Building a Freer World on Blockchain with Tim Draper

HOST:  Hey everybody.  Welcome back to The Unstoppable Podcast.  I’m your host, Diana Chen, and I’m joined today by my co-host, Brad Kam and Matthew Gould, co-founders at Unstoppable Domains and our special guest today, Tim Draper.  As you all know, Tim is a venture capitalists investor and founder of Draper University and many other things as well.  Welcome, Tim, so excited to have you today.

TIM DRAPER:  Great, I’m excited to be here.  I love that you guys have a podcast.

HOST:  Thanks so much for being here.  So to kick us off, I know that you’re a big time, you know, investor and fan of Bitcoin and cryptocurrency in general.  Why don’t you start by just telling people how you would explain cryptocurrency to somebody who is new to the space?

TIM DRAPER:  Cryptocurrency would take a long time, but Bitcoin I can explain.  That from the user’s standpoint, it’s open, transparent, it’s global, frictionless, decentralize; big word for you guys, and it cross borders.  And it doesn’t—you’re not subject to political whim, you’re not subject to when a government wants to print 1.3 million of currency.  You aren’t forced to have an inflationary economy, instead, you can build an economy that’s very solid, and there are only 21 million Bitcoin out there.

So you know that they’re not—it’s not going to be inflationary and it’s so exciting what can potentially happen now, because one Bitcoin; people say, oh, it’s very volatile.  Well, one Bitcoin is equal to one Bitcoin, it’s just all these other currencies are volatile against the Bitcoin as they slowly disappear from our use.

And then the other great thing about it is that it flattens the earth very much, because not only can you send remittance across border very easily, you can pay people easily across border.  And let’s say you’re in Argentina, and you know that your currency is going to drop 75% next year.  Why would you build anything of great value in Argentinian Pesos when you know that it will just diminish the next year?  If they don’t trust their currency, they don’t trust their government.  Same thing in Nigeria and many African countries, some Southeast Asian countries, where they don’t trust their currency.  If you don’t have trust in your currency, you don’t want to build anything of great value. 

Well, now that there is Bitcoin, people will change their approach; they’ll say, hey, I can build this, in Bitcoin I can build something of great value and I can be rewarded for it.  And then from the standpoint of an employer, if I people in Bitcoin they’ll be thrilled.  In Pakistan and the US, all these regulations that they’re putting on employers, they’re basically forcing employers to look elsewhere, because now you can—you can hire people that are just on Zoom and that, they can be anywhere, people can be anywhere. 

So I think we’re going through a whole anthropological, we’re going where we were tribal and tied to borders to now, we’re global and open and transparent and now—and Bitcoin is that; it’s the currency of that new world.  And Unstoppable is the communication system in the wallet for that world.

MATTHEW GOULD:  Appreciate the plug there.  We certainly think that Unstoppable Domain has a big part to play to make cryptocurrency easier to use across the entire Internet.  And that actually leads me to my next question.  What do you think is actually stopping, you know, your friends and family, you know, your dog from using crypto?  What is the resistance?  Is it just going to take time for people to move over here?  Or are there specific things that entrepreneurs in the space need to innovate to make it better?

TIM DRAPER:  Well, ease of use is a big deal, but my friends and family are all Bitcoin people.  [Laughter] I’ve been talking about it for so long, they’re finally starting to come around; their friends.  The family has been on board from the word go because, you know, we’re the Draper’s, we’re are always looking out, you know, at envisioning the future and trying to see what the future look like, and when they see a new currency that’s going to be the future currency, they’re all going to get involved, so they have.

And my friends, some of them jumped on board right when I talked about it and some of them have come back regretting that they didn’t.  We actually had—and we have very funny stories about where I gave away Bitcoin coins to all the speakers at Draper’s University these—if I forget the name of the company, Can...start with a C.

MATTHEW GOULD:  Cassius coin  Yes.

TIM DRAPER:  Cassius coin.  So I gave one each of my speakers, that was when Bitcoin was $200, and I thought, well, that’s a good speaking fee for you guys, and they’ve—and you know, most of them, just put them away, did whatever they wanted to do with them.  I was just talking to Harris Barton and he said, when I heard that these things were worth $35,000, now of course, they’re $50,000.  When I get there $35,000, I tore the house apart looking for those [laughter].  But we’ve also—I told Harris, but it’s okay.  You can say your speaking fee is $35,000 because it was one Bitcoin.

MATTHEW GOULD:  Yeah, one Bitcoin.  Well, speaking of—speaking of price predictions, so actually on September 24th 2014, and this is a while ago, you predicted the price of Bitcoin will reach 10,000 in three years, and then on November 29th 2017, Bitcoin reached 10,000.  First of all, how did you do that?  And then —

TIM DRAPER:  I was off for a month or two, right?

MATTHEW GOULD:  Right.  So how did you do that in the first place?  And then —

TIM DRAPER:  And the first time—the first time Bitcoin when I said it, $10,000, I think Bitcoin was $400 something.  And people looked at me funny and you know, you’re out of your mind, or.  Well, this last time I predicted when Bitcoin dropped to about $4,000.  And I said $250,000 by 2022 or 20—early 2023, late 2022 or early 2023.  And people are looking at me now and saying oh my gosh, this is—this may actually happen too. 

So how did I do it?  I’ve had a long history in watching new technologies evolve and be adopted.  And I get a good sense for how big markets are and how big something like this can get.  And I know that the pattern that they go through, that it goes in fit and starts, and there is a sort of a hype thing and that’s what I was expecting in 2017, was this sort of hype thing that would happen.

And then there is a trough and then what happens is people innovating and they’re working around that, that new technology for a while, and then slowly, but surely, it starts picking up again.  And it’s a much more steady progression, and then eventually it becomes—it grows into our world so much that we hardly remember not having.  And now you’re seeing institutions in the financial world.  BlackRock today just said, well, we’re starting to encourage our clients and we’re buying Bitcoin for some of our clients and, and of course, Elon Musk bought a billion-and-a-half dollars’ worth of Bitcoin for Tesla to hold on his balance sheet.

And then, many others are following suit and you’re starting to see that people are realizing that this is not just a new currency, but it’s, it’s a hedge event against bad governance.  It’s a global opportunity, it’s a way of connecting the world, it’s a way for actually - - for fiduciaries to—they kind of have to own some Bitcoin, as a hedge against inflation when the government printing press prints $3 trillion.  So this is—it’s starting to happen, it will progressively happen more and more and more, and as a currency spreads, it grows in value.

If I was the only holder of Bitcoin in the world, it would be worthless, but once two people recognize the value, then the two of them and it served worth one.  And then three people, now it’s worth three and four people, and now it’s worth six, and it grows exponentially as more nodes are added to the network, and that is happening.  So we’re going to see - -we’re going to pull up in less than half - -.

MATTHEW GOULD:  Well, I can proudly say that Unstoppable Domains beat Tesla to the punch there putting Bitcoin on our balance sheet, and it’s worked really well for us, and I actually think a lot of other people are going to do that too. 

So last one on the price, because I just have to ask, what do you think is the, you know, what do you see as the ultimate you know, market cap for Bitcoin?  You know, what do you think, you know, Bitcoin, what’s the max price?  Or like, what do you think is a price Bitcoin could achieve at scale? You don’t have put the data, I’m actually just curious where you think the market.

TIM DRAPER:  The current currency holdings around the world and fiat; in dollars, is about $100 trillion.  And Bitcoin’s market cap is just reaching a trillion now.  So there’s no reason it can’t go up 100-fold, and it’s not like it’s going to completely replace the dollar, although I think people are going to laugh when, when you’re trying to buy things with dollars in the future, they’re going to laugh at you, they’ll be like, “Here, take my Confederate money or my drachma, or whatever.”  You know, currencies that are out of out of date. 

And I think it’s going to look that way, but, but I think it also expands the market for currency, because this currency can move much faster than other currencies.  It is frictionless, you can actually—you can transact business much faster in Bitcoin, and that will compound over time.  It’ll get more—it’ll get quicker and more efficient and it’ll compound over time.

BRAD KAM:  So you’re investing in crypto companies, as well as, in Bitcoin.  What are some of the ideas that have been keeping you up at night lately?  What are you been thinking about before you go sleep?

TIM DRAPER:  Well, I think about Unstoppable Domains, and you guys are doing such great, um, such a great service for the world, being able to create free speech for the world and allow that not to be centralized, where somebody can be muted, or canceled, as they call it.  I think that’s a beautiful thing.  I think actually creating decentralized crypto wallets, I think is fabulous.  I think that’s a—that’s an amazing service that you’re providing. 

In addition, I’ll tell you what I’m looking at, I’m looking at anything—in fact, on my tie, I’ve got this—I got a big Bitcoin and then I designed this tie, and it says, “Hashtag D. Gov.”  And the thinking there is anything that’s decentralized, that kind of creates a decentralized government or competitive governance or governance that’s accountable to its people, and I think that the decentralized world is making those governments be accountable to their people. 

The governments are resisting it in some cases, and they do it to their own peril.  And so I’m looking for those kinds of companies, and that could mean decentralized insurance, which is really an interesting place to be looking because you can use smart contracts instead of claims.  You take smart contracts and surveillance and you can actually have an insurance company that is a much happier insurance company, because you, you can pay the claim before the person issues that claim.  You can actually send—the surveillance says yes, your house is just burned down, here is the money for your house; before you’ve even filled out a form and issued a claim. 

I think that that kind of insurance company be very popular, because right now you pay, your premium, pay your premium, pay your premium, then you issue a claim and then you’re fighting with the insurance company to find out whether you’re going to get any money.  It’s a battle instead of a happy service, and what is government, but a bunch of insurance companies?  There’s health care insurance and Workman’s Comp Insurance and social security; which is also insurance, welfare and other kinds of insurance, and all of these can be done offshore, I mean, you could actually create all these services.  And if you have a satellite or a boat that’s 11 miles offshore, and create a country and say, here, we’re providing these insurance programs. 

So I think the world is ready for this decentralization.  People are less and less happy with their governments over the last—in fact that has—that has been a trend for the last five years, but the last year, they’ve been the most unhappy with their governments.  And they are looking for an alternative; they’re looking for—to force their governments to be more efficient and more effective, and do a better job, and also to potentially get some of these services from other places. 

The idea came to me when I—about decentralized, open, free market for government was when I met with the prime minister, and then the President later of Estonia, and they explained how they created the Virtual Residency Program.  And they said, you know, by using digital signatures, we save 2% of our GDP and digital voting, brought in the young population to vote, and then digital identity lowered the crime rate and increased the business climate and improve the business climate, and then they said, and here’s this virtual citizenship or residency program, and they made me the third virtual resident.  And now I think there are half a million virtual residents of Estonia, and they only have 1,000,003 people in Estonia. 

And so that means that they can compete, if they start providing real government services there, they can start competing outside of their world.  And so I love that area.  I also love that healthcare is going to be decentralized, it’s going to be the—our company, Cloud Medics does a better job than the average doctor in, in diagnosing a disease, and when combined with a doctor, does even a better job.  And then in therapeutics that can all be digital, too. It can be like, oh, what’s your blood type?  What’s your genetic history?  What your medical history?  Oh, here’s a drug for you.  Oh.  It can be just done on the screen, and they can ship the drug overnight. 

So I think you’ve got some major changes in the biggest industries in the world happening right now.  So you guys are going after communications and wallet holding, whether that they call that banking, or what they call it; finance.  But others are going after insurance and healthcare and government and those are going to be big, big, big areas.

MATTHEW GOULD:  So Coinbase is the first crypto company that looks like they’re going to get listed on the stock exchange next month, and so I just got to ask, like, how long do you think it’s going to be before crypto-native companies start replacing, like replacing large companies?  You know, Coinbase is kind of like a big exchange - - bank.  For example, how long before a crypto company, you know, replaces Visa or PayPal on the stock market?  Or do you think these companies are going to adapt? 

Now, you’re coming from the startup side, so I know you’re biased, but I’m just, you know, what’s your timeline on that?

TIM DRAPER:  Well, I’m always careful about saying replace, I always think they enhance and they create new services, and it does transform industries.  And yes, I think you’re going to see—well, right now you can use OpenNode, if you’re a retailer, you can use OpenNode and accept Bitcoin and the transaction speed and the scale of the business can—with Bitcoin can be faster than the Visa network. 

And so it’s coming; you’re going to see this decentralization coming, and it’s going to be faster and faster and faster.  What they do is they operate off chain and then—and then bring it back on chain later if they feel like it, otherwise, they just hold it.  But they have solved the problem of speed for retailers, and so there’s really, I mean, if I’m a retailer, I would so much rather take Bitcoin than dollars, for many reasons.

And if I’m using OpenNode, now I can actually use the, uh, I can use Bitcoin and accept it and the transactions can happen just as fast or faster than the Visa network, and I don’t have to pay 2,5% to 4% to the banks every time someone swipes a credit card.  So this is a big change, and that could happen very quickly.  Once people start saying—and this is happening, I know a couple of companies that are doing it, we are giving a discount for using Bitcoin, that’s the thing that starts to open up the shopper.

MATTHEW GOULD:  Well, one of the things you touched on earlier that actually I’m a really big fan of the Estonia e-residency.  I didn’t know you were the third resident—or that’s pretty amazing, be top 10.  And I’m a big—

TIM DRAPER:  I was actually supposed to be first, but he met The New York Times just before he came to Draper University, and so he got the first one and then I was going to be second, but I brought in my partner Steve Jurvetson, who’s Estonian, and I thought, okay, you can have the Number 2; I’ll have Number 3.  We’re good.

[Laughter]

MATTHEW GOULD:  Well, I mean, it’s still top 10, I mean, now there’s other 500,000 people registered, and I think people are really underestimating how big something like this could be, like I’m a huge proponent of consumer owned data, like these markets are huge, you have these problems in, you know, in Europe’s GDPR, you see all these problems in the US with lock on some of the social networks like Facebook and Twitter, and, you know, they are making decisions that maybe other people don’t agree with, but, you know.

So how do you think freedom makes people richer?  Like, because it definitely gives you more options, because you can choose more things, but I think a lot of people out there forget that, you know, freedom actually makes you wealthier just overall.  And like how’s cryptocurrency and Bitcoin play into that?

TIM DRAPER:  Yeah, it’s interesting, I was talking to the prime minister of Kazakhstan several years ago and I said, hey, why don’t you guys do this, you can have a billion Kazakhs, you know, running around the world.  And Kazakhs turns out means, means free, that’s not a particularly free country right now, but it could be.  And they could operate outside of Kazakhstan, you know, they can have people anywhere around the world.

Well, here’s how I look at freedom.  There’re two things that make for a great world, and they are trust and freedom.  And whenever you see a poor country, it’s because they have leadership that they don’t trust, because they don’t want to build anything, because they commonly take it from them, or, or, they have a system of government that controls them, so there all the economic value goes up into the government and then gets swept around and then the government decides what everybody gets and what everybody does.

MATTHEW GOULD:  Well, this is one of the things that made me originally very excited about Bitcoin and cryptocurrency, and this is what I actually love about Bitcoin and crypto, is because you get a system that you can trust with a 100% user consent.  So you have a trusting system where you have complete freedom where the users get to choose with their data, and I actually suspect that’s behind the boom in all this investment in the cryptocurrency market, and you know, we go through this, we go through this cycles of investment, but there’s just continuously more money for the cryptocurrency space and for people looking outside of it they don’t understand what’s going on, but what this is, you have the system where you have freedom and you have trust built into the protocol, and that’s just a great place for people to build market economies. 

And so I suspect that this market is going to keep growing and occupying more and more of the space just like, you know, you see, South Korea now has a booming economy compared to North Korea, over the, you know, I think it’s inevitable, right?  And that’s what I tell people when I talk about cryptos, like it’s great to learn about this technology, because it absolutely just has to happen, this is the market finding a release valve from all these controls.

TIM DRAPER:  Yeah, but nothing is inevitable, you have to fight for your freedom, you have to keep pushing, fight - -.  If there is—you did put something in my head, and that is when people come to me and they say, “Well, when are you going to sell your Bitcoins?”  And I say, “Into what?”  And they’re going, “What do you mean?”  And I say, “Well, wait, do you want me to take the currency of the future and sell it into the currency of the past?  And you want me to take my Bitcoin and move it into like fiat dollars, whatever?  No way; why would I ever do that?”  I got the currency of the future, and it seems like it’s—the rest of the world is coming along.  You know, we got a good thing going.  In fact, I’m a little baffled that Bitcoin doesn’t just keep rising at a super high rate, because who’s selling?  You know, I guess people need to buy things and I guess I would—that would be the way I would use my Bitcoin, I would invest it or I’d spend it, but I would not turn it back into dollars; I would not turn it into the old currency when I got the beauty of the new currency and the new technology and all the great things.

MATTHEW GOULD:  Well, so I know you used to invest in crypto companies or at least in Boost VC, which is run by your son Adam.  And you used to invest in companies with Bitcoin very early on, and I’m actually kind of curious, when you think about your investments, since you are not going to take them back into dollars when you are looking at a venture.  Are you actually thinking about it in terms of like how many Bitcoins you think this company is going to be?  Is that the future of investing?  You’re trying to price thing versus the, the index - -?

TIM DRAPER:  Oh yeah.  Oh, absolutely, absolutely.  And I, I realize now when I was—Bitcoin was about $200, and I, I made a bunch of investments in Bitcoin, and I said I give 300 Bitcoins for 4% of the company to all these startups.  And the ones who kind of held, you know, just worked down, did so much better than the ones who sold it all turn it into dollars and then try to run their business.  It just gave them more runway, more leeway, but I realized that I was paying, you know, now—if you did that I’d be paying, you know, $100 million valuation for a startup.

MATTHEW GOULD:  Hey, you know, you helped seeded a lot of entrepreneurs with that money, and a lot of great ideas that went out there and then are going to go on to change the world.  And we are looking at it now on a quarter balance sheet and it’s a better asset, you know, like you saw Michael Saylor out there and then Elon Musk, I think it’s going to be pretty soon when you see other huge companies put this on, like, we are not that far from Apple or Microsoft. 

So I’m actually going to ask for another prediction here. What do you think if you were a pick a company—you can pick more than one if you want, but what’s your prediction on the next Fortune 500 company to add Bitcoin to the balance sheet?

TIM DRAPER:  You know, I, I would have—the first thing I would—that came to mind was it’s got to be a Fortune 100 company that has an innovator founder, and so I was going to go with Facebook, but I know that they had a competitive offering that got shut down by the government, and they’re sensitive to the—I think the four that are under DOJ investigations are not going to want to do this, but I think it’s probably the right thing for them to do.  I think that they, you know, if I’m the CFO of one of those big organizations, I am saying, “We have to own X% in Bitcoin, because it’s a hedge against, you know, another currency becoming the currency of the future, and it’s also a hedge against inflation as governments keep printing more of their funny money; dollars.” 

MATTHEW GOULD:  So if you have a prediction, we’ll take it.

TIM DRAPER:  Yeah.  So if I were to pick one, which is the biggest company with a founder at the lead—oh, you know what?  Who my pick is?  Netflix.

MATTHEW GOULD:  Netflix?

TIM DRAPER:  I think Reed—I think Reed Hastings is a very innovative guy and has a lot of creative thinking, and I think he still controls the reins of Netflix and so I think that that might be the next big one to follow.  Otherwise, it could be—or—then Google could do something, but I think that all - - Google and Facebook and Apple, all trying to - - the a currency that’s centralized that’s theirs, and Amazon, they probably not—although Amazon will probably start accepting Bitcoins pretty soon, in fact you can get Bitcoin on Amazon, I mean, you can pay Bitcoin to get an Amazon product today through a variety of different software packages.  But on their balance sheet—well, you know how else is going to have to do it is all the pensions; all the people who  are fiduciaries and have to take care of people’s money, they are going to have to own some Bitcoins, because that is—they are fiduciaries, you know, they need to understand all the markets and see where there’s potential gain, potential loss, hedging needed, all of that.

So I think you are going to see, you know, you saw BlackRock already stepping up, I’m sure—oh, and Fidelity, it’s been big in the Bitcoin, but mostly because Adam - - has being so partnered with Fidelity in a great way.  So I think he’s encouraged that, but Fidelity has been the big Bitcoin believer.  Oh, yeah, so if I had to pick one that is sort of any interesting tech thing, it would have been Zuckerberg, but he might look at his competitive, so I’d say Reel Hastings.

MATTHEW GOULD:  I think Netflix is an excellent choice.  So Brad, I’m going to get you on the record here, see if you have a choice.  I’ll pass it your way.  What’s your prediction there for the next company to put it on the balance sheet?

BRAD KAM:  I don’t think that the Google founders maybe, maybe need to.  I read that Sergey has been playing around with cryptos, so maybe they got themselves covered with their personal investments at this point in time, and don’t feel the need to mess with Google itself.  But yeah, I would think—I would think some of the—some of the hedge funds and the, you know, the large piles of money that need to make returns, and I think it’s becoming more acceptable for them to do it, so why not do it? 

I think the only reason they probably wouldn’t have done it previously was because they didn’t want to look bad, and the money wasn’t big enough yet.  But $1 trillion plus  market cap, and who knows where it’s going to go in this next round, I think there is enough—there is enough on the table for them that it would make sense since and they’d probably look irresponsible if they don’t do it and others do it, and I think they all follow each other, so.

MATTHEW GOULD:  All right.  Well, I guess I owe a prediction now, so I’m going to go with Visa, because I think that they are getting much more innovative in this space here, and I also think it’s good for consumer branding, you know, once Elon Musk does something all of a sudden becomes acceptable for everybody else to do the same thing, so I think we’ll see it go that way. 

Well, I think—so we got our predictions around here, I want to make sure Brad or Diana, if you have any final questions here for Tim?

TIM DRAPER:  Wait, Diana, we haven’t heard your prediction.

[Laughter]

MATTHEW GOULD:  Yes, I’m sorry for that.

HOST:  Oh, man.  I don’t know that I am qualified to make a prediction yet, so I’m just going to…

TIM DRAPER:  Absolutely.  Do you have a Bitcoin wallet yourself?

HOST:  Yeah, of course.

TIM DRAPER:  Okay, you are perfectly qualified.  I want to hear your prediction.

HOST:  Oh man.  I feel like, uh, I don’t think it’s going to be—I don’t really see it being Facebook, I think you guys all have good predictions, but I’ll just throw another one in the mix. I’ll say Walmart.  That’s my prediction.

MATTHEW GOULD:  Well —

TIM DRAPER:  - -.

MATTHEW GOULD:  Yeah.  So well, Tim, again, I want to thank you for your time coming on here with us today, it’s been fantastic to have you.  We covered all sorts of great topics, from e-residency and Estonia to why freedom and trust are integral to successful economies and also a big part of crypto, just in general, and we made a lot of predictions on here, so people will come back and listen to this podcast and they will see, will see how close we are in some of these things, it will be pretty fun to do it.  So Tim, thanks again for coming, I loved having you.

TIM DRAPER:  Yeah, my pleasure, I’ll do it anytime.  Just let me know when you want to do it again.

HOST:  Awesome.  Thanks so much, Tim.  Thanks everybody for tuning in this episode, we’ll be back again with another episode of the Unstoppable Podcast.