Why Bitcoin is Better than Banks | Interview with Simon Dixon

So my name is Simon Dixon. I'm CEO and co founder of BankToTheFuture.com I left investment banking in 2006 and did a lot of talks on the problems in banking and that got me invited to the first bitcoin conference in the world in Prague. And I wrote the first book, I believe, that covered bitcoin and just been involved in the community ever since. Invested in approximately 100 different companies in the sector, from Bitfinex to Bitstamp to Kraken to Shapeshift and Bitpaser and everything in between. So we're just looking to, I'd say this year, in 2017 at the conference here, we reached $10,000 bitcoins and I think $500 Ethereum. I haven't checked the price today. So it's just a great, it's a great time at the conference to see kind of where we've gone in this very short period of time. When I wrote my book bank to the Future, I identified three simple problems in banking and tried to help people understand it. Spoke about these at the first bitcoin conference to contrast them with bitcoin. So I'll share those with you now. The first is when you deposit your money at a bank, the bank becomes the legal owner of your money. And when they become the legal owner of your money, like the people in Cyprus experience, if they take risk with your money and it goes wrong, then they take the money back. The second thing is because, well, bitcoin gave you the ability to own your own money. So when I buy a bitcoin, I keep it on my phone and I can transfer it to someone else on their phone. So. So the second difference is that when banks become the legal owner of your money, they spend it as they wish. And what they tend to do is they take your money and they spend it on asset classes which are low risk, high return, that is the property market. So you create. The whole deposit system is dependent upon those asset classes that they invest. And therefore the entire economy is dependent upon the risk that they take with your money. Now, with bitcoin, because you can own your own money, it means you can transfer it to someone else completely peer to peer. And that means that there's no censorship in that money. It means that it doesn't matter what other people are doing with their money. There's no systemic risk in the system unless you choose to give your bitcoins to someone else. Like we did with Mount Gox where 70% of people gave it to a bank and recreated Banking, the final thing is a bit trickier for people to understand. But essentially, bitcoin has a fixed supply, whereas traditional money means that they always increase the supply in order to grow the economy. The effect of always increasing the supply to grow the economy means that the value of your money goes down over time in your domestic currency, and therefore you need to work harder in order to increase your savings. With Bitcoin, because there's a fixed supply, as long as the demand for those Bitcoins and the use for those bitcoins go up over time, it means that the only place that you can take that out is the actual price. And so what we've seen over the years is each year, Bitcoin becomes more and more useful to different people because there's so many different user cases for it. Therefore, because it's a fixed supply, it means your purchasing power goes up over time. So what we've seen is that your purchasing power goes down with traditional currencies, but you get stable money, but your purchasing power with Bitcoin goes up over time. And so therefore, those three things means that you get deflationary money, where your purchasing power goes up, you get to own your own money and you get to spend your own money. With traditional banking, you can't own your own money. They own it, they become the legal owner, they spend it for you, and the value of it goes down over time. And so what we've noticed is this trend where people are spending in our community, as this is getting more and more traction, they're trying to spend inflationary money, which is stable, and save deflationary money, which is increasing their purchasing power. And so I'd say in 2017, that user case has kind of reached the phase now where we've got digital gold and we're now trying to determine whether you can have digital cash. And lots of competing cryptocurrencies are trying to take the title of digital cash. I don't believe that there will ever be the end of fiat money. I think fiat money has a purpose. When I land in Singapore, and if I want to go and buy some bread, then I want to use a stable money where that price next year will be similar. But in terms of having my savings, I want as least of my money in the Singaporean dollar and as much of my money in a deflationary currency or an asset class that acts like digital gold. So I believe in the future the two will intersect, and I believe that there will be a major systemic risk event that means that people will actually decide so what we're seeing right now is governments all around the world determining how they're actually going to protect the systemic risk in the financial system. And so what central banks are doing is they're creating their own currencies. They're not going to compete with Bitcoin, then definitely not a competitor. They don't even need a blockchain. They're just a ledger on a central bank. But as the banking system, as governments decide to make cash illegal so you can't own your own cash, and as governments decide, as banking system collapses because of the systemic risk, what the government will do this time is they'll allow the bank to go bust and they'll take everyone's deposits that they had at a bank and they'll open up their digital wallet and replace it with this central bank digital currency. And so you'll still have a movement away from the banks being able to go bust, but you'll still have your fiat currency. Now, in the future, the fiat currency that the government creates, not the banks create, will essentially be controlled. It will, if they, if they believe you owe them tax, they'll take it direct from your wallet. AUTOMATED and if they want to stop you at the border because they believe that you're going to a country that they disagree you should be visiting, then they'll switch off your passport and it will be connected to your wallet. So the user experience of fiat money is going to get more convenient but worse over time as they exercise more and more control and make cash illegal. And what that's going to do is going to drive the two user cases of people saving in digital gold, I.e. bitcoin, and then using, accepting that they want to transact in digital cash, but they want that to be, in a way, you know, where you've got the stable currency that you spend your goods on, but you also have your currency which isn't controlled. And I believe that a lot of wealth is going to go into that sector. Hence the reason why Jamie Dimon calls Bitcoin a fraud, because he knows that he charges millions and billions and trillions sheltering everybody's assets so that rich people can do that that Bitcoin does for free. Really what we're seeing right now is kind of the first user case of Bitcoin and digital currency was anything that involves censorship, that people wanted to buy drugs online, they used Bitcoin, people wanted to gamble online, they used Bitcoin. But what that has done is it's gradually changed the user case over time, where now all of Wall street, all fund managers, everyone around the world want to use it as an uncorrelated asset class. So originally we had a highly speculative asset was the first wave. Then that led to startups creating lots of different things that made Bitcoin more useful, but it was mainly used as a censorship resistant currency. Now we had all the companies building applications that made Bitcoin more useful as money, like Bitcoin debit cards and those things. So people started to earn wealth and then spend wealth very easily using those. Now we're seeing the institutional phase where people are trying to invest in an uncorrelated asset that doesn't, that won't go down with the stock market and all the other assets that are in bubbles right now. And while many people think that Bitcoin is in a bubble is simply growth like people are actually using, there's more and more user cases and more and more money is going into the sector. And then eventually we're going to reach the point where maybe it won't even happen with Bitcoin. It will happen with some other type cryptocurrency where they figure out a way where people can have stable money but transfer it digitally without censorship and without any type of control. But that won't be the same thing. That's an investment product because there will be no investment in stable money. So the kind of the war that we're seeing in Bitcoin right now is digital cold versus digital cash. To me, good cash is stable and not an investment and good savings. You know, digital gold would make a great investment that works without that. And so this is kind of the, we don't know where that's going to go. People are creating alternatives, it's created a very competitive environments, are creating their own currencies and really it's just currency war and making governments more honest by they got competition that's coming through. So we gave one of the opening panels at the Block Show Asia conference here in Singapore. I personally live in Hong Kong and I've recently been to Vietnam and Bangkok and now we're in Singapore and the next will go Seoul and South Korea. And I just think, I think the most interesting thing that we're seeing right now and you can really is really encaptured at this conference right now is just a massive amount of energy and just so many different people, investors, companies, entrepreneurs are looking for new innovation. And what I think is really interesting is that, you know, because we've got these things called ICOs and tokens which have many, many problems. But what we're seeing is an exodus away from geographical locations like Silicon Valley, where the best way to raise finance is to get away from Silic Valley. And that is a ginormous change in the way that people are doing things. We're seeing people move, migrate over to Southeast Asia where they see the highest potential in terms of leapfrogging traditional finance. Going from cash to cryptocurrencies and having major, major impacts is just the energy that we're seeing. We're seeing an exodus of staff away from the banking system, all creating their own blockchain startups and working for different companies in this sector. And as the value is going up more, when We've got now $300 billion of market cap, we've got $10,000 Bitcoin and $500 Ethereum, and we've got billions and billions of dollars in alternatives, we're seeing a really interesting, healthy free market built upon these competing structures with lots of scams, lots of problems, but one of the most interesting social economic experiment that we've ever seen. And I think that's really encaptured in this conference with such a wide variety of people from all around the world that are now getting interested and catching up on what's been happening over the years. I think one of the funniest thing that's happened from our sector one is absolute drama. Every single day I wake up to a new drama. It never, you know, bitcoin and this cryptocurrency sector never ceases to amaze me. Every time I try and predict it, it just comes up with something completely new that I never imagined. But I think one, two things that really were very interest. I think the first was when the financial institution and banks started to realize that bitcoin was actually going to be something and they stopped laughing at it. And instead they tried to call it a blockchain instead of bitcoin. And the only reason that we've got the traction that we are today is because bitcoin is essentially the only blockchain that actually works, that's trusted, that's kind of like digital gold at the moment. And the reason it got so popular is because the banks pitched this thing called blockchain. And in pitching this called blockchain, every corporate, every fund manager, everyone tried to create all these different applications. And when I was speaking to a lot of these fundamentals, everyone was going back and buying bitcoin at the end of the day. So bitcoin has got to where it is today simply because the banks defensively tried to take the word bitcoin away and call it blockchain. And I think that's one of the ironies of this sector. Thank you, banks, for promoting this sector and bringing bitcoin to the masses. The second thing that I think is really, really interesting is that we're in such a weird phase in terms of this technology that now just by holding bitcoin, you get paid dividends of new cryptocurrencies where there's a civil war inside bitcoin and people decide that they're going to want to take it in different directions, they fork it off. And then suddenly, just for holding bitcoin, you get this free coin that's paid almost a 40% dividend yield just from holding bitcoin. Nowhere else but crypto would you have just things like that happen. And in2018 and beyond, I'm sure we'll see many, many more interesting things and many, many stories and many, many more unexpected turns as the whole world starts to enter this sector.