Session Recap: The Dynamic Ecosystem of Blockchain, Bitcoin, and Cryptocurrency

Date: Aug 07 2020

Miguel López de Silanes, Market Leader, Europe and Latin America

The future of money is a timely yet complicated topic, especially with cryptocurrency in the mix. Thomas Anderson, Author of Money without Boundaries, shares foundational facts about money, and answers questions around the cryptocurrency ecosystem.

The U.S. debt has quintupled in the last 20 years, with no real plan to pay it off. Neither party in congress has a strategy to balance our budget ever again. And the U.S. government solves this issue basically by making money.

Anderson asserts that money is surprisingly a “nothing” concept. While theoretically money is vitally important to us, it’s critical to understand that when you have $100 bill it’s not backed by the full faith and credit of the U.S. When you send digital money, what are you actually sending? If you wire someone a million dollars, what is backing that? It’s really nothing – yet today’s dollar has an unlimited supply, and, says Anderson, terrible fiscal stewards.

The creators of Bitcoin thought they could create a better system. Bitcoin is a private currency in limited supply of $21 million.

Money can take the form of a lot of things – gold, paper, credit. Conceivably, we can use a credit card to travel the world, with no cash necessary. So the concept of money transcending currencies is already here.

So to say Bitcoin is a limited supply currency that you can transfer electronically, to many people represents the holy grail of a store of value. A store of value either remains stable or increases over time, but never decreases. With Bitcoin you know what it is, and you know it’s secure.

Bitcoin works through a concept called blockchain. We can think of blockchain as a diary. We don’t want to lose it, but more importantly, we don’t want other people to use it or change it. It is 100% protected and feels safe.

In cryptocurrency you hear the term “token” often. Tokens are basically online rights to access blockchains, and you can permission and monitor this access in a completely decentralized way.

For this to work, we create what’s called a smart contract to decentralize trust. A smart contract is something that can’t be denied because it’s essentially everywhere – so think of the U.S. Constitution. If we all agree on the words that the smart contract says, then we create trust. Through smart contracts, we can know everything in a way that is undisputable.

In cryptocurrency we see two kinds of projects. One is a utility project, where you can build your own blockchain. The more people involved in the blockchain, the stronger that chain. And people network to be part of the infrastructure to facilitate the blockchain, once again decentralizing trust.

You also have projects being built on utilities, that have intrinsic economic value. If you own a token in a certain project, in theory, you have an economic right to that project, and therefore it has intrinsic value. This is much like a stock, where you have a direct right of ownership of the interest in a company and the economics that it generates.

Anderson is not as enthusiastic about Bitcoin as he is about blockchain, which he sees as a more stable store of value. Through blockchain we can know and secure claim to assets. Secured lending through blockchain creates a decentralized currency with a superior stable store of value and no inflation. Anderson doesn’t think Bitcoin offers a stable store of value, but that doesn’t mean it doesn’t have value.

Anderson says Bitcoin will ultimately be mined, and at some point all 21 units will be out there. If we know there’s a limited supply, we can put a value to it, and the value could go up or down, but we value only that limited supply. The achilleas heal of Bitcoin is that the blockchain that allows it to exist also would allow you to make another currency. You could then create an infinite number of items with limited supply. Combining limited supply with an economic right is the most stable store of value. According to Anderson, it all boils down to trust.

Miguel López de Silanes Gómez is the market leader for Europe and Latin America at Family Office Exchange (FOX). He is responsible for delivering FOX services to current members, and also actively works to expand the network in Europe and Latin America. His base is in Madrid, but he spends half of his time in Latin America. 

Areas of Expertise: Enterprise Families, International Trends

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