8 Questions for a Bitcoin Millionaire
It's been described as both "an online form of money laundering" and a brilliant "anarchist's brainchild." The developer who goes by the pseudonym Satoshi Nakamoto called Bitcoin simply a peer-to-peer electronic cash system back in 2008.
However you think of it, one thing is clear: Bitcoin is one of the buzziest things going on in tech and finance right now.
So it should come as no surprise that entrepreneurs and investors are gathering Friday for a conference on all things Bitcoin-related, called "The Future of Payment." Charlie Schrem is the co-founder of the payment processor BitInstant, one of the first Bitcoin millionaires, and vice chairman of the Bitcoin Foundation, which is behind the conference.
Inc. talked to Schrem about the controversial currency--and the frenzy it has caused.
Lots of people think Bitcoin is a bubble. What would you say to them?
If you look at the laws of economics, Bitcoin is really following that. People say Bitcoin is a bubble. I respond: well, which one? There were already three, and we've recovered from them already. The real answer is they're not bubbles; they're speculated bubbles that turn into market corrections. For example, you see the price growing steadily, steadily, slowly--then it shoots up over a two week period. Then early adopters who have so much say, "Hey. I think I'm going to cash out now." People start selling and the market corrects itself to its true value.
Currency. Security. Commodity. Bitcoin has been described as all three. How should it be regulated--if at all?
Bitcoin is two things. There's a capital "B" and a lowercase "b." If someone is talking about Bitcoin, they are either talking about one or the other--not really both. Bitcoin is, on the one side, the world's largest decentralized global payment infrastructure. The ability to send data or money or a unit of value from one person to another regardless of where they are, that can't be stopped or controlled any government, is a feat. It's something that has never existed anywhere in the world.
At the same time, on the other side, bitcoin is also that unit of value that is being transfered. If you look at the human body, you have blood that carries nutrients and oxygen all over the body--and they're carried all throughout the body through the veins. You look at money as the blood and you look at companies like PayPal, MoneyGram, or banks as the veins that connect the blood throughout the whole body, right? Bitcoin is both. It's both blood and vein.
Bitcoin transactions are anonymous, which as been cited as both a strength and a weakness of the currency. Where do you weigh in?
It's not anonymous. That's actually a big common misconception. It's psuedo-anonymous. Private is a better word to use. Every Bitcoin transaction is traceable. You have a public ledger that anyone can view about every Bitcoin transaction that's ever happened. And that's it. As long as the companies that act as intermediaries between the old world--like dollars--and the new world--like Bitcoin--know their customers, it's very, very difficult to have money launderers or terrorists or people like that use Bitcoin because they'll have to give their identity.
What about the early adopters who actually mined for Bitcoins? Are there records for them?
Absolutely. It's a little bit harder to know who the miners are, but let's say the miners want to cash back out into dollars--they're going to need to prove their identity.
So... do you know who Satoshi Nakamoto is?
No, no I don't. I wish.
What about cyber security issues? Are you worried about Bitcoin being hacked?
Bitcoin has never been hacked and Bitcoin can never be hacked. What can be hacked is the various websites or exchanges that hold Bitcoin. Bitcoin itself has never been hacked just like email has never been hacked--but your Gmail account could get hacked. Bitcoin is an open-sourced protocol. It's a way of sending units of value over the Internet. The code is open sourced. Anyone can read it, see it, and update it. So at this moment you have all of the world's best hackers trying to break Bitcoin. And they can't.
It seems like you practically need a PhD in computer science to understand how Bitcoin works. For it to become more mainstream--say for businesses to adopt it--won't it need to be more accessible?
There's a learning curve, just like there is with anything. It takes time to learn how to do something and it's going to be difficult. Back in the day, my mother didn't understand Bitcoin. She thought it was for techs and geeks and nerds. Now, she understands it pretty well. It's like email. You don't need to understand how email works to use email.
The Winklevoss twins are giving the keynote at the conference this weekend. Why them?
Cameron and Tyler are really interesting people. These guys know everyone--from politicians to bankers to the guys like you and me. They also have a ton of experience building infrastructure and building companies. And that's what Bitcoin needs--it needs better infrastructure, better companies, and more people involved. So aside from them being high profile, I think they can teach a lot of people in the crowd how to take Bitcoin to the next level.