TOKEN2049 - When Code Meets Money - Bill Barhydt (Abra)

I live in this world in Silicon Valley where the mantra is is that software is eating the world and I believe that the one area where that really hasn't happened or come to pass is in the area of money we've gone through this transformation over the last ten years where clearly we have a new a new model for thinking about payments and financial transactions in a decentralized model right but it hasn't even money yet all right we still rely on the Federal Reserve we still rely on you know regulators to create securities so what is code finally going to meet money and change how we think about you know storing real value so I think we're on the cusp of that now and I think what's happened over the last 10 years has set the tone for what's gonna happen next and how we're finally going to have money that eats the software that eats money and finally changes the way we think about storing value so let's let's recap how we got here and then we'll talk about where we're going so I look at kind of delet the first ten years is Bitcoin 1.0 and that implies we're gonna come to 2.0 in a minute right this is the number of transactions on Bitcoin on a more or less weekly basis over the last five or so years right and you know we've reached this zenith of about 300,000 or so and and and the numbers have you know especially post seg wit have proven to be very resilient right we've got a 60 billion plus market cap also really incredible right that you can actually measure global GDP now right where bitcoins contribution to global GDP without a lot of zeros after the decimal which is astounding if you think about it that didn't exist ten years ago all right so you know I think we're approaching this point now where we've got a functional decentralized network for the first time and all the pieces are nearly in place to fundamentally change how banks and and money works so let me walk you through the pieces I think there's three key pieces to this the first is finally having something that in digital form can really be referred to as hard money something that is then therefore needs to be truly scalable so that if a billion or two billion people want to use this right that we don't to pick and choose who can have access because only the rich can afford it needs to work for everyone right and there needs to be a really clear path to global adoption right and there's some very hard problems that need to be solved around areas of key management and other things that I'm going to talk about all right so what is hard money right this is a phrase that people who know me hear me use all the time when I start to talk about hard money the first thing I think that I'd like to talk about is what hard money isn't right and then it becomes easier to understand what hard money could be right so if anything jumps out at you on this list it should be that well first let me before I pick on these countries every fiat currency that's ever been created has ultimately failed right the difference with this list is these have spectacularly failed practically overnight right this is a now now these failed people say success leaves Clues what turns out that failures also leave Clues so we'll pick on Zimbabwe for a minutes it doesn't really matter which country we look at here's this in Bob way dollar during its hyperinflation period when it was on its deathbed and you can see that cost inflation is also tracking closely with the actual money supply itself which is hyper inflating to infinity right so this is the US money supply right since 1918 going out to a couple of years ago during the quantitative easing periods and if anything jumps out at you it should be that that chart looks scarily familiar to the previous chart at least the money supply fart alright so if that doesn't frighten you here's the price level right in in in dollar terms since we basically went from a commodity standard to a Fiat standard which basically means that gold wasn't backing up the value of the dollar anymore starting in the 70s when Nixon took us off the gold standard right and you can see that the value of money was no longer a driving force in managing our economy if it was the chart wouldn't look like this right so now the last thing let's make this hit home to people right if you take the same money you put a bunch of stuff in a shopping basket and then you take the same money you know a bunch of years later you're gonna be very disappointed with what's in the shopping basket my favorite analogy for thinking about the value of money today and by money I mean government-issued money is death by a thousand cuts all right it's very hard for somebody to get their arms around the idea that the money that you're holding in your hand if you just keep holding it for a hundred years it basically a little bit gets taken away more or less every day but it's so small the amount that gets taken away every day you may not notice it at first but trust me after 100 years you're going to notice and that's one of the biggest problems with money is that the government-issued money is that you know by the time we realize that our about the net worth of what we have has been eroded by the government 90% you know we're half of us have debt have died but if you think about what's happening in health care right I believe we're on the cusp of people living to be a hundred ten hundred twenty hundred and thirty years old which is totally within the realm of reason and people's ideas on hard money are going to change dramatically when that happens so the best book I've ever read on this topic is by Sipho Dee and I moose who I believe was here yesterday signing books if you don't have it you have to buy it I insist that you buy it and I make no money on it so it takes the first part of what I just explained goes into an infinite detail and then explains why the last hard money we've ever had is gold and why the best hard money we've ever had is Bitcoin because of the fact that you can't have death by a thousand cuts when you have a deflationary assets okay so we had this card asset now or the potential for this hard asset in Bitcoin but it has to be scalable has to be scalable so that a billion people can use it now when Satoshi first created Bitcoin was he was very very clear that Bitcoin could scale to millions of users millions of purchases could work like a Visa card no problem well seven years later the people who are working on Bitcoin tell us well that really wasn't true right so here's a statement from a corporate coin developer which talks about the fact that bitcoin is the most inefficient transaction processing system ever created which is obviously in conflict with the first statement but it wasn't created to be efficient it was created to be decentralized and the cost of decentralization is this inefficiency so how do we reconcile these if we're going to get to a billion users all right we it's impossible to get there unless we solve this problem scalability is now happening in three areas well it's actually happening in two areas and I think eventually the third areas can happen as well right we've already seen efficiency improvements we're now starting to talk about layer two not only a Bitcoin but in aetherium and I think we're gonna get back to the block size debate eventually sorry for the complicated chart but the the yellow line shows segment adoption and the blue line is actually mining fees so you can see that when the Bitcoin price spiked in late 2017 the mining fees spiked with it and then coincidentally of course when we had seg wit that the the number of transactions that we could support when went up dramatically and as a result the mining fees came down the point being that this was an optimization that we did to the network and there are other optimizations around Schnoor signatures and mass that I think are all gonna make a huge difference without actually increasing the block size which is fantastic this is layer 2 this is actually the dollar value and the Bitcoin value of money in various lightening channels around the world we updated this chart I believe in early February and since then it's actually spiked again so the dollar value of lightning continues to grow at a really dramatic pace and and for those of you not understand what I'm talking about this basically means that we have the ability to scale Bitcoin off chain at an almost infinite rates which is fantastic very early days very promising but at Abra we're really excited about the various companies that are working on this type of solution and then lastly when it comes to the block size itself the biggest complaint that people have about increase in the block size beyond the security and and and just the scariness of doing a hard fork is actually internet bandwidth and the amount of connectivity that people have access to and if you actually look at the kind of bits per second on a global scale you'll see that the numbers have been growing linearly linearly for over thirty years so I would actually posit that we have a lot of room for scaling the block size but the good news is is that we don't have to do that right away we can get a lot of optimizations like we did with Segway with a bunch of other technologies that are coming down the pipe and we went in at research and found a huge list this is some of the most prominent projects that are going on I didn't want you to read all this I wanted to make the point that the actual number of projects going on in academia to look at scaling and improving like on chain scaling and other aspects of this is incredible and it's extremely encouraging I was at the MIT conference last week in Boston and heard just some some awesome research projects that are going on which I think are gonna really serve to take us out probably a couple of decades in terms of getting Bitcoin to scale so the last part of this has to do with taking Bitcoin global and this is where my day job comes in right at Abra we're totally focused on allowing consumers to become their own bank to be able to in the first phase do things like invest in traditional assets using Bitcoin and later on we'll get into payments and money transfer and credit but going global right means that we have a clear path to mass market adoption that our parents and grandparents can use this people who aren't computer scientists can use this means I don't have to know what Bitcoin is when I'm using it my favorite analogy is like you know in the early 90s when I worked at Netscape actually even before that you had to install tcp/ip on a windows 311 PC to use the Internet well that's insane by today's standards right half of you probably have no idea what I just said but that was what you had to do to get online right so when you talk to somebody who is uninitiated about you know managing a private key backup it's kind of like having to deal with Windows tcp/ip installs in the early 90s so we have to get past that so that when you push play on a video in Netflix you actually have no idea what happens behind the scenes and that's what we have to get to when it comes to creating a new way of thinking about banking right so the user experience has to eliminate all of this somehow right but at the same time what if the technology existed to take Bitcoin right and it's inherence programmable capabilities cuz at its core Bitcoin is a very simple scripting language simple programming language what if I could actually use Bitcoin to store fiat on a smart phone meaning allow people to store dollars euros pesos you on any fiat currency on a phone or give people investment exposure to any liquid asset in the world stocks bonds mutual funds without actually having to take possession of the underlying stock or mutual fund or I could use Bitcoin and collateralized loans on all of the assets I just mentioned all in a way where the consumer was holding their own collateral and there was no third party Bank involved in the transaction so we've actually created a model that does exactly this we call them crypto collateralized contracts they're collateralized using Bitcoin and they basically enable what we call synthetic assets a synthetic asset is the ability to store anything that's liquid on a smartphone for the first time on an abra we've already been doing this for the past 18 months for hundreds of thousands of users to the tune of almost a billion dollars in synthetic assets that have flowed through our system and the vast majority of our users have no idea that this is happening they just know that they're getting investment exposure to myriad fiat currencies or other altcoins that we give exposure to using this model or soon equities which we announced a few weeks ago the way this works is if I want to buy $1,000 of Apple shares I can put $1,000 on a phone and if I'm depositing via my bank account in the background that thousand dollars will be converted to Bitcoin so I'm now holding on my phone without a key to $1,000 of Bitcoin although I don't have to know that that thousand dollars a Bitcoin immediately gets injected into a smart contract which adjusts the amount of Bitcoin I'm holding based upon the price of Apple so I now effectively have price exposure to Apple without actually holding the share abre acts as the counterparty to that contract and then hedges away the consumers risk in real time and like I said we've done this now with fiat currencies and certain altcoins over the past year for hundreds of millions of dollars in volume and our consumers have never lost a penny and when the price of Bitcoin tanked last year and consumers were holding synthetic Fiat that means in theory I'm constantly giving them more Bitcoin right and if we were in hedging those positions when Bitcoin fell 85 percent I wouldn't be standing here today and so the system works great and so now that has enabled us to go the next step which is to launch synthetic equities commodities and ETFs which we'll talk about in a second right so what wait a minute what does this really mean all right think about this for a second Fidelity manages over two trillion dollars each raid 200 230 plus billion I be here in Asia in the US over 60 billion eToro I believe one of the event sponsors our estimate is them said of publicly but we believe it's about 25 billion the market cap for Bitcoin today is about 60 billion well how can i collateralize a hundred billion dollars worth of assets if I make my new equity system available in all in a hundred countries if Bitcoin is only worth 60 billion well obviously the answer to that is if everybody starts buying Bitcoin in the background to collateralize their Apple and spider shares the price of Bitcoin is going to explode because there's simply not enough Bitcoin to go around to do this collateralization so what I've just shown you effectively I believe is the single clearest path to turning Bitcoin into hard money and end a path to act getting it to mass-market adoption because the average consumer is never actually going to know they're using it right they're going to deposit a thousand dollars in the backgrounds the app will effectively convert that thousand dollars to Bitcoin inject it into a smart contract and now give you investment exposure to any asset in the world so this is what we've built at Abra again we call these crypto collateralized contracts today they're based on Bitcoin we announced yesterday that our app now supports native ether as well and you know we're looking over time to extend the Bitcoin contracts to also include ether contracts and that also addressed addresses some of the scalability rest risk that I mentioned a few minutes ago so that's abre that's our vision for how we take you know this model and get to not only a billion users but probably a trillion dollars in market cap in a very realistic you