Show Notes
https://www.forbes.com/sites/laurashin/2016/09/06/tyler-and-cameron-winklevoss-on-why-they-fell-in-love-with-bitcoin/#236f96c472c3Transcript
Female Speaker:
Welcome to Forbes podcast.
Laura Shin:
Hi everyone. Welcome to Unchained of Forbes Podcast produced by Fractal Recording. I’m your host, Laura Shin, of Forbes contributor covering blockchain digital currencies and Fintech. Thanks for tuning in. Before we begin, I just wanted to give a quick thank you to those of you who have been rating and reviewing this show in iTunes. Every vote of confidence boosts the podcasts rankings and if you’ve been enjoying Unchained, but haven’t yet reviewed or rated it, I’d so appreciate it if you could take the time now.
For todays episode, I’m speaking with Tyler and Cameron Winklevoss whom serve as Chief Executive Officer and President respectively of Cryptocurrency Exchange Gemini. They also run the private investment fund Winklevoss Capital, which has made a few cryptocurrency and blockchain investments such as in Bitcoin vault Xapo and Bitcoin hardware and software firm 21. Back in 2013, they were the first to file with the Securities and Exchange Commission for a Bitcoin exchange trade to fund or ETF which they propose calling the Winklevoss Bitcoin Trust to be traded under the ticker symbol coin. Unfortunately, for listeners eager to hear more about the Bitcoin ETF, while coin awaits an FCC approval, Tyler and Cameron are not able to speak about it publicly so we won’t be able to address it in this podcast. However, for those interested, the most recent filings were made at the end of June and it’s entered a public comment period. Welcome to the show, Tyler and Cameron.
Tyler Winklevoss:
Thank you. Thanks for having us.
Laura Shin:
So, Tyler, why don’t you tell us a little bit about what you guys have been doing since the 2008 Olympics. I think most people may be aware of the trajectory of your careers before then. As chronicled in the movie The Social Network, you were both tied up in the early development of Facebook and you’ve also enjoyed careers as rowers on the US Olympic team. For listeners who last knew that you competed in the 2008 Olympics, what happened after that and how did you end up in Bitcoin.
Tyler Winklevoss:
So, after 2008 we decided to continue to train, but at the end of the day, we decided we actually wanted to get back into entrepreneurship so we hung up our ores in about 2011. During that period, we actually went to Oxford University and rode in the Oxford Cambridge Boat Race and also achieved our MBAs and then we decided we had been rowing for about 15 years at that point and we could’ve kept going, but we always sort of saw rowing, it was a little bit of a detour. It was like one day when we were 15, walk into a boat house, said let’s give this sport a try and next thing we know, we made the junior national team and then we said hey, maybe we can do this in college and we’re freshman at Harvard and then all of a sudden, four years later, we were national champions and said hey, maybe we should just keep doing this a little bit more, so rowing was one of those things, it wasn’t like we walked into a boat house the first day and we’re like hey, we’re going to be Olympians. It was each day, each year, let’s try, let’s go a little harder, I think we can go a little bit faster. The next thing we know, we’re pretty much almost 30 and we’d been doing this for 15 years and had an incredible journey. As you said, we went to 2008 Olympics, were NCA champions undefeated in college, rode in the Oxford Cambridge Boat Race and we decided we had climbed this mountain enough and we could have kept going, but we decided that now was a time to climb another mountain, so we wanted to get back into entrepreneurship.
Our dad’s a strong entrepreneur. We had always, growing up, looking up to guys like Steve Jobs, Bill Gates. We didn’t really grow up in a jock family in the traditional sense in that we didn’t talk about the Yankees at dinnertime conversation, it was really talking about this and this and ideas and my dad was always brining home the newest computer and we were thinking about those kind of thoughts, so wanted to get back into that and the most natural way to do that was as investors, so we setup Winklevoss Capital, a private investment firm in 2012 and figured it’s a great way to network with fellow investors, meet a lot of entrepreneurs, look at a lot of cool ideas and just get back into it. During that year actually, when we set that up, we went on vacation in 2012 in the summer in Spain, in Ibiza, and on vacation we learned about Bitcoin and so that’s how that all started and so we started…
Laura Shin:
How did that happen?
Tyler Winklevoss:
So, a mutual friend came up to us, introduced himself to us. We realized we had mutual friends in common. He was from New York and then said hey, have you thought about digital currency or Bitcoin? We said no, we just pretty much retired from elite athletics and starting an investment firm and we’re actually on vacation not really looking for the next big thing, but obviously that’s always how it works in life, it’s very serendipitous. You don’t predict when you’re going to fall in love or you can’t force that kind of thing. You set yourself up in the right position that you’re aware, but often times you stumble into it, just like rowing was one of many sports we tried and in a way, you sort of fall into it. You don’t know you’re going to be good at it. You don’t know you’re going to like it. You don’t know you’re going to want to do it for that long and Bitcoin, like rowing, and like a lot of things we’ve done, happened serendipitously like that and then I think you know, love is probably a great analog to finding your passion. You can’t sort of will it or force it, so we started learning about Bitcoin in the summer of 2012 and buying it and then next thing we know, it just sort of like sucked us in, not even that slowly, but pretty quickly.
This was a pretty heavy romance, but next thing you know, we’re looking to be entrepreneurs in this space and I think we always wanted to go back and to be entrepreneurs at heart, but being investors was a good way to sort of test the waters and figure out what that idea would be and then over time, we just identified the problem of a licensed regulated exchange in America and decided this was the problem we were going to put our efforts into solving and return and put our entrepreneurs cap on and start building something great, so that started about two and a half years ago and we’ve been operational for about a year. So, right now, we both invest, but at the same time, most of our time is building Gemini. So, sorry if that was a very longwinded introduction, but that takes us from basically 2012 to today.
Laura Shin:
Okay. So, Cameron, as Tyler was mentioning, you guys really fell in love with Bitcoin and have found that it’s your passion and I have noticed that through Winklevoss Capital, you’ve made a number of different investments, but what was it about this technology that captured your imagination?
Cameron Winklevoss:
Great question. I mean there’s so many different aspects to Bitcoin, I guess. There’s sort of the technological protocol aspect. There’s the economic aspect of a fixed supply, borderless money. I mean we were both economics majors at Harvard and I don’t think we had truly thought about currencies beyond the Fiat world until we came into Bitcoin and it was a big eye opener that all of a sudden there’s this huge alternative. It’s almost like finding a new color and thinking about all the different aspects of it and we figured this is either probably a pretty binary outcome, it’s either zero or an enormous new opportunity and the interesting thing about Bitcoin is that it’s both destructive from a technology standpoint, but there’s a tremendous power of social good behind it, so you can both build a cold business or have a great investment return and there’s the promise of potentially improving the remittance industry or banking the unbanked.
We’re not there yet with Bitcoin, but it’s certainly a possibility whereas the existing sort of legacy banking system, it’s not a possibility because if it was, it would have happened already. These are technologies, like ACH, Fintech Wire, SWIFT, debit cards, all those thing have been around for many decades and they have not solved the problem and if you step back, there’s upwards of hundreds of millions, if not billions, of people that have no financial inclusion and there’s no path to that with the current technology, so where Bitcoin is right now, I think is that it’s most being looked at and it’s most being talked at in areas where it’s potentially least impactful, but that’s generally the story of most technologies is that you build all, you know, telecom and all these things and then you basically export it to places that can leapfrog all of the pain points that we went through to get there and it’s really transformative.
Tyler Winklevoss:
When you sort of think about the way everything else works in the digital age and then the way money does, money really falls short and so as it happens, we learned about Bitcoin overseas and actually, we had to transfer additional funds for accommodation after we had gotten there. Apparently, you know, not enough. We didn’t pay the right amount. It didn’t get there up front and so when you’re sort of sitting there and you’re trying to get money from America, you recognize that you have a better chance of overnighting a box of checkbooks or travelers checks or cash. So, from here to London, you can do that overnight if it’s Friday and there’s a bank holiday on Monday, it’s not going to get there until Wednesday, so it might take five or six days. I mean more than a majority of a week for money to get over there and that’s just not the way your email works. Imagine if your email worked on bank hours and was open from 9 to 5, Monday through Friday, and then on holidays, not open.
Cameron Winklevoss:
Some people might actually like that.
Tyler Winklevoss:
Right. We sort of joke that might be a good thing, but for all of our sanity. Money’s acting like pre-internet and many of the forms of money and payments were, as Cameron mentioned, were built by bankers before the internet existed, so they never contemplated the internet or how to work on that, so when you sort of step back and you stop accepting like oh this is how money works, this is what I learned in economics book, you sort of at some point, it’s a little bit embarrassing because you just accepted so much of what was around and because it was familiar, you thought that that’s the way things are done and money’s always been this green piece of paper with a president’s head on it and that’s the way it is. When you start pealing back the onion, looking back into it, money can be anything. It can be ones and zeros as long as the system has a certain secrecy built in and ones and zeros are great because they’re built for the internet. It’s internet money that can work the same way as email, as efficiently, as frictionless, and potentially as cheaply and obviously 24/7 borderless and then you start to say, oh wait, like you know this is how it should always have been or this is how it would’ve always been, except for this guy _____00:12:15 or guy/gal group haven’t figured out this breakthrough until 2009, so it really felt like this is the future and we love the future. We love spotting it. We love being a part of it and trying to help build it, so I think that’s why we got sucked in so quickly to it.
Laura Shin:
I like how you described kind of the long road about how it’s most active now in kind of more developed countries. With that, you see like how down the road, it could help the unbanked, it could help in remittances and you talked about how you identified this problem and irregulated exchange. Why do you feel like that’s the first step and what differentiates Gemini from its competitors?
Cameron Winklevoss:
That’s a great question. So, I think that the US has some of the strongest financial regulation and consumer protections in the world and for very good reasons and I think because of that framework, we also have some of the most liquid amazing markets in the world. Try to imagine the world without the New York Stock Exchange or Nasdaq or the BATS Exchange. The equity markets wouldn’t exist and the ability to fund public companies which build these great products and then have capital to reinvest in themselves and the economy and all that stuff. The starting point or the block of that is both, you know, in our opinion, regulated venues where people can actually buy and sell securities and then also regulation.
Tyler Winklevoss:
Right. To build that confidence that exists in US equities markets, there’s no market in the world like that. I don’t care what county you’re talking about. Every investor around the world wants to invest in US markets because they’re regulated and they’re licensed, they’re trustworthy, they have confidence. If you take that away, the global economy will take a hit like nothing else, so we want to recreate that for Bitcoin and what we saw for many years was try to create something away, running away from that, sort of a race to the bottom antiregulation offshore and while I think that’s important and early adopters will have no problem and more risk appetite, investors or technologists will have no problem interacting in that ecosystem. The majority of the world and the majority of the biggest pockets and the people who can make the biggest change will and so in order to get them in the game, which they’re not even there today, you’ve got to build something, a gateway, a road, a bridge, that’s licensed, that speaks their language, that their chief risk officer or that their chief regulatory officer can get onboard with. It’s still going to be a hard sell, but when you start to do that, then all of a sudden, you take this really cool idea that isolated out here on an island and you connect it to the US or the global mainstream main island, or mainland rather, and then you have a huge situation where one hand washes the other.
Cameron Winklevoss:
I mean imagine gold is off and Bitcoin is generally a lot of times referred to as like the digital gold, well gold is store of value for a very long time, but imagine if you had trouble vaulting your gold or if people didn’t know that they were going to potentially lose their gold wherever they placed it, or how to buy it in a safe manner. Gold would not look as a very attractive stored value and people would probably look for something else.
Tyler Winklevoss:
Your gold in a vault in Venezuela is much different than your gold in a vault in…
Cameron Winklevoss:
In the US.
Tyler Winklevoss:
In New York City.
Cameron Winklevoss:
Or London for that matter and so in order for one of the most obvious use cases of Bitcoin which is a store of value in borderless money to work, we need to have safe secure regulative places to store these stores of value. Without that, we can’t even get the first building blocks and so it’s really exciting and fun to talk about the future of all the great other use cases that Bitcoin can do, but if we can’t even secure it properly, people don’t feel safe buying it or selling it and transacting it and using it, then we can’t get anywhere.
Laura Shin:
So, speaking of security, there’s been a lot of news recently about a major hack of a Bitcoin exchange called Bitfinex and I’m sure you’ve seen on the Reddit boards everyone saying, oh, you know, this is just centralized money where we’re creating these centralized exchanges. I mean it was a massive amount of money that was lost, about I think 70 million at that time of the hack, so when you look at kind of that debate between a centralized exchange versus the power of this just centralized money, how do you make the case that like really this is not only important, but then also that you can actually make it secure?
Tyler Winklevoss:
Sure. Well, I’ll start first by saying we don’t know all the facts of that particular incident, though I think we’ve got the general broad broad-strokes there and I think what’s clear from that particular incident is that the majority, if not all the funds were stored in hot wallets which are internet connected and thereby accessible by potential outside attackers through the internet. I think the easy mitigation for that hack is storing a majority of your funds in cold storage, which is not internet connected. That’s something that our vault design has had since the beginning. We currently employ at a number of other Bitcoin exchanges. That idea of cold storage is actually not particularly new. There’s certainly going to be better implementations of it.
Cameron Winklevoss:
The fact it’s older than, as far as I know, it’s older than multistate technology, which became popular after it, so it’s actually one of the oldest best practices.
Tyler Winklevoss:
One of the biggest probably issues confronting I think Bitcoin in some ways, at least in the security sector, is that people use terms in very loose manner. When people sometimes say multisake and then you sort of kick the tires or look under the hood, it’s not really multisake, or there’s a single point of failure where it effectively nullified the multisake aspect of it and unfortunately, a lot of people will throw out these terms like multisake insurance, this or that, and there’s no real substance beneath it.
Cameron Winklevoss:
And if you have like a car, right, and you have airbags but no seatbelt, I’d rather have my seatbelt than just an airbag and that’s just not preventing you from if you get into a head-on collision.
Tyler Winklevoss:
Or you say, have seatbelts, but you forget the fine print, but they only workup to 30 miles an hour and at 60, that seatbelt is as good as not being there and so the way you solve for these problems is you have actually regulated in companies where the regulators have gone in and made sure that you’re doing what you say you’re doing and so if you’re unregulated and your offshore or you’re in an environment where there’s no requirements that you can basically say what you want and the consumers know _____00:19:46 wise or worse off, they don’t know until it happens and that’s really, I think, one of the key points here is that what we say and what we’re doing, we’re saying not only to the consumer, but we’re also saying it and having to uphold that to our regulator and getting checked and held accountable for that.
Laura Shin:
Well, I have a question about the hot wallet versus cold storage issue. At Bitfinex, I think it was like a very active exchange. I think it has like some of the highest volume. In that situation where people actively want to be trading it, then what’s the solution in terms of hot versus cold?
Tyler Winklevoss:
Basically, as an exchange and if you’re fully funded exchange, you take customer deposits before allowing them to trade, but once you’ve taken custody of those deposits, it’s up to the exchange of the custodian to determine how they want to actually hold their customer funds and…
Cameron Winklevoss:
To the question more specifically, funds don’t know have to be in hot wallet in order for them to be traded because all of these trades are happening off blockchain. These aren’t on blockchain trades, so it’s a mistake to think that to have high volume, you would need a lot of funds in hot wallet because at the end of the day, all of these trades in Bitfinex and Gemini, back to your question a few questions back, is that they’re happening off blockchain and we’d love to create a decentralized exchange, but we don’t know how to do it. We don’t know how to do it yet. At the scale and the speed that’s required for the players in the legacy financial world, so when you think about the speeds that are happening at Nasdaq or NYSE, they’re microseconds.
Tyler Winklevoss:
That’s really, really fast. I don’t know how many times you can…
Cameron Winklevoss:
It’s probably 100 times faster, if not more. Maybe a thousand times faster than the existing trading speed of Bitcoin, so Bitcoin…
Tyler Winklevoss:
It’s like orders of magnitude and a microsecond. I don’t know how many times it would require you to blink your eye in a second, but it’s a lot. It’s like more than is possible for a human being to do, so these trades are happening at, let’s call it like light, like the speed of light and they happen in matching engines all over the world and that’s what the financial world speeds, that’s what they’re used to, that’s the speed times, that’s just the standard and so to achieve that in trading Bitcoin, the only way you can do that is off blockchain and to do it in a centralized exchange. There’s just no way we see the block size today and the arguments about that. Bitcoin transactions take ten minutes approximately and best practices is waiting for six confirmations, so you can’t wait 60 minutes when you’re talking about dealing with microseconds over here and so 99.9 percent of all Bitcoin transactions actually don’t happen on the blockchain. They’re happening at exchanges. They’re happening OTC. They’re happening somewhere else.
So, the reality is it’s just not feasible, as we know it, to build a decentralized exchange that’s performant to the standard that it needs to be in order for market makers and financial players in ethics markets, securities markets, treasury markets, whatever to actually interact with, so we’re stuck with centralized exchanges and back to what Cameron was saying is the implementation of multisake in cold storage is super important and they can be night and day. You can do it really well or really badly and when we think about not all cold storage systems are created equal and often comparing them to each other is like apples and oranges and I think what we learned or what the Bitcoin ecosystem learned is that multisick loan is not necessarily enough and multisig with cold storage is now you’re starting to talk and I think we saw sort of implementations maybe that weren’t quite ideal and people resting on things that maybe shouldn’t.
Cameron Winklevoss:
I also think that decentralized, if you hypothetically could build a decentralized exchange that was fast enough and technologically there, it solves for maybe one problem, but not for other problems in the sense that, that may appeal to certain people who are okay taking custody of their own funds, but at least the existing financial system, most people want a custodian to hold their funds. They do not want to have the issue of storing their gold bars or cash under the mattress and so…
Tyler Winklevoss:
But there’s certainly people who want to do that and there’s people in Bitcoin today that would like to do that and solve for a certain attack factor that costs the money, but that probably creates another issue. I think centralized custodians that are regulated, that have good best practices controls and procedures in place, that’s what every other market in the world looks like. I’m pretty sure Bitcoin’s going to look like that, too. It doesn’t mean that Bitcoin itself will not be decentralized, just like gold is still borderless money but you’re not moving it around, you need a safe secure custodian to hold it. Nobody would argue with that and so I think Bitcoin will look more and more in some ways like that, but it’s never going to lose its true core super hero power of being a decentralized borderless digital asset.
Laura Shin:
One other thing that I was interested in is especially in 2015, a lot of people in financial services were saying that what is truly revolutionary is not necessarily Bitcoin, but blockchain and yet you guys have stayed more focused on the currency or aspect of Bitcoin and other cryptocurrencies. Why?
Cameron Winklevoss:
So, there’s been a lot of buzz around of blockchain or it’s not about Bitcoin, it’s about blockchain. We feel by definition a true blockchain is like immutable, irreversible, decentralized and opensource and that the world can build upon in a permissionless fashion, similar to how the three of us can go, we can go build a website on the internet. We don’t have to ask anybody for permission to go do that and we can do that and it’s truly opensource. We think that’s the beauty and the strongest thing about actual Bitcoin and the blockchain. The blockchain is just one piece of Bitcoin. It’s the open public ledger, but Bitcoin, the opensource decentralized nature of that, that is the strongest pillar of it, so taking one piece of it, sure, but I think a lot of technologists would argue that the same sort of things that can be achieved through private blockchains, which is what most of the discussion’s been around, can be achieved with the distributed database and that technology’s been around for decades, so we’ve just been sort of focused on Bitcoin because we think that it’s truly something different. It’s innovative.
When you separate the blockchain from Bitcoin, I think you’re talking more about distributed database problems and while certainly interesting and without a doubt there’s certainly financial institutions in other areas where they can improve that technology, but they can probably improve it with existing technology, they probably could’ve improved it a long time ago. It’s just that they needed a bit of kick in the pants from things like Bitcoin to say, oh wait, we’ve got to get our tech game a little bit more on point here. It should be maybe a little bit less back office and maybe a little more front office. Maybe we’re not so much a bank anymore, but we’re a bank and we’re growing into a technology company or we want to be cutting edge because we have to talk to consumers that are the millennials and the people coming up that are doing bank through mobile aps and things like that. If I think of like the town where we grew up in, all of the major stores, like the toy stores and things like that, they’re banks and they’re banks and they’re branches because they’re catering to a population that still comes in likes to do banking and I think banks were fixated this aging population for a long time completely sort of trying to figure out how to reach the millennials, the younger kids and things like that, so I think, look if Bitcoin has made their story and how they offer banking services better, that’s great, but I think that is a different, we don’t view that as competitive.
Tyler Winklevoss:
It’s sort of we made the comparison, okay AOL and CompuServe, they are a closed internet system. We’re focused on the internet and it’s sort of a head stretch when people are talking about oh the blockchain’s the innovation because on its own, we don’t feel like it’s anything new and we feel like these solutions have been there for a quarter century. When you start tokenizing the protocol and you talk about an open blockchain, now that’s something completely new. That is a new color. That is something that a lot of people thought was impossible to do and so as Cameron mentioned, I think it’s great. Banks need to improve their technology, we can tell you this firsthand dealing with a lot of them and T + 3, I mean there’s no reason it can’t be T0. Your stock can settle immediately, you should be able to go to the ATM…
Cameron Winklevoss:
Sorry to interrupt, but when you’re actually doing a stock trade, let’s say on your E*TRADE account, the trade says oh you know you just bought your share of Apple, it shows you in real-time. It’s actually taking three days in the background for that share to truly transfer.
Tyler Winklevoss:
To clear and for the money to hit your brokerage account.
Cameron Winklevoss:
So, a lot of these things, they appear real-time and in reality, they’re anything but and I think that gap will be closed and continue to be closed and probably could have been for a long time.
Tyler Winklevoss:
It could have been closed 30 years ago and whether or not it closes because traders like delayed settlement or whatnot, that it should be a choice, it shouldn’t be oh that’s the best we can do and so I think Bitcoin opened a lot of people’s eyes up to the fact that something can settle immediately, but we’re really focused on, as Cameron was mentioning, on these open blockchains, whether it’s Ethereum, whether it’s Bitcoin, open blockchains, open protocols. Similar to the internet, we can all go away and build a company and harness TCP/IP and internet protocols and things without anyone’s permission, without the permission of a company. We’re not going to go down to, it’s much harder to go to J.P. Morgan, Merrill Lynch, and say hey, I want to build a startup on top of your bank chain and what you guys are doing and if it goes really well in a year or two, promise you won’t pull the rug out from underneath me and shut the API off.
Cameron Winklevoss:
You don’t need to worry about that when you’re building on open blockchains and so we’re much more focused on that internet side of things and the tokens, and that’s what Gemini facilitates. We see ourselves as an infrastructure company, sort of like a picks and shovels-type company where we’re a platform. We don’t take a notional position on Bitcoin or Ether or what direction it’s going to go. We just want to help facilitate people to trade it, buy and sell it in a licensed and safe manner, and I think that the idea of the blockchain tech stuff and the post-trade settlement and the bank chains, that’s great, but it couldn’t be more different and you might as well not even have them in the same conversation because they’re just so unrelated.
Laura Shin:
Connect those dots for me between kind of like what you’re doing with the exchange and then the value that you seen in open blockchains like if you want to give people a place to trade this money or form of money, how it’s going to facilitate these other things happening on these open blockchains?
Tyler Winklevoss:
Sure. Sort of going back to maybe one of my earlier points is that if people can’t buy and sell tokens of let’s say Bitcoin or Ether or some other new digital asset and protocol that they want to build on top of and use, if you can’t find a safe and secure place to buy and sell and store that, then it’s really hard to build application layers on top of infrastructure that is falling over or getting hacked or untrustworthy and so basically, we think that infrastructure layers the sort of, the core building block and that will hopefully facilitate developers to do all sorts of things and build all kinds of used cases and applications that we can’t even contemplate today that we’ll be around in the future.
Laura Shin:
On New York’s Exchange, are you seeing more of like traditional Wallstreet traders and investors coming and wanting to trade there?
Cameron Winklevoss:
So, we see a combination of a lot of different participants. There’s everything from an individual user that is interested in Bitcoin, wants to learn more, and wants to buy their first Bitcoin and then you have more sort of long-term investors or people who might have been in Bitcoin early or people who want to take big positions today in Bitcoin that haven’t been in it, but want to sort of start getting into it and then see market makers that are Bitcoin centric people who maybe came out of traditional finance and have been focused on making markets in Bitcoin generally smaller, two to five person shops, and then we do have a number of existing financial institutions that are sort of tiptoeing into Bitcoin and saying what is this all about, how do we figure it out, and we’d like to trade and take on positions and things like that, so the spectrum is quite diverse and we have, I’d say, like a wide wage range of participations.
Tyler Winklevoss:
We definitely do see the blue-chip Wallstreet types starting to come in and they’re not easy to get involved. They ask a lot of questions. They do the due diligence and it’s hard, but we built a great product that they can get comfortable with and I think that’s, in the long run, going to be our differentiator, is that we can get through that difficult conversation. We have great answers to questions on our security story, our licensing, our regulatory posture and so that’s happening and our goal is to make that continue to happen, but these companies are not looking to do business offshore. They’re not going to wire their money overseas and they may not even be able to and so we’re building for that customer base, but like Cameron said, we can point to examples of just about any type of customer on our exchange from young to old, to financially savvy, to hey, I’m just getting involved, so we cater to pretty much everyone.
Cameron Winklevoss:
Yes. We specifically say that we’re building exchange for individuals and institutions. We care about both types of participants and we’re building tools that the institutional trader who makes markets or trades in equities or currencies around the world feels that has the power that they’re used to, but we’ve spent a lot of time building out our interface and the product side of Gemini for people who, I’ll say for lack of a better cliché, like my mom, can sign up and buy her first Bitcoin. It’s super clean, intuitive, and easy. That was the whole goal. I think, far too much with technology, Fintech companies, or at least traditional Fintech, if you look at like a Bloomberg Terminal or some of the brokerage platforms or software’s, they’re very terminal-esque and wonky looking and they sort of make your head spin and that might appeal to a certain type of.
Tyler Winklevoss:
Kind of look like surfing the internet in 1995, so that’s what we sort of joke about.
Cameron Winklevoss:
Yes. That’s right.
Laura Shin:
Do you feel like the trends that we’ve been seeing with Bitcoin will generally apply to other cryptic currencies? I feel like I’ve seen quotes in other interviews where you talk about how you feel like there’s going to be a future of multiple digital assets.
Cameron Winklevoss:
We do think so and we’ve spent a lot of time obviously talking about Bitcoin right now, but we do believe, I mean we built our custody system, our vaulting system, is built so that anything that uses like an elliptic-curve algorithm, we can store, so when we added Ether in, I believe, in early May and started supporting that trading, it was a pretty minor change in our custody system. Our custody system, we have what’s called hardware security modules, HSM computers that store the private keys and they’re tamper proof and tamper resistant. They basically are built, so that you can’t extract the private key and we use those Go distributed and located all around the country in a multisig configuration to store our Bitcoin and when we looked at Ether and it started to develop and look really interesting and viable to support, it was actually a pretty straightforward upgrade to just our existing. It’d almost be like putting a new application on your MacBook or something, as opposed to building an entirely new MacBook and two computers know like this is a desktop, we just put another application on it and we’ve been building our custody system for two plus years and I fully anticipate there being sort of more digital assets that will come in the future. We ourselves are invested in one particular company called FIOCOIN which is building basically, it’s not obviously, it hasn’t been released yet, but basically minors are rewarded for contributing storage to the network and so it becomes a cloud sort of storage, almost like an AWS. It’s distributed AWS.
Laura Shin:
Yes, it’s a centralized drop box.
Tyler Winklevoss:
Exactly. You can totally see the utility there. It’s not something Bitcoin can do or will do and so that would be awesome if there’s a distributed drop box out there. If there’s a token for that, we would love to store, support it, and allow people to trade it.
Cameron Winklevoss:
We’re also seeing this with companies themselves. I haven’t spent a lot of time looking at Steemit, but the example of a company that’s actually issuing their own token and that may or may not be a security, which is an interesting legal question, but it’s not just people building protocols for certain utilities, but people are taking a protocol approach to their companies and basically issuing tokens just like a stock share and so I think zooming out without getting too in the weeds, Cryptographic tokens seem to me like the future. It seems to me like all sorts of assets will trade via Cypotgraphic tokens, whether that’s me sending you a token that represents the keys to my car after you’ve paid me in Bitcoin for it or a TV or you sent the internet of things and you’re devices are interacting with each other by a cryptographic token transaction to provide or buy our self services, that to me seems like the future. Assets will live on blockchains and be transferred from person to person, machine to machine, or machine to person via cryptographic tokens and that is the future that we’re building towards with Gemini and I think it’s going to be a pretty exciting one.
Laura Shin:
Well, so this is actually a big topic of discussion amongst a lot of people in this phase and I happen to be at this meetup last night and there was a debate about whether these are securities where they will be regulated, whether the FCC will put a stop to them and then some people were saying, oh you know it doesn’t make sense for most companies, it’s just a way for people to try to make a lot of money and then there were others that were like, no, you really need one of these tokens and depending on the way that the network is setup, you could really need that in order to make this file coin function the way that you want it to function, so I feel like there is a wide variety of opinions right now on this. Do you feel like this is, I mean it sounds like you don’t think it’s a fad, but then in that case, when does it make sense? When does it not and in what instances can we see this flourish where it’s not going to be shut down by the FCC?
Cameron Winklevoss:
Well, I think that it’s a great question. If something is more than a fad and it becomes just the way the world’s moving, at some point regulators have to accept that and adapt to that. Obviously, the FCC’s some of the brightest regulators we have, so I’m confident that they will evolve and understand their mandate which is to protect the consumer.
Tyler Winklevoss:
And certainly, these tokens are a super exciting idea. The cryptographic tokens that represent an ownership of company, but they can also be really misused poorly and a lot of people could lose money with them, so just like we have regulated financial markets to protect the average Joe investor from getting swindled by boiler room-type charlatans, we’re going to need the same type of guardrails, whether or not this is considered a security or not and so I think that time will sort of playout and I think the demand of how the paradigm shift if it happens, then it should be interesting, but at the same time, the internet wasn’t always open, wasn’t a project that was basically military a class of military of government controlled and developed and then solely released out and then it’s regulated in some areas, but it’s constantly evolving.
I think that these tokens very much may be the future, but I’m an optimist at the end of the day with regards to regulation catching up and sort of technology finding the right path that makes things more evident, but it is a really fascinating idea when you look at your phone and this idea that you could have all of these tokens on it that represent your share of Apple, your Bitcoin which is, we think, is your future version of gold, but will disrupt gold and I’m looking, the listeners can’t see, but I have my iPhone and my leather wallet on the table right now and I think that the leather wallet doesn’t exist with plastic credit cards in it and I’m looking in it right now. I don’t have any cash in it, so cash is starting to go the way that Dodo in my life and I think it’s just a matter of time before credit cards and this nice leather wallet is gone, too, and I’m just carrying my personal computing devise, smartphone with all of my assets on it, whether it’s the keys to my car and I just walkup to my car and it opens because it handshakes with my phone and knows that the cryptographic handshake that’s happening is me. I walk to my house, the same thing happens. I want to sell you a share of my stock, I can send it to like an email and we can make some sort of exchange, so that’s sort of the way I see the future in the long run. I’m sure there will be a lot of interesting ups and downs and learning tails along the way, but that’s kind of the way I see it inevitably going.
Cameron Winklevoss:
Yes and just to be clear, I think Bitcoin, the CFTC in September of 2015, declared it basically an exempt commodity, similar to like gold and so I don’t think that’s there’s much of a question at this point as to the characterization of things like Bitcoin, but when we’re talking about tokens that are centrally issued and things like that, they send to fall a little bit more into the securities side of the field and there’s a _____00:46:59 and then there’s like, I think, three or four points that you can go through and see if something fits more into a security and in those cases, it’s going to be very interesting question of how do we characterize these things. Are they securities or does a regulation evolve somehow?
Tyler Winklevoss:
Is there some sort of safe haven area or market cap that you can experiment in that’s sort of cordoned off? Is there kind of like the jobs act for small companies or startups? Is there some certain amount of money or filing that you can do that’s not super owner-esque like filing an S-1 statement to make an IPL? How does that evolve?
Cameron Winklevoss:
Certainly that’s…
Tyler Winklevoss:
Yes. I mean I was flipping through the channels in between the Olympics on, I think Saturday or Sunday, and did catch a bit of the Wolf of Wallstreet and I was sort of cringing and saying thank goodness for financial regulation and so, it is a tough balance and I think that this is how mentioned, we have tremendous forward thinking regulators in the US at the FCC, at the New York Department of Financial Services, and that’s a big part of why we built Gemini in New York because the regulation was clear and under Superintendent Lawsky, they really blazed the trail there and so to build a company and to get a banking relationship, no bank was really going to bank something that was uncertain and so having the ability to be regulated and licensed was a huge deal, but yes, I think it will be an exciting future to see where all this goes.
Laura Shin:
Well, this has been a great discussion. Thank you so much. Where can our listeners find more of your work or contact you in the future?
Tyler Winklevoss:
So, winklevosscapital.com is the website for private investment firm. Our portfolio’s listed there. We blog on that website. We also are on Twitter, so I’m @tylerwinklevoss, just the spelling of my full name. Cameron is @winklevoss. The reason he’s not @cameronwinklevoss, people think he won a bet, but the truth is his, actually, full name won’t fit on Twitter handles. It’s too long. I think it’s 17 characters and Twitter has a limit of 15, so you can find us on Twitter, @tylerwinklevoss, @winklevoss. On Instagram, @tylerwinklevoss, @winklevoss and then we’re on AngelList, winklevosscapital.com. We blog, it’s our investment company website and of course, last but not least, Gemini.com is our digital asset exchange. You can buy and sell Ether and Bitcoin and there’s also email on both winklevosscapital.com and gemini.com, there are email addresses for inquiries that you can find, so it’s pretty easy to find some sort of channel into us. It’s more about what do you have to say and what’s the content. Depending on whether we have the time to get back, but also just lastly, getting in the ecosystem, getting into the Bitcoin ecosystem, or getting into the startup system is step number one. You know, just cold-calling someone seems like you haven’t done your work beforehand. You should be able to get to us. You should know an entrepreneur. We’ve invested in 50 portfolio companies in Silicon Valley, New York, and LA and each one of those companies has a lot of employees and those employees have friends and so it’s not when you start bringing out the social network rings. It’s not too many hops to get to us if you’re actually in this startup world and so generally speaking, going through a friend who can vouch for you that we know or we respect somehow, in our reaction, is always the best way to get to anyone, whether it’s startups or hey I want to become an actor, or I want to become an athlete. Well, you know, get into the system, get around athletes and start going to Regattas, start hanging out and you…
Cameron Winklevoss:
Or meetups. You mentioned you were at a meetup last night, right? We were at YC Demo Day yesterday and a number of entrepreneurs were presenting came up, said hello, business card, hey what are you working on, things like that, so we’re around and that’s the cool thing about Bitcoin and technology in general is that people are very giving of their time and want to be inclusive and everybody remembers when they first sort of got in, so when they see people that want to learn and want to get in, they generally return the favor.
Laura Shin:
Great. Well, thanks so much for coming on the show.
Tyler Winklevoss:
Thank you for having us.
Cameron Winklevoss:
Yes. Thanks for having us. This was fun.
Laura Shin:
Thanks for joining us today. If you’re interested in learning more about Tyler and Cameron, check out the show notes which are available on my Forbes page. Forbes.com/sites/laurashin and if you like what you’ve been hearing, please review, rate, and subscribe to the show on iTunes. Every rating and reviewing helps boost the podcast rankings. Thanks again for listening.
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