How Will Cryptocurrency Change My Life?

MATTHEW GOULD:  Welcome everyone to the Unstoppable Podcast.  I'm joined again today by Diana Chen.  Diana, thanks, for joining, 

HOST:  Of course, thanks for having me back. 

MATTHEW GOULD:  Great.  We're finally getting, we're starting to get into the groove on this podcast episode.  Today we're still going to keep this at a high level.  We're going to be talking about crypto finance and why this is good for you, the user.  One of the first questions I get asked whenever I start telling people that I work in crypto, or that I'm in the blockchain industry, is why would I ever need this in my life? my answer to them is normally, well, you probably don't need it right now, but you're about to see this just impact you in so many, many different ways.  The last couple episodes we talked about, you know what blockchain was, what these new technologies were doing, and how they may start creeping into your everyday life today, we're going to focus on much more practical issues. 

How is this directly going to impact you?  One of the first places we wanted to start was mostly about the currency itself.  If you've been in the news recently, at least this past week, I think there was a big bill that was put into the US Congress for stable coins. It's called the stables bill.   That's been a topic of conversation among those who are in the blockchain space and countries, digital banks, banks in general, and the finance industries, trying to wrap its head around what is all those digital finances going to mean? For me.  I guess we'll, we'll start there and Diana, I'll let you come at me with the questions and we'll just kind of progress through and see where this goes. 

HOST:  Yeah, sure.  I mean, the theme of this seems to be, you know, me just asking you dumb and dumber questions, but I just want to take it a step back, even from why is crypto finance good for you? I'm just trying to wrap my head around this whole concept of digital currency.  I understand cash.  I think we all understand cash.  At this point I think everybody understands credit cards. Apple Pay is probably the newest thing that maybe some people still don't understand, tapping your phone on the thing, and that allows you to pay.  But now we're talking about digital currency.  What, help me understand what this even means.  Are countries still going to have their currency? Like how, if I went to China, how would I use my money on my Apple payor on, you know my Bitcoins to pay in China when they have a different currency and transaction rate and all of that. 

MATTHEW GOULD:  Yeah, there's a lot to unpack there.  I want to start. First, it's a good idea to take it from the top.  I just want to point out that you already have a digital currency in your wallet.  Like when you tap Apple payor when you swipe a credit card, all these things are digital.  We have moved away from cash.  Very few people use cash on a day-to-day basis.  I'm, one of those people that does but some people, but most people I know don't use cash and they use their credit cards, their bank cards, they use Venmo, PayPal any of these other methods to make payments.  We've already digitized currency.  The problem is the systems that we have built in our current versions, and we should maybe call them digital currency, 0.0, it's the very first accidental version of digital currency was all systems that were created back in the 1960s. 

What happens when you make a payment with your apple pay at Starbucks is it goes to a database at a bank, and then it changes the database injury. Because it's so inefficient, it takes several days for that to be recognized across all their various bank databases at the same time, there's a clearing period. And you wouldn't believe that it takes three days in some cases to clear very large transactions.  When someone is trading stocks on the New York stock exchange or sending a large loan for maybe building a new manufacturing facility, it can take several days for that money to clear. What happens is during that period, banks make money on interest.  If they have to wait three or four days for the money, while it's in transit, that's a period where that money can't be put to use. 

And if you think about trillions of dollars, moving along a global economy, always having this period between when the transaction, everyone agreed to it, like, and then being able to get the money in your account causes a lot of trouble. And you can see this with merchants, right?  When you buy something from Starbucks, it's probably quick, because they have a pretty good back end.  If you buy something from your local coffee shop, maybe they only get credit card payouts once every two weeks.  There's that, that time lag there.  These next generations of cryptocurrencies essentially make that whole process significantly cheaper and a lot faster and it's a lot less scary than you think.  It's not like we've been building digital currencies just on top of bad architecture for the past 40 or 50 years.  The first part of your question and it's like what we're doing with that.  We already had them and now we're just going to make them a lot better.  The next question, I think you were asking about maybe global currencies, like the dollar or the, or the yuan, or where were you trying to get with that? 

HOST:  Yeah, yeah, exactly.  Just how do you, how do you measure valuation? say right now, like one us dollar is equal to, I don't, I don't know the latest rate, like say like it's like around six Chinese yuan or, you know, whatever the case may be.  If I go to China and I've got one, you know, I'm going to invent a new crypto - a wild coin, I've got one wild coin in my wallet and that's equal to one us dollar and I want to buy something over in China then that, you know, that's like one Chinese yuan.  Then would I only be paying,  point whatever out of the one wild coin that I've got in my wallet? Or how would that work? 

MATTHEW GOULD:  Yeah.  You brought up a couple of things there.  One of the ones is, are we going to have all these new and interesting currencies? So that's, that's like a topic we can hit on, and then the one is how are we going to figure out the exchange value between all these new digital currencies that we've created? I'll take the first one first, which is, I don't think you're going to be doing a lot of payments with cryptocurrencies that are not attached to some national Currency peg for everyday payments, and what I mean by that is I think that if you want to buy a coffee at Starbucks, you'll probably pay with a crypto coin that is equal to one us dollar. There are a couple of examples of these that are already on the market.  Tether is the largest of what we call a stable coin. 

Then there's US DC, which is one that's backed by a coin center. Coinbase is one of the people there along with a couple of exchanges in banks in New York, and I think that you're going to see more financial institutions issue tokens on the blockchain that are equivalent to dollars in real life, and this is already happening.  It's like an easy prediction and therefore the stable coin act came out this year in the US they want to talk and think about how these new stable coins could potentially create financial instability.  I mean, that's the job of these regulators. And the reason is, is that two years ago, I think there was, there were less than a billion dollars of these tokens that were tied to national currencies on the blockchain, this year, I think there are 20 billion tokens tied to the US dollar. 

To be very clear about what this is, you can have a dollar coin.  This is also called a stable coin.  That's what people refer to these two and you can walk into a store that accepts cryptocurrency payments and you can pay.  If I want to check out the coffee shop and they accept cryptocurrency, they could tell me, Hey, this costs $5 and 20 something cents.  I can send them five points to you know, $5 and 20 cents of stable coin token directly to them.  There's no need to do the currency exchange in that case.  Therefore, stable coins are so interesting and why a lot of people in crypto are very excited about the growth in the stable coin market because these are going to make day to day transactions a lot easier.  The other cool thing is when you pay that merchant with that money and the merchant gets it immediately like I was talking about at the beginning, you have to wait until your credit card processor approves. 

It usually takes anywhere from three to 30 days, depending on your backend systems, when you pay with a stable coin, they get it right then. If you are a contractor, like maybe you have a small business and you do a lot of business right now.  You probably do it in cash because you need that money right now.  If you're you know, building you know, a house and you're the contractor who comes out, does the lumber, you can't wait three days to get repaid for the lumber that you just picked up, the lumber yard, you need that cash today, sometimes in advance and digital currencies make that possible.  If they swipe in the credit card, it takes three days.  You got, you're not going to, if you have a construction project, you don't want to wait three days to get the money before you do the next step.  That's why people use cash in our economy. Currently, its super causes its quick and it settles immediately.

HOST:   I understand that bit, from the merchant side, if you're like a small independent coffee shop and you don't want to pay those exorbitant transaction fees for people to pay with their credit cards, I get why you would rather accept cryptocurrency, but for me, like what difference does it make for me as the consumer at the coffee shop to pay 5.25, you know stable coins versus just pay $5.25 cents out of my capital one visa card? 

MATTHEW GOULD:   The use cases that are going to happen first are going to be the ones where people have the most pain about doing them.  I think that the, the use case, I was giving you where you're maybe a small business and you, you know, you are in the middle of some sort of project and you need to be paid as you go along in order because you also have vendors that you need to pay out catering. You can imagine being the same way. So those will be for those larger transactions. It will make a big difference in getting that money immediately for consumers. You can imagine a future where you get a discount for paying with cryptocurrency because now they're avoiding the transaction fees and almost every coffee shop I go to has some sort of rewards program for the more times that you shop there. 

And you could imagine something similar for purchasing with a cryptocurrency right now, if I shop on Amazon by Amazon card, I get a discount because I'm using the Amazon card of the Amazon store.  You could see things like that pop up too for the consumer side.  I think the real value of having a digital currency is going to be how much easier it is for you to do savings and investing and manage your financial processes.  It'll just be a lot cheaper. To answer a consumer question, it's going to be a lot easier for you to invest in things like stocks. Everyone knows Robin Hood, especially if they live here in the US, but internationally, it's very hard to invest in US companies.  If you, if you're an international citizen, this could be made a lot easier.  Once we have a decentralized finance backend for people to plug into. 

HOST:  Got it makes sense.  I'm going over to China, again, I want to buy some coffee from the coffee shops there and I want to use my stable coins or, my, my Bitcoins or whatever I have in my wallet. Yeah.  How does that work? 

MATTHEW GOULD:  This is going to be a lot easier for you and you're going to save a lot of money.  If you like to travel, if you are older, you may remember a point in time when you traveled with travel checks or Traveler's checks, right? And this was a very long time ago, now everyone uses credit cards and they travel.  If you travel a lot, you know that those credit cards are typically charging a very high fee unless you use a very specific credit card that people like to use for travel.  Let's say you don't have one of those credit cards. It's great for traveling, or you've looked at the exchange rate that your current credit card company offers you, it's not a very good exchange rate.  Instead, you could load up your cell phone with crypto. 

Let's say that you were visiting China, you could load it up in the future with a digital one. And then when you get to China, you could just spin that just like you would tap with Alipay.  Hopefully even with Alipay, because we expect large payment companies like Alipay to integrate cryptocurrency into their applications. PayPal just started doing this in the US.  It's a baby step. It's going to take a long time for that to happen, you could imagine using your Alipay or PayPal app and before you travel or even while you're traveling, just loaded up with stable coins from your bank converting that currency into the stable coin, and then spending it directly, this would save you the credit card fee and credit card fees are usually high internationally because there are a lot of risks when you travel, right? 

Because your credit card company's like you're in a different country.  We have no idea what your spending habits are.  It's a lot riskier and the financial networks are a lot worse on the back end when you're connecting from country to country like inside the US, you can ship payment from one bank account to another and it can cost about 20 cents.  But when you need to make a payment from Europe to the United States, like a wire, you get charged 30 to $50 for that now, that's the same problem that the credit card company has.  It's a little bit different, but it's similar in that they have to reconcile those two, it's going to make it cheaper.  You'll be able to travel, then on your Alipay phone, instead of using your credit card where your exchange rate is, just making up numbers here, like your phone may say, oh one, the dollar only worth five one on your credit card. 

If you swipe a credit card, but if you buy the one directly on a blockchain, maybe you get a six-to-one conversion and that would allow you to spend more.   You'll save money on the transaction fees and you won't have to go to a money changer because you'll be able to do that directly from your cell phone.  This is the thing that people are going to have to get used to if you're going to be doing a lot more of your financial transactions for your phone.  People like me who are still spending cash or like my like [laughter], well, my dad doesn't use checks anymore.  I don't know anyone.  He uses checks, but for people who are used to using old ways of doing payment processing, they're going to have to get much more comfortable using their phone for a lot more of their financial interactions. 

HOST:  Got it.  Tell me if this is a dumb question.  Maybe I just missed it but isn't there still going to be an exchange rate, and transaction calculation.  That's going to take place at some point, it's just now instead of the credit card company, doing that exchange rate for you or telling you what that exchange rate is, it's the Bitcoin, you know, or the crypto company or like a central bank or somebody like isn't somebody still going to have to do the math on that exchange rate. 

MATTHEW GOULD:  Yeah, and people are already doing this.  There are already exchanges that exist on the blockchain. They're known as decentralized exchanges or Dexus is the term that people use for them and these can programmatically give you trade right now between one currency pair and another.  This is something that a lot of people are excited about for next year.  Believe it or not.  We've been waiting to build a blockchain-based currency exchange, blockchain FX for the past decade. People have been working on this problem for 10 years, and we're just now starting to see this happen.  They have some regulation pieces that are being worked out and there are a lot of people that are on all sides commenting and trying to make sure that this is going to be safe, but it works already and they already have this set up for trading between different kinds of cryptocurrency. 

You can trade Bitcoin for Ethereum on the blockchain.  You don't have to have a bank.  You don't need a credit card company.  You don't need an exchange centralized exchange like Coinbase or Gemini or anything like that to tell you what the rate is because there's a market maker.  That's sitting there on the blockchain, constantly trading back and forth to determine the price.  The biggest difference you're going to see is again, you're going to get a much better deal as a consumer.  Cause when you swipe your credit card, you're doing an exchange as a captive member of that credit card company.  They are just going to charge you whatever the hell they want.  They're going to take an extra 5% on top.  When you do the exchange on your phone, in your, PayPal or Alipay or crypto wallet in the future, you're going to be making that trade directly with the broker-dealer. 

Who's setting the rate on the chain? You are going to save yourself through your 5%.  The best part is you don't need to know how any of that works as a user.  You'll just click a button on your phone that says, I have a thousand dollars in my bank.  I want to change that a thousand dollars into, a digital one, it's easier for me to spend on my travels. You click a button, it'll go and execute on the backend for you and then deliver it back to your wallet and you'll get the best rate, not just the best rate of anyone who owns a credit card, not just the best rate for a US person, traveling to China, you'll get the best rate for anyone in China, which is pretty incredible if you think about it, because right now the only way to get the best rate on crypto, I mean, sorry on currency transactions is to be on the stock exchange at the New York stock exchange or the London stock exchange. And I'm telling you, you'll be able to get that on your phone, which is a huge advantage for people. 

HOST:  Yeah.  Wow.  Got it. What is this going to do to banks? 

MATTHEW GOULD:  I have a, that's a pretty hard prediction to make, like what's going to happen to banks in general.  I think that but I can think I can confidently say that a lot of banks are really smart and they're going to be very adaptive to this technology and you're already seeing them start to do that and I could be wrong here, but I'm pretty sure that it was either Goldman Sachs or JP Morgan or someone is one of the investors in the coin center circle stable coin for US dollar coin. There are already banks that are interested in starting to build the back end to make these dollar-based coins easier to use. that's only going to continue to get much, bigger. You could see several more banks coming and issuing these types of a dollar backed coins and they make money on this, on the float. 

By the way, if you're wondering how banks make money for these stable coins is when you send a thousand dollars to get a thousand stable coins back.  That means that a thousand dollars are sitting in that bank's account and they get to earn interest on it.  Banks love making money by earning interest.  There is going to be a market for these and in the US, at least we're going to allow private companies to develop them.  You can see in some other countries they're talking about having a central bank-based coin.  China has one that has high government involvement. But in the US, I'm, I'm thinking we're going to have more of a private market solution for this rollout.  There is going to be banks that make all these backends for all this, and then you're going to have banks also roll out wallets for you to interact you know, on your everyday basis making payment transactions. So, it's pretty, I think that banks are going to have more opportunities to make money and that's just the tip of the iceberg for them. 

HOST:  Gotcha. Yeah. You kind of alluded to something I was going to ask earlier too, is like, what is going to need to change for us to live in a world where I can travel to different countries and use the crypto in my wa--,  I, I can just open Alipay and pay in China with the money that I already have in my wallet.  What's going to have to change is new government regulations.  Do you think every country in the world is going to get on board to the point where this is a, an, a truly global thing? Or is this still going to be, you know, just, I don't know, the Western world is on board with this, or like only certain countries are on board with this. 

MATTHEW GOULD:   Yeah, we've seen that this is global and that's one thing that's very positive about cryptocurrency and that I try to express to people is that this makes the world much more international just by default because of everyone's trading on the same markets. Everyone has access to the same technology.  Everyone gets to go to the front of the line.  No one has to wait for this to come to them. The same way that a lot of sorry, differently than a lot of other technologies, when we rolled out the industrial revolution, it took hundreds of years for that to reach everywhere around the planet. And some places are still struggling, but, this digital industrial revolution, because it's so much easier to ship around this information is going to hit everybody at the same time.  Everyone's going to be able to participate. 

Then you're asking, what's going to have to change, it's a perception shift mostly, right? and users just need to get used to it. 15 years ago,  there wasn't a smartphone yet and people would not be walking around, just staring down all the time and reading the next news cycle.  Here we are 15 years later, you couldn't imagine living without your phone, for mapping or anything else, there's all sorts of things that you just have to have, the same type of shift is going to happen with crypto finance over the next 15 years.  You're not going to be able to imagine a point in the past where you had to, where it was difficult to move your money across borders, where it was painful for you to, make a transaction. There was a huge fee that was stuck in the middle where your investment options were limited to only where you were, right, where you had to, you could only invest in the thing down the street because you didn't have access to US markets where your business if you needed to have a loan had to didn't have a lot of opportunities for where to source that from now, they could source it from everywhere. 

These are the types of things that are going to happen.  It's going to be a perception shift for people, then for governments, governments always kind of trail behind.  What I think is going to happen is consumers are going to adopt this technology like, wow, this is super useful, then governments are going to come in and fill in with new regulations.  Of course, there's going to be a few bumps along the way as we go through there, but ultimately the amount of money that people are going to save by using crypto finance, cryptocurrencies, and blockchain technology is going to get them on board just to give a number here.  The global payments revenues in 2018 were estimated at 1.9 trillion.  Let's just call it $2 trillion, that's about two and a half percent of global GDP. Just imagine everything you do in your life, you're paying this two and a half percent fee just without you even really realizing right now it's being taken out your pocket, someone's reaching in and taking that out. 

And what technology is going to allow us to do, just like it did with everything. You know, I remember when, the first flat-screen TV was $5,000 or something, now I can buy one at Walmart for 250 bucks. Technology's going to come in and it's going to drop the cost for these transactions by an order of magnitude. Instead of paying $2 trillion a year, hopefully, we can get that number, one 10th that size.  Then that puts so much more money back into consumers' pockets.  Governments and people are going to start using this technology simply because it's going to be in better form. 

HOST:  Got it.  The last question matches because I tend to be sort of a skeptical person. And when I hear things that sound a little too good to be true, I'm always like, what's the catch, right? Are there any negatives or cons to the shift towards digital currency and crypto finance that you can think of? 

MATTHEW GOULD:  I think some of the biggest negatives around moving to a world that has cryptocurrency as a default way of doing transactions are mostly issues around governments, losing little pieces of control over the way that they work on the economy now.  I would view those as being net positive for individual freedom.  We're going to have an increase in individual freedom.  We're going to have a net decrease in the amount of regulatory authority for people's actions. Let me be very specific, if you live in Brazil and you want to invest in apple stock five or 10 years from now, it's going to be super easy for you to do that, it's going to rearrange all these capital markets.  There's going to be a transition period for the whole world. 

As we, as the rules of the game have been changed.  However, the net outcome for everyone is going to be beneficial.  I guess, one other con that may be easier for people to understand is people are going to have to learn how to do digital security and most people right now are bad at being safe about there, about being safe online just generally.  One of the things you hear all the time in crypto is I lost my keys or something like this.  People lose access to their wallets or something like that. If you lose your credit card, they can send you a new one in the mail right, if you lose your cryptocurrency, then you can't get it back.  We'll see if technology can improve on that front too and make that easier, technology is going to help those.  Technology will help regulators adjust to this new climate.  Technology's going to help consumers be better with their online security.  We solve both those problems.  There's no reason why everyone shouldn't be using this every day. 

HOST:  Awesome.  Well, thanks for having me on again, Matthew, and letting me bombard you with questions.  I always feel so much more enlightened after our conversations. 

MATTHEW GOULD:  Appreciate it.  Thank you.  Thanks for the questions and everyone else.  Thank you for listening.  As always if you have any comments or questions or you have a guest that you'd suggest for us please just reach out.  We'd love to hear your ideas.  Thanks again, and we'll see you next time.