Future Of Money 2014
Stellar: Building a Common Financial Platform
Greg Brockman:47% of the million people who signed up for Stellar had not used digital currency before so we created 500K users
developing world countries like the Philippines, Indonesia and Vietnam were huge sign-ups for Stellar
we had a huge take-off in Vietnam before we had translated our site because 1 local tech celeb translated it for us
we have the thesis that money is culture - it is different in the US, Asia and europe. we took off worldwide
in Indonesia <15% of the population have credit cards: we found arbitrage of pre-paid top-ups online through Stellar
We're seeing a lot of people building to stellar in the developing world as we have more users in their country
Dan Rosen:90% of the work of building something is little grungy details that you don't want to hear about
the world is a chaotic system and it is not clear how it will respond to things - say what you're doing and execute
bitcoin has been this iterated process over many years to get people used to it. Stellar addresses its shortcomings
Greg Brockman:every panel about cryptocurrencies we ask about mainstream adoption - where are we?
joyce kim:we're still a couple of hops off mainstream adoption - there's always hobbyists first
we have yet to show that cryptocurrency makes people's lives better - which feature matters?
there is also the problem of trust - cryptography doesn't solve the trust problems
Dan Rosen:we're really far off - the biggest problems are access and user experience—my friends think it's a crazy tech thing
when it become the backend and they don't have to think about ti to transact with it, then we'll have made it work
Jed McCaleb:excluding Stellar and Stripe, which company has the most potential to affect the future of money
Greg Brockman:some cryptocurrency we haven't heard of yet will likely have the impace
joyce kim:The US government or other world governments could make cryptocurrency stop dead or take off
Jed McCaleb:telco's - we see them acting as the other bank - they're in a different regulatory world than banks
In tanzania the govt mandated interoperability between different mobile payment companies - that is key
joyce kim:you can monitor a a bitcoin address for receiving, but stellar is easier
Greg Brockman:stellar as a currency should not be as significant as bitcoin because people transact in their own currency mostly
our board is 3: @collision, Jed McCaleb and @rabois - we're expanding to 5
Stripe's role is the same as every other important advisor - no specific veto
Jed McCaleb:we gave $3m for 2% of the stellars - we'll auction off half our stake to other companies to spread this out
the $10 in stellar per user for 1 million users - the value comes from the people on the exchanges trading
a lot of people with bitcoin are trading them into stellar so we see value defined by that
joyce kim:we're not being a payment provider but a common language for payment providers to use
Greg Brockman:there is always a sender and a receiver in any given market so we will work through those in each country
I'm fascinated with healthcare - most people on < $2/day are temporarily there because of illness
joyce kim:if a govt got behind a cryptocurrency - the question would be how they interoperated, which is odd today already
in order to get this more valuable than what we have today, we need cross-border operation. Stellar is the layer
countries could make a cryptocurrency successful in their region by law, but interoperation is still key
if they make their own currency it could run on stellar as it is currency agnostic. A protocol could translate
Visions of the Future of Money
johnshinal:Bill Tai:what investments are most exciting right now in money?
Nick Shalek:I'm excited about a mining company called BitFury: they started as an open source community and migrated to silicon
BitFury have proprietary silicon designed perfectly for bitcoin and experience in efficient data centres
Dan Morehead:we invest in lending and personal finance, accounting and insurance built. I see Coinbase as an example in Bitcoin
Nick Shalek:Bitcoin isn't a category killer it's a serial killer- it ca do so many things - we invested in ChangeTip
Bitcoin is fantastic for very small transactions and @changetip is a way to do this easily
Dan Morehead:the last 20 years of innovation in financial servcies have been slow compared to eg media - bitcoin triggers more
there has been more innovation on top of bitcoin in the last 2 years than there has in banking in 20 years
Bill Tai:blockstream and sidechains are important innovations - altcoins a way to test compared to bitcoin conservatism
bitcoin is likely to win out over altcoins because of the network effect
johnshinal:I follow communities rather than technologies, and the Bitcoin community has developed further than the others
BitFury has evolved to one of the worlds largest transaction processing engines, not just in bitcoins
the features of the blockchain that allow services to be built on top of the protocol still need the infrastructure
Bitfury building operations at scale that run on hydro electricity gives an advantage, and bitcoin mining is mature
a lot fo otehr mining companies are making money by taking cash and selling machines, not mining directly
Nick Shalek:you mentioned community - this only works if a lot more people start using cryptocurrencies what about Stellar?
Dan Morehead:it doesn't need to be stellar versus bitcoin: there are several trillion to be solved in financial services
the competition is not to create the most efficeint technology, but the one with the most users
Nick Shalek:we have a foot in both camps - we invested in Ripple and partnered with Caleb of Stellar
they are providing a payments layer that is independent of payment processor
Dan Morehead:it's easy to mock mining, but it has worked very well so far: there are unknown unknowns, but this has been robust
efficiency can be solved at a higher level in the stack than mining
johnshinal:Paul Krugman's thesis that bitcoin consumed $60bn of electricity is bogus as eg the fed spend $4bn on money
Nick Shalek:you said Bitcoin is worth roughly $5B - is it too late to invest in bitcoin?
Bill Tai:it is still very early in bitcoin - we are at the top of the 1st inning 10M people use it now
bitcoin has a value because it is scarce and useful - the upside is very high - it's a good asymmetric bet
Dan Morehead:Nick is 99.9% right - I'd be wary fo investing in new infrastructure companies because it is a scale game
Nick Shalek:Bill is talking about companies, like bitfury, but you also have the ability to own bitcoin itself
you couldn't buy a chunk of TCP/IP in the 1990s, but you can buy shares in bitcoin the protocol directly
johnshinal:we invested in BTCjam - a global lending club denominated in bitcoin
Bill Tai:what about things like smart contracts or markets that should exist
johnshinal:what has been successful in tech has been reducing the friction of things that matter. Financial system is ripe
with bitcoin trust is built into the tech, so financial services overhead goes away and can remake the industry
getting rid of the overhead of trust can reduce the cost of financing and lower the friction
in the Philippines legislature is the e-peso initiative - I think that could be important
Nick Shalek:lets talk about some of the limiting factors: consolidation of mining or efficiency costs? what puts you off?
Dan Morehead:the speed at which developers and entrepreneurs move is much faster than regulators and banks do - need a standard
we need a way for bitcoin businesses to find a path to regulation
what worries me is the incumbents moving too slowly and missing the long term upside
if you were the NYT in 1994 you wouldn't shut off the presses then, but you would have invested in the net
johnshinal:banking regulation around bitcoin is key so entrepreneurs can open accounts and pump money through the system
Nick Shalek:you didn't mention security - given Mt Gox, knowing bitcoin can be stolen, or quantum computing?
Dan Morehead:there are some existential questions you can ask about bitcoin security - we don't really know but 6 years
I don't spend a lot of time thinking about quantum computers becasue they would affect many other things too
I keep all of my bitcoin in companies like coinbase and feel fairly secure. I don't worry about their ability
Nick Shalek:the current alternatives have serious security problems too - you can't buy burritos with $100 bills
credit cards were the last major advance and that's just plastic with 8-track tape on the back
Dan Morehead:our current payment systems are incredibly insecure, and the breaches we have seen over the last few years show it
Bill Tai:brute force attacks on our current simple authentication protocols are very easy to do
centralising the authentication is not a good idea as it creates a target
Dan Morehead:fiat and bitcoin are going to coexist as long as I'm alive, though govts may start crypto currencies
Nick Shalek:fiat currency to manage money supply has been adopted by most countries, but bitcoin is like gold or credit
Bill Tai:email didn't set out to disrupt the post office - but it did as well as expanding use
Dan Morehead:banks still require faxes for money transfers, so technology can coexist for a while
johnshinal:I can see lower tier fiat currencies vanishing - Kenya already has most of its economy in M-PESA
Bill Tai:what do you need to do to educate about the difference in investing in crypto currency?
Nick Shalek:you feel like you want to explain it to them, but the most important point is asymmetric risk
in normal investing you have to spread out the money to cover your losses; bitcoin does that
Dan Morehead:in the last 10 years there was a "triumph" of financial engineering and we're all still paying for it
Nick Shalek:I spent the first half of my career investing in bonds, currency and investments, not bitcoin is all we do
bitcoin doesn't fit in anyone's organisational chart
Dan Morehead:if some people did't think it was too early Bitcoin wouldn't be an investment opprtunity
Nick Shalek:I think tipping is going to be the next phase of this and is a seamless way to use bitcoin
Bill Tai:the use cases have been very mixed and varied - Amazon used to be for obscure books, ebay for pez dispensers
microtransactions, machine to machine, small international payments, but don't dismiss a store of value
more will be mined but there is a limit to how many will exist
Nick Shalek:the youth market matters -my 15 year old doesn't see it as different form other payemnts
Dan Morehead:in 1994 we might have talked about email the way we talk about microtransactions now, but Google and FB came too
Nick Shalek:bitcoin is at a pre Mosaic browser inflection point - VC in bitcoin tripled in 2014,
you have the choice with bitcoin to invest in the protocol or the companies—more leverage in co's less diverse
Kaliya-IdentityWoman:lending is the worlds largest market - we expect digital currency to take this over
generation Y is not going to invest in the same way their parents have
Nick Shalek:you said authentication needs to be improved - the govt wants 2-factor auth too. What apart form bitcoin?
Bill Tai:for us bitcoin is part of what we are doing, but the changing of the guard in financial services is key
we haven't invested in identity or authentication but solving compliance or know your customer is interesting
coinbase relies on a number of interesting startups that manage compliance for them as a service
Blockscore (stripe for compliance) coudl be interesting
Kevin Marks:i have a lot of other investments but not in money related - big data in financial services is going to may
Dan Morehead:at what point do you start accounting in bitcoin yourselves rather than dollars?
Bill Tai:not for a very long time- people think in their own currency and translate
my 15 year old can tell me how much he has in bitcoin to 2 decimal places, but has no idea how many dollars he has