RAOUL PAL: Erik, great to get you on Real Vision.
I've been wanting to sit down and chat with you for a while, so it's good to get here.
ERIK VOORHEES: Yeah, happy to be here. Thanks for having me. RAOUL PAL: Listen, for those people who don't know
you, I'd love to hear firstly your background and then how you got into this whole space, because
you've been in this space for a long time. So I'd love to hear some of the story.
ERIK VOORHEES: Yeah, becoming an old man. So I got very interested in monetary economics
sort of during the financial crisis.
And I was living in Dubai. I was just out of
college. And I saw the whole world burning for 6 months before it ever hit Dubai. And it
was kind of this surreal time where everything felt fine where I was, but the rest of the world
was falling apart. And I got really interested in Austrian economics, in banking generally, what
money was, how it worked, all these things. And kind of came to the conclusion during
that period that money was really like the most important good in society.
because it was the most important good, it was the most important good to not be centrally
planned or controlled. But I didn't really have a good suggestion or alternative. Goals has
obviously been money for a long time, but had fallen out of practice with almost everyone.
But I was ready for when I heard of Bitcoin. I was so eager and excited for
some kind of solution like that. RAOUL PAL: Who told you? How did you hear?
What was the seeding of you and Bitcoin? ERIK VOORHEES: So it was a friend of mine named
Keith Ammon. He was a fellow Free Stater in New Hampshire. He's now a state Congressman, I
believe, in New Hampshire. I had joined the Free State Project after coming back from Dubai. And so
he had posted something on Facebook in May of 2011 about Bitcoin. And after reading a couple of
articles, I absolutely fell in love with it. It just seemed to me like– the fact that it
couldn't be stopped, and the fact that you could move value anywhere instantly at near zero
cost, and then anyone could do it from anywhere, to me seemed like the most obviously
valuable invention I had ever seen. So fell in love with it.
And it's been my
hobby and passion and career ever since then. RAOUL PAL: So what was your– when you first–
because everybody's idea of both Bitcoin and then the whole space kind of it changes, right?
You hang onto a narrative to start with, you think, right, I get it. And then you
realize you don't get anything. And then suddenly the whole thing opens up. What was
your original narrative that you kind of got? It was the stateless money transfer of value?
ERIK VOORHEES: Yeah, with Bitcoin, the narrative I've had since the beginning has stayed the
same, this, as you put it, this stateless money. A form of money that was beyond borders, that
was not attached to a flag, that was immutable, that no one could print more of, and that didn't
It was just like this neutral ground for the world that couldn't be stopped. And
that has very much remained what Bitcoin is to me, and why I think it's been so successful.
What has changed that the industry has gone from just that, which itself is a huge invention,
to that plus all these other different crypto experiments, many of which aren't going anywhere
interesting, many of which are changing the world, and everything in between. And so I like to use
this analogy of like this tree. And the trunk of the tree is Bitcoin. And from that trunk,
many different projects have sprung out. And so it's now just completely overwhelming,
because there's so much stuff going on. But that core stateless money is great.
RAOUL PAL: Yeah, we'll dig into some of that in a bit I just want to hear your– so you
hear about Bitcoin, and then you decide to start a business? Or what did you do now?
ERIK VOORHEES: Yeah. RAOUL PAL: What was the thing that
did once you found out about it? ERIK VOORHEES: Well, at first it wasn't —
RAOUL PAL: Hi, I’m Raoul Pal. Sorry to interrupt your video – I know it’s a
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RAOUL PAL: Bitcoin, and then you decide to start a business? Or what did you do now?
ERIK VOORHEES: Yeah. RAOUL PAL: What was the thing that
did once you found out about it? ERIK VOORHEES: Well, at first it wasn't:it wasn't
really something– like I immediately realized there was a lot of entrepreneurial potential in
that, but it was very small. I mean, the entire market capital of Bitcoin back then was probably
like $30 million. And really I just wanted to– it was my hobby. It was like the thing that
distracted me from my responsible job.
And at that time, I was just doing like freelance marketing.
So that was an easy thing to do less and less of. And kind of my first real job in Bitcoin,
I had gotten in touch with Charlie Shrem, who was down in New York City. Roger Ver
was his first investor. Roger and I had met at the first Bitcoin conference in August of 2011 in New
York City. Roger suggested to Charlie that he hire me to do marketing for BitInstant. So I was sort
of the third person to join Charlie's little crew. And then I had a job.
Then I was making like a
salary. And I had moved down to the big city. And that was super exciting. BitInstant, for those
who don't, it was essentially a way of moving money quickly into Mt. Gox. So normally if you
had to send money to Mt. Gox, which was the first big Bitcoin exchange, you had to wire
internationally to Japan. And you know, wiring sucks, especially internationally. So it can
take 5 days or 2 weeks, and you never quite know. So Charlie had figured out a pretty clever
way of basically letting people deposit cash at like 7- Eleven type places.
And once we
knew that it was going to be in our account, we would immediately credit them with the same
amount of money at Mt. Gox, which we already had there. So people would get money at Mt. Gox
in an hour instead of in 2 weeks, which was hugely exciting and useful for people.
So that was really my first job. And during that time is when I also started Satoshi Dice, which
started as a side project and ended up becoming like the world's biggest Bitcoin gambling site
and half of all the Bitcoin transactions for the first several years of its existence.
So that got a little out of control. [LAUGHTER]
But those two projects were like my late 2011, 2012 time frame.
RAOUL PAL: And then what happened when Mt.
Gox went Under? How did you get affected by all of that?
ERIK VOORHEES: Yeah. Well I had left BitInstant by then. The Winklevai had invested
in BitInstant, and we had a falling out. I left, moved down to Panama. And it was about
nine months later, so late 2013 when Mt. Gox started having serious issues. And I think
it was the very start of 2014 when it collapsed. So at that point, my business wasn't reliant at
all on Mt.
Gox. But obviously it devastated the whole industry, and it was a cataclysmic event.
RAOUL PAL: And then what happened with the Satoshi Dice? Where did you go with that?
ERIK VOORHEES: Yeah. So Satoshi Dice became very successful. It taught me a lot about statistical
variance, which I did not appreciate. Like everyone knows that the house wins, but
Satoshi Dice had very thin margins. And so I would go through weeks or months
of losing money as the house, and this paranoia of, like, did someone figure
out an exploit, was constantly in my mind. That was very stressful.
But what was more stressful was I knew that Bitcoin was itself going to be a very
Like stateless money is truly something new and is going to make a lot of
enemies. And I was a very outspoken proponent of Bitcoin. I was also the public face and founder of
Satoshi Dice, the world's biggest gambling site. Gray area, whether that was legal or not,
as gambling it depends on the jurisdiction. And so I realized that if I wanted to really
help Bitcoin grow, just from an optics and legal risk perspective, I shouldn't also be running the
world's biggest Bitcoin casino. Like I kind of had to like go underground and do the casino, or stay
as Erik Voorhees and be the Bitcoin proponent. And my goal with all this is really
to advance Bitcoin, to advance this idea of stateless money.
And so I made the hard
decision to sell Satoshi Dice. And that sucked. It was like my first big success, and something
I was really proud to have built. And had to kind of let it go in order to stick with Bitcoin.
RAOUL PAL: And then you started ShapeShift? ERIK VOORHEES: Yeah. ShapeShift the idea for
that was early 2014. This was pre-Ethereum. Bitcoin was, I think, 98% of all crypto value,
or 99%. And I saw– I used to be a Bitcoin maximalist, and I hated all these other projects
and coins. But I came to the realization, 2 things. 1, these other projects were
actually part of the decentralization that was so important to Bitcoin. And 2, that a
lot of these things weren't just trying to be like a narrow form of money, but they were
actually trying to do something different. And with those 2, that kind of broke me out of
that spell of the tribalism and just thinking Bitcoin is the be all, end all of everything.
I realized that for this industry to grow, people needed an easy, safe way to convert one digital
asset into another. And Mt. Gox had just happened. I wanted to do something from what I had learned
with Satoshi Dice, of how you can build a service that is non-custodial, where you're not holding
any funds. A user sends a transaction in, and the service sends a transaction right back.
Same model as Satoshi Dice. So that's where the idea for ShapeShift came from.
RAOUL PAL: I mean this Bitcoin maximalism thing is really prevalent
right now. I mean, you see it a lot on Twitter. I see it a lot on Twitter. Why?
ERIK VOORHEES: It drives me crazy. RAOUL PAL: Well, yeah. Me
too. But why do you think it is like that? I've got my own thoughts on it,
but I'd love to hear why you think it's so strong. ERIK VOORHEES: I think the fundamental reason
is that there's a very human tendency toward tribalism.
Humans evolved in these small
tribes. There's a lot of survival reasons why people have affection and trust for those
around them and fear for those who are not part of their tribe. That's ingrained into our minds. And
it expresses itself I think in a lot of ways from people who are vehement sports fans, and they
love their team, and they hate every other team, to people who love their political party
and hate every other political party. And it just it has emerged in crypto, right? And
you have all these different crypto projects. You can understand why someone who owns and loves
Bitcoin would look at these other projects as competition, or just dismiss them as scams or
as a distraction. And so they fall into this kind of perpetuating spell of needing to justify
why Bitcoin is better than anything else, and why those things are always bad.
And I think it's very poisonous.
It leads to a– whatever facts they learn about
or whatever stories they hear, they start painting in the Bitcoin
good other coin bad narrative, right? So every time they hear something bad
about Ethereum, they'll think about that. And they'll regurgitate the bad thing. And they'll
recite the bad thing about Ethereum on Twitter. And every time they hear a bad thing
about Bitcoin, they'll do the opposite. They'll justify it. They'll dismiss it. They'll
defend it. They will come up with a long argument about why it's not actually that big of a
deal. And so they'll defend their tribe, and they will ridicule the other tribe. And
it just is like this perpetuating phenomenon. And, yeah. It sucks. It's really a distraction.
RAOUL PAL: I mean one of the things that– I mean I looked at this. And one of the things I realized
is Bitcoin is the world's greatest behavioral economics experiment. So it's an incentive based
system, loosely based around Metcalfe's law, which means that basically if you think
of Metcalfe's law as applied to Facebook, the more people get– so you get your friend
on that you went to school with– your utility valued from that is you get more connections
With Bitcoin, you get more money because it goes up.
ERIK VOORHEES: Yeah. RAOUL PAL: Right? So that everybody is
massively incentivized to think of it as their own network, and everything else
therefore is a threat. You and I would come at it and say, no, the whole thing is the network.
ERIK VOORHEES: Mm-hmm. RAOUL PAL: And so none of this is a threat.
They're all compliments to each other. But the really strong behavioral economics of it,
if I get you to convert from Ethereum to here, then the value of my network goes
up. It's kind of like genius. ERIK VOORHEES: Yeah. And that's what really
sucks about it, because it distracts people from the important picture, right? Like it's great
to make money.
I've made lots of money in crypto, the vast majority from the appreciation in
Bitcoin itself. That's awesome. I love that. But that's not the point. The point is not to make
a bunch of money. There's a lot of ways to do that in life. The point is to actually change how money
works, and how finance works, and how the entire global economic exchange apparatus works at a
fundamental level. And anything that advances that cause should be applauded. And anything that harms
that cause, I think, is fair game for ridicule. So I see these different experiments as attempts
at moving this out, right? Even if Bitcoin is the best money the world has ever seen, and I
have made that argument for close to a decade. Money itself is not the sum total of
You need tooling. You need financial services, right? You need all
these different things that money itself is not. And Ethereum comes along, and allows people
to start building some of this tooling in a decentralized way. So profoundly
important, like so inspiring and magical, as magical as money doing that.
RAOUL PAL: When Ethereum first came along, and you were Erik the Bitcoin maximalist,
so you see Ethereum. What did you think? ERIK VOORHEES: To be honest, I didn't understand
it enough at the start. So I did not buy into its token sale. I've known Vitalik since he was like
18 writing for Bitcoin magazine. So I should have been a little closer and ready to pounce on
that opportunity. But the fault lies with me, because I did not understand this whole concept
of smart contracts and Turing Complete Blockchain. It did not make sense to me at the time.
I understand it now, but back then I didn't.
So I kind of just thought
it was this weird thing. And I wasn't quite sure what to make of it, but was kind of skeptical.
RAOUL PAL: Yeah, because it's harder to pin a simple narrative on, because by definition it's
actually quite difficult. You know, Bitcoin is very easy. I can go to my mom and say, it's kind
of digital gold. And she'll sort of understand it. ERIK VOORHEES: Yeah.
RAOUL PAL: But Ethereum, that starts to become more complicated.
ERIK VOORHEES: Totally. Yeah. It's absolutely a more complicated thing, absolutely.
RAOUL PAL: So, OK let's ignore Bitcoin for now and look at the world that's developing in terms
of all the digital assets. What is your vision– we all change our vision as we go as we adapt
to new things. But where do you think this is all going in the system of exchange of value, the
internet of value, all of the various components, where is your big picture view?
ERIK VOORHEES: Yeah, my big picture view is that the world is
currently in the process of transforming from a financial system and a whole economy based on fiat
and banks, sort of an analog financial system, to a financial system based on
digital currency and blockchains. And that transformation is 2, 3 decades long,
will be completely upending of many current orders, will have many enemies.
But ultimately will substantially advance humanity forward, will create wealth,
will make people on net far better off, and bring about a much more transparent,
fair, honest and immutable financial system. So that's the big picture.
That's the goal.
RAOUL PAL: So let's talk about the battles together. So there are battles to be had. 1 is
we talked about the maximalism and the tribalism kind of needs to come together. But I think
that will happen over time as things– [LAUGHTER]
ERIK VOORHEES: I don't know. I don't know. I mean, there–
RAOUL PAL: We're 12 years into Bitcoin and 6, 7 years into Ethereum. It's not very long
to build a mutual trust amongst tribes yet. ERIK VOORHEES: Yeah. That's fair. I don't know
what solves that. It's certainly something that bothers me a lot. One thing that solves that is
when people realize who the actual enemy is. The enemy of the Bitcoin maximalist is not– it's
It's the central banker who will go out on TV in front of 300 million people and
say how Bitcoin is used for terrorism and crime. RAOUL PAL: That was– that's exactly the point.
Is that the hurdles we've got to get through are the battle with the owners of the current
financial architecture. So that's the central banks, the banking system, the governments,
the regulators, all of that. The regulators are making more noises. You must be closer to that.
What's your view on regulation and where it goes? Regardless of what your personal view is, because
nobody wants to be regulated.
But the reality is you're in business. And you kind of know–
ERIK VOORHEES: Yeah. There's a very profound tension. The tension is this new technology came
out that allows money to move without central control. And there is an entire government
regulatory apparatus of controlling money, very entrenched. Most people support it. Most
people believe it should exist. So it's popular in some ways. And it's how things are done.
And then this technology comes along that refuses to listen, can't listen, is immutable, can't
be turned off.
These things are clashing. And they will cause all sorts of little battles within
that clash, right? It's like the unmovable stone and the– what is it– the God who has all the
strength in the universe and the unmovable stone. It's like one of those paradigms, right?
And part of the challenge I think of Bitcoiners is people who care about this
technology is helping regulators understand that many of their goals will still be supported,
right? Like I don't think regulators are evil generally. I think they're usually good people
that tend to harm others without realizing it. And a lot of them have noble goals. I think many
of those goals will be met by crypto, by Bitcoin. Many of those goals will be even advanced
further. Like, which regulator doesn't want a transparent financial system that
reduces fraud? Like that should be– everyone should agree on that.
But also at the
same time, it will prevent them from having some control and some surveillance that they're used
to. And they're going to have to get over that. They're going to have to realize, like, OK. Some
of this power that I've always had and that I think I should have is going away. And how much
do I want to fight it? How many people do I want to throw in prison for the crime of advocating an
open, honest form of money? And like that question I think is where a lot of attention will come.
RAOUL PAL: And how do you think that gets solved? Is it by then saying, fine, we
own the on ramps and off ramps to the taxation system, to payments within society?
So Bitcoin operates with that outside of that? Because the other view is that maximalist view,
which is, well everybody just adopts Bitcoin as full money.
How do you see this play out?
ERIK VOORHEES: Yeah. I ultimately do believe that everyone will eventually move to Bitcoin as
full money, that fiat currencies will go away. They fall apart on their own. They collapse
on their own because they're printed into oblivion.
BOTH: Yeah. RAOUL PAL: Yeah.
ERIK VOORHEES: And they've never had to deal with something like
Bitcoin as an alternative. They always just go into the next fiat currency. Now that there is
a credible alternative emerging , they have a much bigger challenge. So I do think humanity moves
to Bitcoin over time. I think fiat falls apart. This is going to make governments lives harder
because currently they fund themselves in 3 ways. They tax. They borrow, which is just taxing in the
future. And they print. Those three ways are how governments are funded. And as the world moves to
Bitcoin, that third way goes away entirely. They will not be able to print anymore. They'll still
be able to tax.
They'll still be able to borrow. But they will not be able to print money anymore.
And so that will necessarily mean that governments have to shrink on a relative basis. Personally
I find that the most glorious thing that could come out of Bitcoin growing, is the
reduction in coercive government. But a lot of people obviously don't agree with that.
RAOUL PAL: What about the kind of tensions around the– this is going back to Bitcoin–
is the tensions around who's mining it? The concentration amongst a few countries. How
does that play into the– I mean it's obviously sub-optimal. I think everybody would agree
except maybe the Chinese would not agree. But it's sub-optimal. How does that get solved over
time? Because people are working on it, and it's very interesting to see how that gets solved.
ERIK VOORHEES: Yeah. 2 points there. 1 is the question of who is mining, how centralized
that is, and where it's being mined, has been a controversy for 10 years, from back
when I was on the Bitcoin forums people were talking about this thing. But I think what people
forget is they'll look at like a static analysis of what mining looks like.
And they'll come to
some conclusion like, 60% of mining is in China, right? And maybe that's factually correct.
But they don't realize it's not a static thing. It's a dynamic thing. It's a dynamic
system. And the mining can move and has moved around the world. So to whatever degree mining
in any territory or place becomes problematic or is clamped down on, the mining industry
itself, the hash power, migrates somewhere else. That can cause disruption. It's
not like a perfectly smooth process, but it's not like the mines are stuck there.
It's not like we have to assume that in 10 years 60% of mining will be in China. We don't
know that. We don't know where the mining industry will evolve. So I think once people
realize that that is a very fluid industry, and it can change where needed. It's anti-fragile.
Hopefully that will allay some of the concerns. RAOUL PAL: Yeah. Mining is just cost base. And
if people can figure out cheaper cost base, hence why Russia does a decent amount of mining
because they've got cold weather and a lot of power.
I mean it's kind of a no-brainer, right?
ERIK VOORHEES: I've heard, I have not validated this, but I've heard that the Bitcoin mines
in Iceland consume more energy than all of the people in Iceland.
[LAUGHTER] RAOUL PAL: There's only about 12 and 1/2 people in Iceland, so probably true.
ERIK VOORHEES: Yeah. I think there's 300,000, something like that. So it's not huge obviously.
And this is, of course, green energy there. Like this is thermal energy from the earth. So,
yeah. Mining moves around and changes, and that's just a fun part of how crypto works.
RAOUL PAL: Yeah, absolutely. So in terms of the broader space, what's exciting you right
now? What are you looking at and thinking, huh, this is a game changer, or this could be
Because it's very difficult, as you said, it's overwhelming. I
mean, I can't get my head around everything that's going on. There's so much innovation, so
much trial and error and failure and success, all at the same time. It's incredible.
ERIK VOORHEES: Yeah. Yeah, I mean it's overwhelming for those of us who are in it 24/7.
What I'm really most excited about right now is the rise of decentralized exchanges. Like the
crypto theme of 2020 was decentralized exchanges. It was Uniswap and the projects like that.
RAOUL PAL: Explain. Sorry. If you can explain to people a little bit, some people who
are not familiar with how that works, how do they work? What are they?
ERIK VOORHEES: OK. So Bitcoin is obviously decentralized. You can move
it anywhere. No one can stop you. But exchange of digital assets has largely been done in
centralized custodial exchanges, generally order book exchanges. People put a bunch of crypto
in there. They put up their bids and their asks and trading happens. And it's quite efficient.
It's dangerous because of the custodial risk. But it is also like it diminishes the immutability
and the decentralization of the system as a whole. So for a long time people have been talking
about decentralized exchange and have known that it is possible.
And there have been various
iterations of decentralized exchanges, basically building a platform where people can trade digital
assets without a central company behind it. And that didn't really take off because
the latency of blockchains meant order book exchanges just didn't work
very well. They were too slow, too costly. So the volume and the liquidity
kept staying at the centralized exchanges. About 2 years ago, 2 years ago is when Uniswap
launched. And it wasn't the first with this model, but it certainly popularized it. There is a
new model of exchange called liquidity pools. And it's not an order book at all. You
essentially have a pair, like Bitcoin and S, and people put both those assets into
a liquidity pool.
Whatever the ratio of those assets is is what determines the price.
So people put assets into this pool. And when you trade from 1 to the other, the price
you get is based on the ratio of the pool. The pool tends to be the same price as order book
exchanges, because arbitrage keeps them in line. So what it means is that you don't need
this sort of high frequency throughput of a centralized order book exchange in order to
get high liquidity, high value trading going on. And Uniswap is the exchange that has really
turned this from a, yes, it can be done, to a, wow, this is actually being highly used. Uniswap
is currently doing hundreds of millions of dollars a day in transaction volume.
They have surpassed
Coinbase on certain days. And this is just getting started. And not only is– it's not like Uniswap
came along, and it is the decentralized exchange. Uniswap has spawned like an entire field of people
experimenting with decentralized exchanges. It's open source code. People are copying it and
creating other things. There's SushiSwap, which was like a copy paste of Uniswap. And now
it's doing hundreds of millions of dollars a day. These things are changing so fast. And what it
means is that the decentralization that everyone has enjoyed on the money protocol layer is moving
one layer higher to the exchange layer also. That's very exciting.
That helps the system grow
into a more immutable, more decentralized whole. So decentralized exchanges are just
really where people– people should understand them. Anyone in crypto needs to
understand how Uniswap works. That's like table stakes for the industry.
RAOUL PAL: We've seen a bunch of kind of the pull of liquidity moving from
one to the other. Talk me through some of the pitfalls that people have been learning
as they've been building out these businesses, because it's not been a clear run of it, has it?
ERIK VOORHEES: Yeah.
I mean I don't want to pretend that decentralized exchanges are a
panacea. They have different trade offs and different problems. Instead of trusting a central
server, you're trusting protocol code. It can have bugs. It can have hacks. It can have all sorts
of horrible problems. But people will fix those. However many problems there are, they will get
fixed and iterated on. So that's important. 2, is that this does not solve the fiat stuff.
You cannot trade fiat in a decentralized way. But you can trade Stablecoins in a decentralized
way. So as you've seen the rise of Stablecoins, Tether is like $20 or $30 billion in
existence at this point. People are using cryptocurrency Stablecoins as their fiat
proxy. And they're never going back to banks. They're never going back to the fiat at the
banks. They're just– if they want to de-risk out of the volatile crypto, they go into a
So that's been really cool. And those can trade on dex's all day long.
RAOUL PAL: So where do dex's go from here? Because right now, I mean as the whole
world gets tokenized and everything becomes a digital transfer of value, it
sounds like there's something really big here. And I can't get my head around it.
ERIK VOORHEES: Yes. They will consume more and more trade volume. The big step
for dex's now is to go out of Ethereum. All dex's today generally are Ethereum based. And
you can only trade Ethereum and ERC-20 tokens. That's still the majority of assets,
but it doesn't include Bitcoin, the most important asset at all. It
doesn't include many of these other important chains on the base layer. It
doesn't include Monero, for example. The next step is doing cross chain decentralized
trading at scale with liquidity pools. There is a project called THORchain that is
They have not fully launched yet, so they still need to prove some things. But if
that works as intended, you will be able to trade native Bitcoin on the Bitcoin chain for
native Ethereum on the Ethereum chain through a decentralized highly liquid trade.
That will be an absolute game changer. And I think that will be the theme of this year,
of 2021, is that that will start happening. RAOUL PAL: The interoperability layer is something
that seems that it's coming as well.
As everybody builds out these kind of networks and protocols
and applications, there's a feeling that there's another layer to come on top of that that ties
it all together to make it seamless. What's your thoughts on that? And that sounds like THOR
is doing really there, within that somewhat. ERIK VOORHEES: We currently have this
islands of chains, right? Bitcoin, and then you have Ethereum, a lots tokens on it.
But these things don't really talk to each other. A few projects have been trying to solve
that. I'd say the most prominent one is Cosmos.
Cosmos is essentially trying to build an
ecosystem of chains that can talk to each other, of bridges between disparate genes.
So that a Bitcoin can go into a Bitcoin address, a 1 to 1 backed token on a Cosmos zone is created.
That can move across to a different zone in Cosmos and then be converted to some other asset on some
other chain, all of which have no counter parties, all of which have no central custodians or
anything. So cosmos is the most ambitious. It is launching this thing called IDC inter- blockchain
communication like just in a week or 2. It's been 4 years in the works. And so that will be big.
And again, that hasn't been proven yet. So it's sort of like still needs to vet itself.
But if that happens, you'll start seeing these chains be able to have their own advantages
and still work with each other, right? Bitcoin has advantages that Ethereum can't and doesn't
have, and vice versa. And a world that has both of these things easily composable together
is a better world. So Cosmos is doing that. RAOUL PAL: I believe Polkadot is trying to do that
as well and maybe a couple others.
But those are the 2 leading one. Quantum Network is another
one isn't it? Quant, I think, was the other one that we called talked a lot about. Quant–
ERIK VOORHEES: Yeah, don't know that 1. RAOUL PAL: –Quantum Network.
ERIK VOORHEES: Yeah, see can't keep up with it all.
RAOUL PAL: No, it's impossible. But it's fascinating because you and I are talking
now in a way that back in 1996 would have seemed inconceivable.
ERIK VOORHEES: Yeah. RAOUL PAL: Right? So I don't know
what type of computer you're on. We corresponded on Twitter, which is a
platform. I'm using a different computer to you. I'm in a different continent.
We're using video. All of the stuff, we don't care anything about what drives it.
I just know I click on Zoom, and you're there. ERIK VOORHEES: Yeah.
RAOUL PAL: Right? In other words, interoperability that once you– we stop
becoming tribal, really, when we don't care. We don't care how I send you money.
could get 3 different chains to get there. You know? And that becomes super interesting
ERIK VOORHEES: Yeah. And your analogy with computers and like this video talk we're doing
right now, the reason that works is that you have this borderless super inexpensive transmission
of communication, right? You can speak, and I can hear you, and vise versa. And you can
talk to anyone, anywhere in the world like this. You don't need a license to go communicate
with a video call with someone else. You don't need to walk down the street to, like,
file a request to have a call, and then wait a week for your call to start. And yet all that
exists in the banking system. It's preposterous. [LAUGHTER]
And when that's gone, when all that's gone, and people look back at, like, even in the year
2020 an international wire would take multiple days. Like, this is an analogy I like to use back
when I was first promoting Bitcoin was like– you can more quickly FedEx an anvil with cash
tied to it to Japan, right? If you're willing to pay for the shipping, you can get an anvil there
with cash tied to it faster than a digital wire. Why? It's preposterous.
The money that's going
there is already digital. It's going in a digital bank account to another digital bank account.
What's the problem? The problem is that banks have 0 desire to compete with each other as
they are appendages of the state. And there has been no fundamental financial innovation
at the banking and currency layer because government is the monopoly provider of money.
And what you've done now is you've cracked open the market to start innovating with money
and finance in a way that it's never been able to do before.
You're going to start to
see advancements that should have happened a decade or two ago and are way overdue.
RAOUL PAL: Yeah. I mean I grew up in that environment investment. I was investment banking.
And almost all of it is going to get dismantled over time. Investment banking less so because it's
the advisory part of the business that generates a lot of fees for people. But the money
center banks, I mean with the rise of central bank digital currencies coming
as well, it sounds like the governments themselves have kind of got the gun to the head
of the banks to put them out of their misery. [LAUGHTER]
ERIK VOORHEES: Yeah. RAOUL PAL: You know because you don't need a
bank. You just need a fintech layer if you've got central bank digital currencies. Now, I that's no
solution in the world we're looking at. But it's the growing acceptance of the digital world,
that even the central banks kind of realize. ERIK VOORHEES: Yeah, well and banks exist because
they used to have a really important purpose, right? Money was like a physical metal.
If you had
a bunch of it, you needed a really safe place to put it. You don't put that in your house. You
go to a brick building that's easy to get to, and they are trustworthy, and you
leave your money in the brick building. Money has all become digital. And those brick
buildings are still there. And that's still where you go for your money, and it's still where
you go to send a transaction. It's a legacy habit of how humans used to work when money used to
be metal and physical. It's amazing that it's taken so long to get out of that system.
Crypto has broken that wide open. And it children today will grow up, I think,
without ever having bank accounts. They just will not need them.
RAOUL PAL: No, when you look at it, it's objectively hilarious now compared to where
the rest of the world is in terms of technology. And to finance feels like it's the last part.
finance and probably government are the last 2 things yet to be fully disrupted by technology.
ERIK VOORHEES: Yeah. Yeah, government's a– that's a hard nut to crack. [CHUCKLES] Crypto certainly allows people to govern
things in a much more resilient and robust and immutable way. There is an irony in that
when the government looks at crypto people, they see a bunch of these, like, anarchist types.
But what the anarchist types have actually built is a system of, a true system of laws and not
of men, a system of code-based laws that are transparent, objective, execute exactly as
written always, regardless of who you are. Versus this subjective system of men,
of government, which is subjective, hard to understand, arcane, hard to change,
hard to read, horribly unfair in certain circumstances to certain types of people based
on who they are, what country they were born in, like all that kind of stuff.
care. Code doesn't care. It brings objective money now, objective governance of
important systems to humanity. And that's a beautiful thing. And I would hope
most people start to see that as a really important step for humanity.
RAOUL PAL: The step they're going to take, however, is central bank
digital currencies. ERIK VOORHEES: Yeah. [CHUCKLES]
RAOUL PAL: Yeah. There's the world that we want, and we're going to probably,
and the world that we're being delivered, which is more regulation. Fine, we get it, and central bank
digital currencies. Talk me through how you're thinking of this? What it means for Stablecoins?
Because there's a war to be fought there. We talked about the battles that needs to take
This is one of them, who owns the rails. ERIK VOORHEES: Yeah, so central bank digital
currencies are interesting. They're– for the first couple of years that people were talking
about these, I dismissed it with kind of like kind of a snide comment of, like, fiat currency
is already digital. All right? You already have central bank digital currencies. It's called
dollars. It's called euros. It's called yen. Those are digital currencies created
by central banks. What's the big deal? I've changed my tune a little bit because
central bank digital currencies as conceived are different only in bad ways, which
is the surveillance, right? They will be surveilled top to bottom 100% and controlled
completely by their respective governments. Whereas central bank digital currencies fiat today
is fairly surveilled, fairly controlled, but not completely. And you can pull it out and have
cash. Like, there are leaks in that system. The new central bank digital currency that's
being conceived will be a completely totalitarian, in the accurate sense of that term, money
system for the planet.
And you are going to see the battle between free and open money and central
bank digital currency. I know which one is going to win, because one of them is far more efficient.
And people are profit maximizing creatures. And even if it takes a decade
or 2 longer than it should, humanity will not suffer the burden and
the cost of a totalitarian money system when there is a free market open,
immutable, objective alternative. So I know where it is going. But it's going to
be a big struggle to get there. And I hope it doesn't claim too many people in the process.
RAOUL PAL: Yeah, I mean I called it the Bitcoin life raft for that. Because as we move to
this regime, look, there's going to be some great benefits of programmable money, be able to
blend fiscal and monetary policy.
But in the end, all it means is that they're going to print
more money and just use it in more unique ways. And you need a way out of it, and
Bitcoin is the perfect way out. How do you get around the fact that in the battle,
they're going to stop the on ramps and off ramps, if the battle gets too hot? So it becomes hard
for you to take your value out and use it in non digital forms, so physical forms.
Let's say you want to buy a house, buy a car, whatever it is, send the kids to
school, whatever it is. How do you do that? That's the thing that worries me actually,
because there are banks that just will not accept money that comes out of the crypto system.
ERIK VOORHEES: For sure.
I've had 3 bank accounts closed just because I've received
fiat that came from a crypto company. And now that's just the bank doing their own
risk mitigation. That's not a directive from the Fed, not yet. Yeah, it's a good question.
So first, governments can't stop the on and off ramps, but they can make them very problematic.
And they can drive them underground. So it's important to realize they can't be stopped.
They can just go underground. 2, I don't think all countries will act in unison here.
some will be much more oppressive than others. And 3, at least in the US, and maybe I'm being
naive. There is a hope that enough people– I almost want to laugh saying this, because maybe
it's just too naive. That enough people understand constitutional limits to the federal government
that that outright bans have to actually have basis in the Constitution. That doesn't just
happen automatically. Now, people can easily say, yeah, but look how easily they banned gold, right?
RAOUL PAL: Well, the gold one is an interesting one, because I look at this– it was only the US
that banned gold. So US gold went to Switzerland. And the rest of the world continued
with gold. So people's argument, well, they banned gold. I'm like, horseshit.
ERIK VOORHEES: That's a good point. RAOUL PAL: 1 country in the world at 1 time banned
Well, guess what? Turkey's currently banned gold. A bunch of countries banned gold,
because they don't want capital flight. And they're deal with crypto periodically. But
as you say, there's always somewhere else that will accept it. Because if it's deemed to
have value and it's trusted, it's got value. ERIK VOORHEES: Yeah. Yeah, and I think what
can happen is if there's major crackdown, crypto, Bitcoin, its value can fall by a lot.
50, 70, 90% just from that kind of crackdown. RAOUL PAL: Yeah.
ERIK VOORHEES: But, OK. So it falls from a $1,000,000 to $100,000,
and it goes underground for several years. Like, it already won. Right? Humanity will move
to it either 5 years from now or 20 years from now. It already won. And it has been tested
through these market cycles, I think, quite well. So you know, ultimately it's incumbent on anyone
who cares about this stuff to speak about why governments shouldn't fight it. And hopefully
enough people within government will realize that actually, yeah, this is where things are
And even if we could harm it for a while, what value is that? Like, what value is that
for humanity long term, and get enough people thinking that.
RAOUL PAL: But there's an issue within that whole construct, which is not the construct of does it survive. It
is a cockroach. It's almost impossible to kill. ERIK VOORHEES: Yeah.
RAOUL PAL: I get that. But there's a big damage to a system of
money where the value of money falls 90%. ERIK VOORHEES: Yeah.
RAOUL PAL: Right? We understand we're still probably in the Metcalfe's law adoption
effect phase, so we haven't got to full price discovery. But let's say we are at a $1,000,000,
and in some hypothetical future the IMF will get together and say, all of these countries,
you cannot trade with us unless you stop it. The value falls, and there'll be some sort
of black market versus white market probably in crypto.
It just it depends how long
it takes to recover from that. Again, I'm no believer in a catastrophic failure from a
ban. I'm just always trying to think it through. ERIK VOORHEES: Yeah, it would be a real problem.
I don't want to minimize that. It would be a real problem. But Bitcoin's history is 1 of defeating
real problems over and over and over. Also, I think you have to keep in mind the
point at which national governments, IMF are outright trying to ban it, is a point
where their own currencies are falling apart. Like that's what will cause them to really fear
it so much that they go through that effort. And that's a situation where inflation is
probably really painful for a lot of people. Stock markets have fallen apart or are only
[INAUDIBLE] in inflated terms. There will be a lot of skepticism toward governments trying
to do that. And they'll be basically trying to prevent people from owning Bitcoin and
putting them in the alternative of their own fiat currencies which are falling apart. Right?
So that's going to be a tall order.
And I don't know that they would be successful with that.
RAOUL PAL: So here's another way around it. And I haven't thought this through. Is if the
community starts building out the digital exchange of value of physical assets more. So we've talked
tokenization of real estate and stuff like that. The things that we want to cash in our lifestyle
chips for, which happens to be in dollars or whatever currency you live in, the things that
you need to operate in the physical world. The faster we build out that,
the harder it is to stop them, because then because of the decentralized
nature it's almost impossible to stop.
Sure, there has to be a tax probably. You have to
pay somebody for the tax of selling your house. I get it. We live in a society. That's
the government rules. But it's very hard to stop the exchange of value. And I feel
like we haven't built that part out yet. ERIK VOORHEES: I have a slightly
different perspective. I think the Bitcoin industry started by building that
out, right? Like the whole narrative in the beginning of Bitcoin was, like, let's get
people accepting this as a means of payment. That was a huge uphill battle and didn't get
But all the infrastructure is there. There are already companies that
will process Bitcoin payments, other types of crypto payments for different things.
It's just not used much, but all that stuff's already built and ready. Like, my Jeep
I bought with Bitcoin back in late 2013. I actually bought a brand new Jeep from a
dealership with Bitcoin. And that was 7 years ago. So it can happen. It does happen. And I think in
a situation where people were really worried about receiving fiat, because it was losing value
quickly or the banking system was becoming less reliable, you would start to
see a real interest in the seller, receiving something that they could trust more.
And whether that's Bitcoin, or whether that's an algorithmic Stablecoin, which isn't
as volatile, that infrastructure I don't think is going to be too big of a challenge.
RAOUL PAL: So the final question about the kind of overall universe of what's interesting that's
been going on.
So obviously it's been the– last year was the year of decentralized exchanges
but also DeFi. What's your thought on DeFi and how that's evolving? Because that has been
slightly hilarious. There's been good things, bad things, a lot of experimentation, a few
scams, I mean, it's been a great story. But it feels like something real is happening here.
ERIK VOORHEES: Yeah, absolutely something real is there. I think a good analogy is
like the ICO days. And in the ICO days, you basically had a profoundly cool and
important invention, the ability to raise capital quickly effortlessly from around the
world regardless of who is involved. That was really powerful. And then to give
them– and to not just raise the capital, but then to have a liquid transferable token
that represented a stake in that project. That was a great invention. People took that
invention and did all sorts of things. A lot of it, total nonsense garbage, a lot of
it scams. But some actual projects that were totally legitimate, very credible teams,
they raised money.
And they actually delivered. And so you have this core of, like, legitimate
innovation happening inside this big bubble of speculation and nonsense. And that was true of the
ICO days, and it's true of DeFi today. You have this core, good teams building like legitimately
innovative projects, many of which will be profoundly important, surrounded by all sorts of
nonsense and noise and scams. And you have to just understand that it's both of those things.
And people argue on Twitter all day of, like is DeFi scam? Or is DeFi legit? Is DeFi scam
or is it legit? It's both, depends on the specific projects and the attributes of that project.
RAOUL PAL: Yeah, my view on this has been– I wrote some articles about it.
Is that in the VC
world, so early stage company building something from an idea, you've generally got a team of
people who will vet it, good or bad. You'll get a bunch of those wrong, but there's some process.
Within the token world, because there's a lot of retail in the space, these tokens actually
trade quite richly to start with. So there's an incentive to take your money and run.
Now, good projects, sure, the founders may sell some tokens and some of the original buyers
of the offering will buy them. But then over time, the proper project comes to the surface because
the quality business– and if you had real time market to market valuations on VC, it would be
terrifying. Much like it is with tokens or DeFi. You know, nobody wants to sleep at night
with that. But you know, you've started 2 businesses.
You know how terrifying they are.
ERIK VOORHEES: It's such a good point, that immediate price discovery that are encrypted
tokens. When a project falls apart and it's token declines by 95% or 98%, people are like, no
one should have invested in it. It was a scam. Most projects go that way. Most projects will
fail. They just do not get off the ground. And the reason you don't see it in startups as
much is because it's opaque. The equity is held by some VCs and some investors. It is not traded.
You do not know what the price is for years often. And then they'll just liquidate and go out of
business without ever having a traded price. So crypto, ICOs, tokens have brought a price and
a transparency and liquidity to those shares, which I think is really, really important and
But, yeah. I mean people need to do their due diligence. Just because they
make a flashy white paper and they give you all these promises, don't throw $100,000 at
them. And fools and their money are soon parted. There is a part of how markets work, which
is that when people make bad decisions, they need to be losing money on average. And when
people are making good decisions on average, they need to be making money. Crypto puts that right
in the face of the world. And some people don't– can't handle that, because they see so many
people making bad decisions. And they blame it on crypto without realizing, like, it is just a
mirror, a clearer mirror for humanity itself. RAOUL PAL: Yeah. I mean absolutely right. I can't
agree more. Erik, listen, fascinating to speak to you. Really enjoyed it.
ERIK VOORHEES: Yeah. RAOUL PAL: Thanks so much. And good luck with
everything you're up to. ERIK VOORHEES: Awesome. RAOUL PAL: Super exciting times.
ERIK VOORHEES: Thanks, Raoul. Thanks for having me on.
RAOUL PAL: All right, take care. NICK CORREA: Thank you for
watching this interview. This is just a taste of what we do at Real Vision.
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