’s all sort of a healthy competition between all of these players as well as uh in this but I think um the changes that have happened in Saudi you know that my first time to visit Saudi was was many years ago but the changes are there are um enormous and I know you know Saudi gets a bad rap but um you know they have made some extraordinary progress over the last few years but let’s welcome our guests hey so we but before that actually actually you know before we get to to bill um uh just uh let’s let’s tackle the uh the news what have you got uh on the news from the future this week all right the news from the future
this week we selected a few headlines from the cryptocurrency world why not it’s in the news and there’s a lot happening and seen relevant for today’s show Sam bankman freed the founder of Ft FTX uh that recently collapsed he’s in the news again so he postponed his testimony he was invited by Maxine Waters who’s the chairwoman of the house Financial Services committee uh to testify in a house hearing on December 13th um but he can’t find time to do that however he did find time to participate at New York Times deal book Summit recently uh where he made the cryptic statement I didn’t ever try to commit fraud so we’ll watch that space that story is going to keep going on and they’ll be full of interesting turns and twists no doubt about it uh one that happened today Senator Elizabeth Warren has sent a letter uh demanding information from silvergate about FTX silvergate is one of the few U.S banks that allows customers to transfer US Dollars into crypto exchanges and both FTX and Alameda research and several of the related companies had Accounts at silvergate um about 20 accounts and so Senator Warren’s demanding answers about that from from the bank um because she’s trying to track down the 10 billion dollars that went missing as we as you may recall um 10 billion dollars of customer funds were transferred from the FTX exchange to the related firm Alameda research uh which looks like it was making Investments and playing both sides of the table and so forth so there’s a real problem there and it looks like silvergate may have facilitated that that’s what the letter from Senator Warren alleges uh the pure silvergate facilitated the transfer of FTX customer funds to Alameda um in other news arrest warrants were sent out for terraform Labs co-founder Daniel Shin three of his investors and four of his Engineers uh this is the group that created the cryptocurrencies Terra USD and Luna that collapsed spectacularly a few months back and the three arrows Founders uh this is another firm that collapsed based in Singapore these folks have resurfaced this week in Bali interestingly bali’s in Indonesia which is a jurisdiction that does not have an extradition treaty with the United States so they just happened to be in Bali uh when everyone’s trying to find these two guys three arrows has not cooperated with investigators who are trying to find information related to the bankruptcy of that firm they’re based in Singapore and three billion dollars has gone has gone missing so three billion dollars is owed to creditors uh meanwhile those guys are relaxing on the beach in spite of all this crazy Shenanigans uh that are happening and the spectacular levels of fraud that have been revealed in the last couple of months blackrock’s Charlie Fink says that the technology behind cryptocurrency remains relevant for the future and he says that he says he’s supportive despite what he calls uh misbehavior by uh Sam Friedman uh Sam bankman freed and it Reuters announced today that Goldman Sachs intends to invest tens of millions of dollars into cryptocurrency startups uh so clearly there remains interest in the space uh despite all the hiccups craziness and Chaos that’s occurred so those are the headlines from the future yeah and now let’s turn it over to our guests Bill bar height Bill such a great pleasure to reconnect with you thanks for joining us on the futurists oh thanks Robert good to see you Brett yeah great to be here welcome bill yeah yeah so bill for folks who aren’t familiar with you and Abra why don’t you start by telling us a little bit about what you’re doing what is Opera how’d you get started what brought you to that space sure yeah I’m a long time uh technology entrepreneur uh kind of a mixed background and working in both Capital markets as well as early internet technology uh all the way back to early 90s and and so uh via many many uh permutations of working on payments companies and developing more markets projects in in remittances money transfer micro Finance I I became super excited about this this movement towards integrating software and decentralization finally into money in the banking system which is what got me really excited about about Bitcoin when it first was launched uh you know now over 10 years ago I can’t believe it’s been over 10 years but but yeah I I was working in Frontier markets on building payments and and remittances and and other basically Financial products in places like Mexico Philippines Haiti Central America Southeast you know other parts of Southeast Asia India uh even China and and and basically you know was running into brick wall off the brick wall you know dealing with the incumbent Banks who were disincentivized to work with the bottom of the pyramid or even the lower middle part of the pyramid for that matter uh to Regulators who you know you’ve seen the memes lately probably oh well they’ll check the 600 transaction from venmo but you know the the Senators can basically you know invest in whatever they want with no disclosures et cetera et cetera so so it’s it’s like that but like times a million right so everything you do has a roadblock regardless of who you’re trying to help uh even if you’re a non-profit we I wasn’t running a non-profit we actually had a nonprofit arm as well but but it doesn’t really matter it’s just roadblock roadblock after roadblock so when the Bitcoin white paper came out you know I I had been part of the cipherpunk community in in the 90s that had looked at Myriad um uh you know e-money schemes and the Holy Grail question for e-money since the beginning was can you eliminate centralized trust and end or solve the double spend problem which is really part parts of the same problem the double spend problem was basically can you um can two people have a copy of the same money or key in this case and and and not have both people be able to spend the same money which is the double spend problem right because it’s so easy to copy a digital file on the internet right basically the internet’s a copying machine exactly so that’s the problem that’s the core problem people forget that they were trying to solve that that you know things like digital gold back in the 1990s it’s a long time ago well you had you know there were there were some of these formative cryptocurrencies even if you discount things like Al on Mars and so forth you had QQ coins in China you had second life with Lyndon dollars they were Proto Proto crypto you know in those days yeah exactly but they all basically had some component of centralized trust in the system with an off switch and that’s right test for decentralized systems right I look at it like uh bittorrents right you know they asked the uh riaa where the off switch is for BitTorrent and they will tell you there is none and and suing people doesn’t actually manifest an off switch and and so but like I said that was the Holy Grail If you eliminate the double spend problem you’ve also eliminated the off switch in theory and and and we thought that problem couldn’t be solved and I think in hindsight I know why we thought the problem couldn’t be solved once you see a viable solution and that is you know Bitcoin is is clearly not created by an academic because you the idea of using every computer in the world to create a decentralized solution is is orthogonal to the way any academic would think right it’s not there’s nothing elegant about it it’s the most inefficient transaction processing system ever devised by man but it turns out if you want to solve the double spend problem you have to rethink your requirements right which is why we have this argument now between proof of work and proof of stake and all these other Technologies because what what really matters is decentralization and and security when it comes to eliminating uh centralized trust and which which ultimately usually means governments essential Banks and things like that so when I saw this after having hit roadblock after roadblock for all these years for the different projects I was working on even going back to my Netscape days when you worked on SSL if you understand how https works even though it’s an encrypted connection the trust actually rolls uphill meaning there’s settings in the browser to determine whether or not that that secure connection you have is truly secure and there’s what we call Root authorities you know which sounds very ominous at the top of the chain that determine who you trust so even with encryption on the internet for how you process credit cards you’re actually trusting someone in that kind of encrypted connection some higher authority a higher authority that’s exactly what it’s so it’s a hierarchical system it’s baked into the Internet it’s also the way DNS the same thing again even in yeah but DNS is highly essentialized highly centralized it Remains the ultimate attack Vector for for the internet so this idea that you could have money that the more it got used the more decentralized it becomes the more previous Trend more secure earlier transactions actually become was was mind-blowing to me like how you know like I said it was so inefficient in how in its design relative to you know centralized databases that it was obvious that no academic would ever come up with this but it turns out that it’s the only solution that we’ve ever been able to come up with and and may actually be the only solution to the problem anyway I was all in and I said this has got to be the future of money and then the question becomes around it what’s the future of banking right because because on its surface what Bitcoin does is eliminates the need for trusting a central bank to make the right decisions trusting governments and central banks to create money out of thin air eliminates the need for us to have to use gold rocks as as the basis for a trusted monetary system Etc et cetera et cetera but around that that money we’ve built a banking system right most people have no idea how the banking system works right they’re questioning crypto but then you know ask the average congressperson what a repo is in in a bank and how money markets actually work and you probably get a blank stare right and and so then the question becomes okay can we do better right and you’ve probably heard your audience probably heard these acronyms defy uh obviously now everybody knows what a stable coin is and and these things are basically being built out via this equivalent decentralized stack to replace now the banking system the same way Bitcoin is is proposing to uh completely change money on its hit some things let’s recap a few things because you covered it off a lot that’s quite interesting um the first thing is the banking system is highly centralized and we see evidence of that all the time for instance uh the sanctions against Russia that the United States imposed you know even the United States government can basically decide to cut a country off from the banking system over the country in 12 hours that’s right and so there’s an example of decentralization now you know a lot of folks might support that people who are supporters of Ukraine and so forth but it does illustrate the kind of risk in the global system yeah that’s not the country can make that call that’s right um the second idea there is that we often hear a Bitcoin um and blockchain in general the blockchain that under underlies the Bitcoin but not not just Bitcoin all the blockchains that use um proof of work we often hear the complaint that they’re inefficient that they’re grossly inefficient right what people don’t realize is that’s not a mistake that’s not a blunder that’s not a side effect that’s by Design that’s baked in that’s the security model that’s intentional or that inefficiency makes it incredibly impractical for someone to try to hack the whole network and that’s why they’ve been very secure but there’s a Bitcoin blockchain hasn’t been hacked you know Robert there’s a corollary to that watch Ray dalio when he wrote his book about the changing World Order and principles around that uh published the video on YouTube where he talks about how the military-industrial complex basically supports the reserve currency now I would posit that the military industrial complex is infinitely more inefficient uh than Bitcoin in terms of you know pollution money spent uh I read a report that says for this is like the umpteenth audit of the Pentagon where 70 of their assets remain unaccounted for and we’re talking about trillions of dollars right and and most of it is supposed to be accounted for in in one building and they still can’t find it right and and so I would posit that this is a move towards uh you know less inefficiency than the military industrial complex but it exists for a different reason right and I think you know I think in addition to transparency let’s let’s add that because every every transaction that’s on the blockchain can be audited which you can’t do with the Pentagon right the Pentagon to be audited and you know the these flaws exist in the financial system today I mean um if we look at money laundering as an example um you know money laundering exposure is is massive and um even though we spend billions of dollars a year trying to stop money laundering the entire Global Financial system is only successful at eliminating about one percent of money laundering globally so there are some serious functional problems even with the fact that it’s a very mature system and yet people have implicit trust in that system because it’s centralized because banks have Charters and the Central Bank looks after it but there are serious flaws in in the existing system and let’s remember what the money laundering is about money laundering sounds nice you’re cleaning money that’s good it’s dirty clean it up but is it funds terrorist groups it funds arms deals it funds drugs it funds the funds also no activity Behavior human enslavement yes and cash cash is the primary vehicle for that now you know a lot of the criticism for for Bitcoin and crypto is that it enables that but the reality is that the global banking system and you know real estate in cities like London and Dubai New York go an essential part of that but Bill I do want to ask you um this question I know I know you’re a big fan and I do want to get into the remittance function um you know and where Bitcoin sits in that because the remittance businesses is a massive um issue for financial inclusion and other things as well um but you know it has become clear over time if you read the Bitcoin white paper and the intent of Bitcoin to be used as a means of value exchange uh you know we we don’t hear a lot about Bitcoin as a means for Value exchange and simple payments we hear a lot more about the value the future value of Bitcoin and it’s become speculative so um you know a part of the problem is I don’t know whether this is a design floor or just you know um the nature of of humans but um you know it’s potential to be really a revolutionary payments uh um platform and and digital currency has sort of been Twisted a bit because now people are so speculative in in their relationship to to bitcoin but do do you think that um there is a way that we can solve that problem or over time is it just going to become more trusted you know more less volatile so that the speculative element disappears so so I actually believe that we’re already on the right path as it relates to bitcoin and maybe some competing Technologies within the crypto sphere in 1976 it is obviously predates the internet predates Bitcoin uh by extension uh Friedrich Hayek wrote a book called The denationalization of money and the idea was what would happen if you took governments out of the Fiat money printing game this was after we were off the gold standard and Fiat was basically valued based upon whatever perception or value the public decided to give it give to it and if you look at that book it has basically a game plan for what would happen and Bitcoin is basically playing out that game plan to the letter he predicted that money would be hoarded if it was Private right with a fixed float because it would be so valuable right because there would be no way for any Central party to just arbitrarily print more you know we have the meme in the in Bitcoin world and the printer goes Burr there’s no more Burr right uh and it would be hoarded until such time that it was so valuable that it made no more sense to hoard it anymore right and I believe that’s what’s playing out here there’s only 21 million Bitcoin but it’s it’s subdivisible out to eight decimal places so you really have to think about the individual Atomic units of Bitcoin at scale which are these satoshi’s and at scale you know you have basically billions upon billions of these satoshi’s but that’s a fixed amount of Bitcoin which is going to become so valuable at some points eventually the early holders right are going to loosen up the purse strings and say it makes no sense for me to to hoard this until and take it to the Grave it doesn’t make no sense okay now hang on hang on hang on Bill I’m sorry to bust in here but we’ve been hearing this now for 12 years about Bitcoin right there’s a limited number it’s a fixed amount it should be the hardest currency in the world and it’s a hedge against inflation it might not be a medium of exchange that people are using every day but it definitely has long-term value as a store of value right we heard that message many many times well this year we’ve had record inflation and by all accounts Bitcoin should be soaring in value
so a few things let’s stop so first of all it’s I think it’s something like four to five x actually more than 5x where it was at the trough uh before you know the inflation started but even that is is irrelevance to me okay bitcoin’s price is moving as an exponentially growing asset no difference than Amazon did right if you basically plot on a log chart its price from the whenever it went public in the late 90s to today okay prices had multiple 70 plus percent drops that is not the point the point is why is it an exponentially growing asset now and what is it becoming okay I don’t claim that Bitcoin is an inflation hedge today I claim that as it becomes hoarded it’s a valuable increase to the points where nobody thinks in dollar terms anymore because the dollar becomes irrelevant as the sound money it has to happen it’s happened to every other fiat currency in history and you’re printing your way to uh you know irrelevancy and and so this is an exponentially growing asset whose adoption is growing faster than the internet did itself in the 90s on the promise that it is going to become hard money at scale and that is clearly right what happens to something that has a fixed float it’s why it happens with Collectibles and arts and baseball cards or whatever you want we’re just doing this at global scale with a system that can actually be transferred without the need for middlemen that’s never happened before but the idea you’re saying that if we zoom out and look at the long growth curve from from 2009 to today okay there’s occasional drops and actually historically this isn’t even the biggest crash that Bitcoins had it’s the oh it’s not just crash percentage-wise it’s not and the long curve continues to grow and you’re saying that’s an exponential growth chart so so hang tight holders no hurdles it’s hodlers those are two different issues right right I’m not I’m not saying that the price should be this or the price should be that I’m saying that the exponential adoption is happening independent of the price the money supply the changes in money supply are what map the exponential adoption to the actual growth in price and that’s been true since the early 90s
so so Rob uh Bill let’s let’s we’ve got to expand on this a little bit I you know I do want to you know bring back you know this is an interesting debate but um where does this get us to this is really you know what we we’re going to talk about but let’s um how about we uh do the quick fire around have a quick break and we can come back on that basis and talk about the future of digital money overall because I think that’s what we’ve got to get to that’s the problem that Bitcoin is trying to fix so how do we get there you know in the end but um let’s uh if you if you’re ready for it Bill we’re going to give you the quick fire around here we go
uh what is the first instance of Science Fiction um that you can ever recall being exposed to Star Trek yeah I think uh growing up in New York City there was reruns of Star Trek on late at night and when I should have been sleeping I was probably watching like you know on a black and white TV all episodes of of Star Trek and I was all in I was hooked I was like this is unbelievable um this is the future that I want and you know I want to be on that ship go and exploring the world and I want I want all those gadgets in my bedroom basically in the meantime yeah yeah well you know it’s funny isn’t it the communicator the flip phone you know a lot of those things Alexa and Siri and you know the computer yeah there’s a lot of analogies there um is there a futurist or entrepreneur that you CA you uh can as as being very influential in your life many um a lot of them your audience wouldn’t even know because you know now I’m an older guy but but you know I mean I worked with Mark Andreessen and Jim Clark as a kid and and that was awesome I mean they you know Mark Andreessen was younger than me um and and you know there were so many talented entrepreneurs that I work with in the early days I mean if you look at crypto there’s a few of us from an escape days that are CEOs or crypto companies now uh Brendan I hit the brave runs the brave browser Mike belshi runs bitco um you know I’m running Abra of course and uh and and so just since then there’s been so many people that have that have you know touched me and and and whatever whenever you know you’re basically dealing with with nonsense and crap that that invariably happens in in Market at Cycles there’s always an entrepreneur that that manages to re-excite me somehow and the last few years you know just looking at this kind of decentralization movement and some of the the developers you know just follow the developers in my world right who’s coming out of MIT and working on the next the next big project in this kind of global movement towards decentralization whether it’s you know ethereum or Solana and some of the other competing now Aptos and some of the competing projects in the crypto space that are getting phenomenal entrepreneurial talents and but yeah I mean in in my life there’s been probably dozens of people that I can you know sit down and think of that have had a dramatic impact and significant influence on my life excellent now um of course the show is about futurists so is there anyone that you can um who do you think from a futurist perspective or a forecasting perspective has been particularly good at making predictions about the uh you know I I am a big believer in kind of this whole movement towards uh Singularity and and the growth of exponential tech and and Moore’s Law and and kind of being pretty damn accurate and predicting that and I’ve I’ve come to rely on that and put disbelief aside and so you know folks like Peter diamantis and and Ray courtswell have been very instrumental in kind of enabling me to accept what I intuitively believe and it’s at some point it’s just that like to the early discussion Star Trek it sounds like science fiction like so in the early 90s it was very obvious to me that Moore’s law was going to enable things like smartphones and and you know little video handheld uh phones that you would carry around with you and and and everybody else it was science fiction but you have to suspend the the disbelief part of Science Fiction and just do the math and and those are trending like people like Peter and Ray have been very instrumental in my life in terms of enabling me to suspend that disbelief to to just do the math all right and a special one for this week last question who is Satoshi Nakamoto so I I did say that I don’t think that Satoshi was an academic or at least the the primary developer I don’t think it was one person I think it was a group for different reasons have you heard the theory of the four satoshi’s the secret it sounds like the Samurai and no I I haven’t heard the theory of the forest ocean it’s a Brock Pierce told me this so you know Brock of course so um you know and and he he well we you know we should get into this after the break or offline but idiots yeah yeah he’s made that argument that you know Hal Finney had the private key and that’s why none of satoshi’s Bitcoins I think how funny was genuinely brought in right before right after the white paper so I don’t think he was the original ideator of the idea of of blockchain and Mining and you know the individual components but I do think and that he was heavily involved in rewriting a lot of the original code into CBS which I think pissed off as a non-academic I think Satoshi was probably older and and probably came up in in the assembly and and if you look at the way uh the op codes for for Bitcoin work it some of it reminds me of the old kind of Pascal P codes and stuff like that this was clearly somebody who came up through the assembly world and not somebody who came up through Modern functional programming um and and so that’s interesting interesting Insight so so um but I do think that there’s some Communications that are inconsistent in terms of being one person so yeah no I agree there’s different flavors have come in there yeah and listen that’s that’s that’s great thank you for your your answer let’s have a quick break and when we come back I want to get into the future of digital money and what you know let’s let’s play that how do we get to the full potential of what we’ve been talking about with cryptocurrencies like Bitcoin and now um you know the emergence of cbdc’s and so forth you’re listening to the futurists we’ll be right back after these words from our very kind sponsors
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welcome back to the futurist this is part two with our guest this week Bill bar height from Abra and Bill you know one of the things I want to make sure we cover is abra’s business what you actually do at Abra and I think the way to set that up is to talk a little bit about the remittances businesses uh one one thing I was surprised to learn when I lived in Asia is how much people depend on Western Union and similar services to send money back home for instance a huge percentage of the Philippines many of those people work in other countries and they’re every month they’re sending money back home but candidly Western Unions are rip-off and this is an inspirational idea for people who want to disrupt an incumbent company that’s highly centralized that takes too much for a service that they offer talk a little bit about the remittances racket sure so so money transfer is definitely uh one part of our business we actually have a retail business a private banking and institutional business and I’ll I’ll start off addressing the the remittance question which was some of the things I was working on before we started Abra and yeah so to your point uh there are a few large centralized players that have basically cornered this Market over multiple decades uh the Western Union MoneyGram and then there are a few kind of upstarts that have tried to take uh pieces of that Zoom which become which became part of PayPal and remitly which is a standalone company and but they’re you know single digit percentages of the overall Space versus the the two large incumbents uh and and some banks offer uh remittance Services now but the idea is that somebody who doesn’t have a bank account or doesn’t want to spend 50 60 on wire fees or have the money take three to four days to get there via Swift uh settlement based settlement process can go to a retail store a hand the person behind the counter some money fill out a long form show their ID and based upon so some internal systems at um at Western Union another window let’s say back in Mexico could be visited by the same family member uh or a member from the same family uh with a pickup code and that store tenda would basically hand out the equivalent of the 250 dollars in in cash in pesos and that’s the huge fee that they take off the top yeah right minus the fee uh you know or the fees added on top depending upon how you do the transaction and in the background what Western Union is doing is they have banking relationships all over the world and they’re using those relationships to do settlements with these retailers every day and so that the retailer is handing out cash temporarily and then Western Union is making them whole minus the cuts that they have to pay them for handing out the uh cash in the first place so let’s say that you hand out 300 they may reimburse them 305 or something like that and the five dollar being you know a fee for basically effectively they’ve lent Western Union money for a few hours while the customer has picked it up until they pay them back okay now there’s actually a lot of hands in the pie here that I have to get paid there’s Western Union there’s the retailer there’s the banks in the middle uh in some cases there’s correspondent networks and so there’s a reason why the global floor on remittance prices in extremely competitive markets is somewhere probably around three percent ish and then in in less competitive markets and parts of sub-Saharan Africa for example Michael the fee could approach you know 10 yeah which is an incredible amount of money and and it’s all about competition but there is a floor because of the number of hands in the pie who won’t participate for free okay so so clearly in order to optimize those fees you need to eliminate these hands in the pie there’s no other way so the more hands in the pie you can eliminate the lower the fee should get right so so Bitcoin solves a couple of these problems because you can do transfers peer-to-peer right without the need for the banks but the question is how do you get the Bitcoin in on the send side and how do you get the Bitcoin out on the receive side and this was one of the ideas that we had for Abra because in theory most people sending money have a bank account even immigrants okay it’s the recipient that does it okay so if you could use something like ACH in the U.S to buy the Bitcoin send the Bitcoin and then use the same cash window to effectively get the cash out which amounts to selling the Bitcoin you’ve eliminated two out of the three hands in the pie right in theory so so anyway so so we’ve played with Myriad versions of this we have you know hundreds of thousands of consumers in the Philippines and Mexico and Central America and parts of Southeast other parts of India that Bangladesh that now use this to do everything from going to a window to buy stable coins that they send to other people that they then use to buy Bitcoin and speculate as savings uh because they they see that as a better savings model than trusting their Banks right a lot of the countries that we deal with have consumers who’ve seen their banking systems fail and confiscate their cash so they end up using Abra as kind of an off-the-grid savings account I’ve heard that cases which is super interesting yeah I’ve heard that sometimes people don’t want to be paid in their local currency if they’re doing you know International work like on fiverr.com or something they’ll they’d rather be paid in some stable coin yep and then we have our private banking business which actually is the fastest growing part which is not only in the US but even in developing markets where people are using Abra to now invest in cryptocurrencies uh do large transactions where they need to send money around uh but in particular we’re helping a lot of wealthy clients we have kind of large Staples celebrities now that use Abra to manage crypto manage their wealth so one of the things I love about what we’ve built is we have super wealthy people using the same app used by foreign
enabler for all of this um and and for different reasons right some people are speculating some people are sending money some people are doing payments some people use it as their bank accounts and and we don’t care and then we even have an execution alarm and that service is the likes of the the goldmans of the world there there have been some uh recently the big scandals have occurred around uh the exchanges right so that’s the point where we go from crypto from the crypto world into the Fiat money world that’s that’s the exchange point does Abra compete with the exchanges are you like an exchange or are you due to a different function so exchanges have what we call an order book which basically takes a bit in an ask and Maps a buyer to seller we don’t run an exchange we don’t run order books we actually route orders uh so it’s more like the the fxc custody yeah yeah so we more like the FX window at the airport they’re using different banks to do your exchange and since we use different exchanges to Route those transactions so if you want to buy Bitcoin for cash or if you want to swap your Bitcoin to ethereum or your ethereum to you know BSC binance token Abra will do that by routing to different exchanges or if you want to use your bank accounts to buy and sell crypto we integrate with different banks who basically process those transactions and convert the cash to stable coins for us so that we’re only holding the stable coins not the cash and then you know we have a lending business which will allow you to park uh Bitcoin and then borrow against it for example which is is we have customers all over the world from that from super wealthy folks to people who you know may have saved up a thousand dollars worth of bitcoin don’t want to sell it but want to borrow fifty dollars this week right um and and and so basically all kinds of banking functions now uh that are centered around the crypto model if you would consider Abra centralized or decentralized so as a company there’s no such thing as a decentralized company right so we’re we’re a company so obviously we’re centralized we have an off switch um and an on switch mostly we’re generally on because we’re open 24 7. but but we use decentralized technology to enable the services we provide to Consumers and businesses in other words we use D5 in some places to generate yield we use D5 to process loans in some cases but we also have C5 versions of lending and and yield and we use Bitcoin and ethereum rails to also move money around and and so it’s a it’s a central is the banking entity that uses crypto decentralized rails to enable the services we provide okay uh bill I I want to jump into look you know in this conversation you’ve talked a lot about the rails you’ve talked a lot about the um the functional disparity in the system the need for decentralization and so forth but what’s the core problem um with Fiat currencies um you know beyond the cost of sending them from a functional perspective in the world we’re moving to over the next 20 you know 50 100 years what is the functional deficiency in fiat currency that that crypto and and stable coins or these variants might might solve sure so so basically the global banking system is as complicated hubspoke network of central banks in different countries with you know large Banks connected to them in smaller Banks via correspondence connected to the larger Banks and and moving money around basically forces you to move from outside of the wheel into the center spoke then settling via another correspondence to another Network in another country and so moving small amounts of money for for example cross-border is effectively impossible right because the cost of moving between those Hub and spokes if you’re moving from in between networks in other words going from the US to Germany is untenable okay so so that’s that’s number one number two is even if you’re doing a micro transactions every country has its own system usach UK has faster pay Mexico has spay Eurozone has all basically variants on the same thing which basically allow you to push money um in most cases from your bank account into some other accounts either for a merchant or another consumer the US has a pull version of that as well but most countries do push because it’s more secure and and and but they’re all incompatible which is why you end up with venmo and PayPal and different mobile money scheme teams in in different countries so so there’s no commonality in any of that we still use checks and then this is right but that but that’s a problem with the piping right the the transmission Vector it’s not a problem you know there’s not a floor in the design the monetary system is it a floor in money so money and banking have their own sets of problems okay the biggest problem with Fiat money today is centralized control right meaning meaning you have two people in the United States that make the vast majority of the decisions on what your money is worth tomorrow that’s insane okay and by the way they’re getting it wrong time after time right so if you look at what’s happened the last few years they’ve basically have been manipulating interest rates and the overall money supply right to try to control and manage an economy and at scale it doesn’t work that’s why we have these 80-year debt cycles that Ray dalio has been writing about meaning by definition two percent inflation it sounds and sound like a lot but that is a crazy number over the course of the lifetime that eliminates the vast majority of the value of your money that’s the problem with the monetary system yeah what I’m also describing are the problems with the banking system so as I said I think that Bitcoin and the idea of a deflationary cryptocurrency solves the problems of the monetary system I think that smart contracts the promise of ethereum uh other competing Technologies to ethereum solve the problems with the banking system those are two different things okay right the money doesn’t have to be Bitcoin it doesn’t have to be dollars it could be gold rocks but the problems with the banking system remain and so so this so happens that decentralization can enable the solution to both problems and some of this infrastructure right right it’s not ready for Prime Time some of the some of this infrastructure when you say the banking system uh you know it may be in an efficient it may be inelegant it might not be compatible but it works versus uh the piping for the the crypto world it’s still a work in progress and that’s why we see these periodic flaws well I’m going to take a little bit of exception to that talk to people in Venezuela talk to people in Argentina talk to people in Turkey talk to people in the Ukraine talk to people in Russia the banking system and the monetary system neither of them work in those countries okay people are adopting crypto in these markets because they have no choice right well go look at the the writings from the the human rights Foundation that has been covering this and actually making donations to help people get into the system as basically a backup to the fact that their governments are confiscating their money that they can’t do cross-border transactions right we we have employees in the Ukraine who were basically stuck and the only way they could transact was with crypto and and so it’s not just about what works for us if we’re trying to ACH a thousand dollars in the U.S of course that works okay but we’re also the people who run the system right and there’s 140 countries that don’t run the system right so yeah so the view from outside the United States is going to be significantly different than the views in the U.S system of course but then how did how did El Salvador go so sideways right they lost 60 million dollars on their attempt to make Bitcoin a national currency okay so those are two different things right so so let’s break it down El Salvador is unique in that they’re one of the few countries in the world that actually used already the dollar okay so they didn’t have to turn off an internal monetary system and their the people of El Salvador are very skeptical of their dependency upon the United States to do the right thing for their monetary system okay now they still are a dollar-based system that hasn’t changed what they said is in parallel we’re going to run a test to use Bitcoin as a parallel currency now my opinion is it was too early to do that given all the things we talked about earlier around technology adoption migration towards private money I understand why they did it I think it’s very interesting test but if you look at the Playbook that I was talking about earlier it’s too early so I I actually it would not have done this but they did it already it’s fine now they chose to also speculate on the the value of of Bitcoin versus the dollar that may actually turn out to be the smarter of the two bets at scale I realize you you know you comment notwithstanding that the price has fallen but but if you actually look at the value of a deflationary asset when an end or an exponentially growing technology combined with the fact that it’s valued in dollars where the money supply historically only goes up right that’s why stocks go up in value over time in Mass right right is because the money supply goes up it’s got to be a good bet at scale unless something breaks in the technology I realize in the short term that it doesn’t look like a good debt but that doesn’t matter because they don’t seem to need the money right now so they should be holding it for 15 years anyway but anyway I just focus on the future because we’re right at that point now where we’re talking about governments experimenting different opportunities outside the United States um Brett you know the well you know the Central Bank digital currency development we know talking about here it is it you know is even though that is programmable money even though it can be used for underpinning smart contracts potentially and things like that which is a a big key part of automating the world supply chain Automation and and so forth improving cross-border trade seems like it’s still going to be fraught with these functional issues of the systems that you have right because if you have lots of different geographically based cbdc’s you get the same difficulty you have in the current system you know particularly for Forex and so forth however there is a lot of conversation now about Regional CBDs you see China doing a partnership and a bridge between the Hong Kong monetary Authority and and the Central Bank in in China for creating a bridge so so it could be that we see these pan Regional cbdcs emerge and for from a wholesale trading perspective it would give these central banks some continuity and it was solve many of the problems you’re talking about so when we talk about this future world smart contracts supply chain mechanics and so forth where is the advantage um that that crypto and and these and these tokens have versus um what’s emerging out of this the Central Bank uh prototypes of cbdc okay so there’s three things you need to understand in my opinion about this idea of a central bank-based digital currency and and and the first point that I would make is relative to where we are today as a planet we are in a late stage debt cycle unless this time is different versus the last 700 years we are in a late stage debt cycle and Bretton Woods was the whole idea to the that to the victor goes the spoils and the Victor was us and we defined a new monetary system that system slowly fails once you reach the peak cycle which we reached in the 60s okay that was exacerbated by Vietnam which is why we came off the gold standard and many smarter people than myself have written about it at the end of that debt cycle the world is forced to take sides because the bomb markets start to break debt becomes untenable right and the bond markets are invariably what lead to these world wars and new debt Cycles follow the money now it just so happens but that’s point one is that we are in a late station exactly and and but but independent of Central Bank digital currencies the world is forced to choose sides settling oil and rubles uh you know looking at that China basically forcing other other training Partners to use the digital Yuan et cetera et cetera 0.2 is that it just so happens that the technology for creating these Central Bank digital currencies it now exists at the same time that the world is being forced to two sides which is something we didn’t have before in previous debt Cycles okay now that’s interesting because it makes it much easier in many cases for non-us trading partners to be pushed by China into this using this currency for settlements but hang on why shouldn’t China do that they’re going to be the biggest economy in the world they from they they already you know in terms of um you know the financial system um Chinese Banks um have twice the tier one capital of uh banks in the US they have twice the assets of the banks if you’re looking at the global banking system it’s all China right they’ve got the largest uh fintech the largest wallet ecosystem um you know alipay and 10 cent WeChat Bay do twice the volume of all the plastic card schemes in the world right so if you’re looking at the future of banking it’s in China it’s not in the US the US has already lost that battle sure so so that may very well be true and I I agree with most of those points and but the point the point the most important Point here being that the world is going to be forced to take sides regardless it just so happens that we have this new technology happening at the same time and if I’m China what you’re saying makes perfect sense as an American I have major concerns with this but as an American I have major concerns but America has done the same thing 100 of the world that’s the whole idea of the victor goes to spoils that’s the whole idea of the military-industrial complex was to use navy ships to make sure that the money basically maintained its value because the Commerce could continue to happen that was the whole idea of all of this that’s and as an American I accepted that that there was no other way and we exported democracy and and that was the the price for all of this that’s why we police the world I totally get it but that leads to point three which is what is going to happen vis-a-vis this adoption because there’s two end games well okay so the first end game for cbdc’s is basically like it’s an interim solution because all you’re doing is putting a a very pretty uh cone of paint coat of paint on a dilapidated house because it doesn’t prevent them from increasing the money supply another 100 fold which is what they’re going to do whether it’s paper money electronic settlement via the FED cbdc’s in your smartphone it makes no difference the money supply is just going to continue to explode all that all this does is it says okay the FED can make payments directly into people’s bank accounts they can monitor what you’re doing which is a big concern right they can’t do that with ethereum but they can if they make their own blockchain for this stuff right they can’t do that with paper money that’s a big concern but again this third point that I want to make is it’s just an interim solution because the money system is breaking anyway whether okay so so this gets to the heart of it this is the futurists after all so then let’s go big picture 50 years out right you know um you know what does it look like how has this system resolved itself if you were I mean obviously we’re experimenting with all of this now but what is the end game is it self-sovereign currencies that combined with soft Sovereign identity you know you know how does this all wash out what the futurist head on I’ll give you my take on money and then I’ll give you my take on on banking I think for in terms of existing monetary systems the vast majority of Fiat currencies are going to fail you’ve got 150 I think 135 of them will be gone within 20 years that I’m not exaggerating I think that’s fair once it happens it’s gonna the cascading effect it’s gonna be like whoa what happened all right you’re going to end up with dollars Euros uh maybe Yen uh pounds um you might even get the Deutsche Mark reintroduced if the Eurozone falls apart and and obviously the r b and and and countries will be asked to take sides as part of this fourth turning that I think is coming and that will be for mostly for ephemeral transactions meaning that we have to settle the transaction somehow but for actual storage of wealth none of these currencies are going to succeed because they’re inflationary by Nature you need a deflationary asset at scale with the fourth turning which is what we did post Brett Woods we needed deflationary currency so we created one and collected all the world’s gold in order to do that well now we don’t need to do that because Bitcoin gives us the same effect I don’t know if it’s going to be Bitcoin but it is going to be a deflationary digital currency I don’t see any other way out I kind of be it why can’t it be a carbon coin which prioritizes the environment over actually monetary value maybe but it has decided we come up with a different value exchange it couldn’t it could be a competing technology all I’m saying is if it has to solve the problems that I’m describing because okay either it doesn’t either it solves the problems I’m describing or this is the first time in hundreds of years that it doesn’t
and then on the banking side I believe that Banks which are closed more than they’re open are moving towards a global decentralized always-on system with no off switch where all of these Myriad Regulators are going bye-bye there’s no way it’s going to be just AI based incorrect AI but but blockchain all kinds of global settlement systems etc etc I totally agree with you there and and that’s going to happen faster than the other part with the monetary systems let’s talk about a computable economy that’s one of the things that some folks have gotten very excited about with the Advent of cryptocurrencies the idea that you can now have visibility into all the transactions and thereby compute an economy a radical concept I don’t really know if I have my brain wrapped around it but I’d be curious to hear your perspective about the long-term implications of that as more and more transactions move into the cryptos well it’s just a smart economy needs smart money right it needs a programmable what does that mean to put some substance behind it oh okay so so you have to break it down right so the the challenge with crypto markets this year have been that the decentralized technology has worked flawlessly the centralized entities have been a disaster that’s right so centralized entities rehypothecate and and if you go back in history to the banking problems of the last 30 years it’s been leveraged right and rehypothecation is the process for enabling The Leverage an essentialized entity meaning you meaning you’re borrowing borrowed money effectively or effectively that’s what FDX did right well there’s also fraud there in terms of actually moving money around but you’re but you’re basically taking collateral and reusing the collateral it’s too kind of two two sides of the same coin and and so the idea of of these this D5 model is that if you eliminate If you eliminate the centralized entities and I I say that knowing that I’m one of them that in theory that rehypothecation or over leverage it can’t be stopped but you know it’s happening whereas with long-term Capital Management I’ve heard stories where all the largest lenders to ltcm didn’t know that they were all the largest lender to ltcm and they were reusing the same damn collateral over and over again right this is exactly what happened this year with three arrows and you know collateralized dead obligations exactly because it sounds a lot like the same thing that has nothing to do with crypto that has to do with centralized actors trying to manipulate the system to use leverage to make more money when when the government is printing money right and and so the promise of is we can’t necessarily stop that but we can see that it’s happening all right well listen um in the interest of time we have run over and I’m respectful of your time Bill but I I just want to ask you one final question 30 50 years out big picture futurist this time not about crypto not about the banking system um what makes you bullish on the future if all of these you know obviously clearly painful elements are coming with this conflict between China and us and these collapse of these systems you know what makes you um really positive about the future of humanity over the the emerging decades honestly it’s technology I think we’re we’re approaching this this I this convergence is happening which is amazing to me that it’s happening at the same time that we’re basically nearing the end of this debt cycle meaning that we’re less than 15 years away from reaching a singularity moments in in computational capabilities where computers will be able to solve problems in in ways that we never thought of and we have no idea yeah with the implications of that are because we we can’t solve those problems and so we’re about to enter an age of artificial intelligence and combined with decentralization and democracy which is spreading now a little bits are off right a little bits are off I just don’t see that ending poorly I actually see it ending really well and and well I’m I’m the I’m of the abundance and posts this post-cosity you know theory on this as well I know Robert and I’ve had this conversation on numerous episodes of the show but um I I think AI is going to usher in incredible benefits for Humanity because of all those things you talked about Bill it’s it’s look it’s great to chat with you again very Lively um conversation and uh thanks again how do people uh follow you know you personally and keep in touch with what you’re doing at Abra yeah sure so I’m Bill bar Heights on Twitter try to be reasonably active even though I have a day job you can also follow Abra Abra Global on Twitter and obviously you can sign up for abra.com and you know we want to be basically everybody’s One-Stop shop for basically you know buying access to crypto moving money around whatever whatever it is you want to do we want to we want to basically help you do it super well bill it’s been a great pleasure having you on the show you’ve given us really good answers to some complex questions you clarified the matter for me thanks for that thanks for joining the futurist this week and I want to give a shout out to the folks that work on the show Kevin hirschhorn our engineer and producer Elizabeth Severance who’s also a producer and the friendly Folks at provoke media who help us make the show and distribute the show the show’s doing great and uh if you’re enjoying these conversations I would really really appreciate it if you could give us a five-star review that helps other people find the show and the good news there is it’s working the show has been growing rapidly dare I say it’s growing at an exponential rate it’s going up every week the number of downloads listeners it’s on every platform it’s insane right and it’s approaching the number one Futures podcast in the world we’re very thrilled about the progress and we appreciate it greatly when folks give us feedback about guests we should invite topics that we should cover questions that we should ask we welcome them and we encourage it and so we want to thank all of you for doing that so please do give us a shout out if you can and that would help us a great deal and we will see you in the future [Music] well that’s it for the futurists this week if you like the show we sure hope you did please subscribe and share it with people in your community and don’t forget to leave us a five star review that really helps other people find the show and you can ping us anytime on Instagram and Twitter at futuristpodcast for the folks that you’d like to see on the show or the questions that you’d like us to ask thanks for joining and as always we’ll see you in the future foreign