Tired of having your friends and family say cryptocurrencies are a Ponzi scheme, nothing backs them, they’re in a bubble and only criminals use them? In this episode, Amanda Gutterman, chief marketing officer of ConsenSys, and Jamie Smith, global chief communications officer of Bitfury, tackle every common misconception of Bitcoin, Ethereum and cryptocurrencies. This is an episode you’ll want your friends and family to listen to. Plus: Gutterman and Smith talk about how they did the seemingly impossible: create gender-balanced crypto conferences.
Transcript
Laura Shin:
Hi, everyone. Welcome to Unchained, the podcast where we hear from innovators, pioneers, and thought leaders in the worlds of blockchain and cryptocurrency. I’m your host, Laura Shin, a senior editor at Forbes covering all things crypto.
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Get big results in no time by visiting thinkonramp.com. The topic of today’s episode is how the hell do we explain blockchains and cryptocurrencies to other people? My guests today are Jamie Smith, Global Chief Communications Officer of Bitfury and CEO of the Global Blockchain Business Council and Amanda Gutterman, chief marketing officer at ConsenSys Systems. Welcome, Jamie and Amanda.
Amanda Gutterman:
Thank you for having me.
Jamie Smith:
Hi. Great to be here. Thanks for having me.
Laura Shin:
So, Jamie, let’s start with you. How did you get into Bitcoin and what do you do at Bitfury?
Jamie Smith:
Well, how much time do you have? Just kidding. So I was actually you know…I used to work at the White House and in politics and government and after I left my last post as Deputy White House Press Secretary, I went to a big PR firm and I was enjoying my life and my…my largest client actually at the time was Western Union and so I was aware of Bitcoin a little bit, but not too, too much and I was frankly home with my 10-day-old baby on maternity leave when a friend of mine who I worked with at the White House who’s now at MIT, his name is Brian Ford, called me and said hey, I think you should quit your super safe job and go work at this tech start-up on Bitcoin and blockchain.
I think I said to him that he was crazy and there was no way that I would ever do that, but I ended up…actually I think my words were that’s criminal money, I want nothing to do with that, are you crazy? So I actually what I ended up doing was because I was on maternity leave, not that you have a lot of time but you do have time to read and I kept…I couldn’t put it down, I would look, I would read, I would put it away, and then I kept going back to the next article and the next article and the next article and once I really understood it, which frankly took me a long time, I sort of went through the arc of what I think a lot of other people go through of first thinking that it’s something bad and nefarious and then understanding the security and then understanding the potential from a financial standpoint and then the beyond-finance piece was mind-blowing and then I was hooked, and I left my super safe job and joined this crazy start-up and that was two years ago and I have no regrets.
So I oversee all communications, strategic communications for Bitfury, which is the world’s largest and leading full-service blockchain technology company and then I oversee this new organization we started with a number of other people about a year ago called the Global Blockchain Business Council, which lobbies businesses and regulators on understanding the technology better.
Laura Shin:
Oh, gosh, I love your first reaction, especially because of the topic of today’s show, but before we get into all that let’s turn to Amanda. So how about you? How did you get into this space and what do you do at ConsenSys?
Amanda Gutterman:
Sure. So I started out in the more pure media and marketing world. I worked for the Huffington Post, working specifically on the blog platform there. I ended up leaving and starting a platform called Slant. That was a media company and what we did was we allowed any journalist to create a piece of content, publish it on our platform. We would optimize it to get traffic.
We would serve advertisements across it and we would give the creator a percent of the revenue brought in from the advertising dollars, so the way that we’d structured our business model, we ended up handling a huge volume of micropayments because of course not every story on the web gets a ton of traffic. It’s all over the map so I encountered blockchain technology. I knew about Bitcoin, I’d read about it but I really encountered it for the first time as a solution to the specific problem that we were having, which was processing fees.
I got really excited about decentralized peer-to-peer payment mechanisms and got really excited about all of the different business models that they would open up in the media industry. Then I learned about Ethereum and realized my…the scope of my thinking was so narrow in the context of all of the different use cases of Ethereum and I got so excited I ended up joining ConsenSys a little bit over a year ago as chief marketing officer.
At the time ConsenSys, which is the largest global blockchain venture studio, which is doing a huge amount to build applications on top of Ethereum and expand the Ethereum community worldwide. At the time it was a very engineer-led organization. It still is and we’re very proud of that, but there wasn’t really anyone building a team around telling the story of Ethereum and blockchain to the world and so I stopped into some of those functions at ConsenSys.
We now have a marketing team that’s going to be about 15 people by the end of November, so our functions range from PR to creating a huge amount of content, educational content about blockchain, about Ethereum, about decentralized applications or dapps and running all of our growth and analytics and our community so that means a lot of events and conferences and meet-ups to try to introduce these concepts to the wider public.
Laura Shin:
Okay. Yeah. And one of them includes Ethereal, which I do want to talk about later and also Jamie runs another conference, the Blockchain Summit, which we are going to talk about both of those later, but first let’s dive into the main topic for today, so I wanted to do a podcast on this subject for a few reasons.
One is that I feel like so much of the media tension around cryptocurrencies centers around price and that’s definitely something that’s kind of interesting to watch, but I also think people sometimes focus on it so much and forget that the real reason that crypto assets have any value at all is because the technology represents a real breakthrough and the second reason I wanted to go into it is just because as technology can be so difficult to wrap your head around, that when you try to explain it to other people, they often don’t really get it and so I wanted to dive into how it is that you guys with your non-technical backgrounds came to understand the technology.
Jamie Smith:
So I have spent the last 20 years of my life trying to take complicated issues and make them make sense to my family and that’s kind of how I think of my job. I also used to describe to my grandfather that my job is to make challenging things easier and to either get you in the news or out of it, so that is kind of how I define my existence and so when I came across this technology I really had a hard time.
I mean, it was…it’s not easy to explain this and I had to really explain it to myself. I think first I got very in the weeds of trying to understand how it all works technically, which I think is critical, but then I sort of looped back to taking on the big picture from 50,000 feet and where I…I kind of started in a place or ended in a place that I think is important for your listeners.
Essentially what we’re going to have in the years to come is I believe there will be global WiFi. I think that almost everyone in the world will have the ability to have access to and/or own their phone and so with those two components now you have basically a system that allows people to move money or any asset that they want peer to peer for almost free anywhere in the world, and that is a big game changer, so I really encourage people to kind of start big and think about it and then drill down deeper and deeper and decide how much more you want to know so that is kind of the basics of what this is.
Sometimes I call it a global notary because I think that that’s essentially what we’re talking about. It’s the ability to move all of these assets around the world in a secure way, but for me the biggest issue was understanding the security and once you really get that, I think that it’s really clear how much more this technology can offer the world and how globe-changing it can really be.
Laura Shin:
And what resources were you reading to try to understand the technology and some of the other concepts?
Jamie Smith:
You know, to be frank not that many. That’s not true. I tried to read a lot of them, but I found them all really not helpful and I remember saying to my husband at the time well, I think I might do this, I think I might actually jump off this bridge and take this crazy job and one of the reasons that I want to do it is because there is clearly a very strong need for communicators to get in this space and make some really edible content and what I mean by that is just how do you take all this and really understand it in a short, quick way.
And so you know I read and read and read and it actually made it more complicated for me, so I ended up just talking to people and the more I talked to people the better off I was and I continue that to this day. This is a very…it’s been two years but it’s a robust process of going around the world and hearing how other people describe this.
The best way that I’ve been able to explain it and I base this on sort of an informal focused grouping of these efforts is that I think of the blockchain like a train track between me and another person or you and another person and essentially there’s a car on top of that train track and that car is just a digital token and what people are doing is they’re attaching something to that digital token and in this case, in most cases at this point in this technology it’s money and when they attach the money to that digital token, they move that token across the you know cyber sphere and they send it to another person and when they do that, that transfer gets tracked in this notary and that notary is the blockchain and so when I think of a digital token, a digital token is a cryptocurrency. It’s a Bitcoin. It’s an Ether.
It’s whatever token you want to use, but it’s just that simple and then what’s blowing everybody’s mind is that it of course just doesn’t have to be money. It can be any asset and so hopefully that is helpful to people. I think that they can at least wrap their heads around that kind of imagery and understand where this is going and why it matters so much.
Laura Shin:
And Amanda, how about you? How did you start to figure out what the technology was about?
Amanda Gutterman:
Sure. So my approach really came through the software side, not the cryptocurrency side because I started by getting really excited about the applications of Ethereum for the media industry and on Ethereum the relation between the cryptocurrency and the blockchain is a little bit different, so the cryptocurrency serves as a fuel to actually allow the public mainnet to exist and to keep working and one really simple comparison that I’ve made before because sometimes I’ve been asked to explain blockchain as though I were speaking to a 4-year-old, which I can’t quite do yet, but is just the comparison to a computer.
So if you have a bunch of tabs open on your computer, eventually if you keep on opening tabs and opening tabs, your computer is going to slow down and not work and in a similar way Ether exists as an economic disincentive for overuse of the public Ethereum Commons. So without having a currency attached to the functionality of the blockchain, which is the big thing with Ethereum, that it can do all of these really exciting things and has all these amazing software applications, you need this kind of gas or fuel to actually be able to use it and that itself is a pretty good metaphor that you would have to actually power your applications with some kind of fuel and that fuel is Ether.
Laura Shin:
How do you guys begin to explain cryptocurrency to people? I asked some of my Twitter followers about this and they told me all of their family and friends are saying things to them like how can it be money? There’s nothing backing it. How can it be real? So how do you explain kind of like what it is and then also how it can have any value?
Amanda Gutterman:
Sure. I’ll just take a quick crack, which is you know monetary theorists have come up with a few specifications for what makes a currency. Those properties are usually scarcity so the actual number of the objects being used as a currency, fungibility, which means your ability to exchange them, divisibility so you can divide them into smaller parts, durability so they can actually survive time and weather conditions, and transferability, which is the obviously ability to move them between owners and throughout time human beings have used all kinds of objects as currencies.
Some of them rank really highly in terms of those properties and some of them don’t. You know, some of them are decaying. Some of these properties play into the reasons people decided to begin using gold, which also doesn’t have any inherent value. It gains value from human beings deciding it does and the fact that it has some of these properties and in a similar way and for me actually Nathaniel Popper’s Digital Gold was a great resource to learn about cryptocurrency and the space in general, even though it did come out before Ethereum and is mostly about the origins of Bitcoin, it’s a really good intro to how we move from thinking about gold to thinking about cryptocurrency and the kind of monetary theoretic basis for why this should and needs to exist and qualifies as a currency by the standards that monetary theorists have held it to.
Laura Shin:
And Jamie, what about you? What do you say when people ask you how?
Jamie Smith:
Well, that was an awesome answer. Like I said, I love learning from everybody I hear from. So I spend a lot of time talking to government officials and people and CTOs and people who are in positions of trying to decide whether they should go from the situation that they’re in, which is moderately okay with pretty high levels of cyber security to something that we believe is much more secure for data integrity because at the end of the day that’s what…that’s to me the biggest value of this technology from off the bat, right?
That to me is like the first door you have to walk through is understanding the pieces of the cyber security offerings and so what I think is fascinating is that you know there’s always the chart that shows how Bitcoin is going up, up, up, Ethereum, etcetera. When I look at…just take the Bitcoin because I’m much more expert on that, the increase in value of Bitcoin to me is actually really reflective of an increase in people’s understanding and value of the security that it offers.
The more that you believe that this product as Amanda was saying about gold, the more you believe this product has value, the higher the price goes, right? That’s the same with gold. It’s the same with basically cyber gold, which you know in most of the world cyber gold is cyber security.
Everybody in the world is trying to figure out the best way to keep data secure and not to you know go off on a tangent, but essentially I do…I spend a lot of time explaining this evolution that in the ‘90s and ‘80s when the internet was created, it was created to move information and it did that and changed the whole world, but that information had to be stored somewhere and when it was stored in various places it was stored in these silos that keep data and we’re pretty much still in that situation and so what these geniuses in 2008, 2009 came up with was essentially just a very simple concept of taking all that data and breaking it into a zillion pieces so that you don’t just…you can’t just break into one house, you have to break into an entire town, and you have to do it with all the same keys and all of the…you know, and there’s so many different factors and so that distributed ledger, that distributed technology is what keeps it and makes it so secure and so promising and so different from the current cyber situation that we’re in today, so I think that is why you’re seeing a value in this currency and the fact that there are only so many you know tokens out there, but I think that basically as the security gets even more validated, I think the price will continue to go up.
Laura Shin:
So obviously the value of money does derive from the perception that people have of its value, and yet at the same time we also have a lot of people like Jamie Dimon as we’ve found in recent weeks, who’s saying that that also then shows what a bubble it is, that if the only thing that gives it value is people’s belief in it, then it’s nothing more than that so what do you…when people say that how do you respond?
Jamie Smith:
So I’ll take a crack at that first. I think that one of the first things that I did when I got into this space was I went and found a lot of people who are a part of what I like to sort of loosely refer to as the creation of the original internet because a lot of those same people are in this space now because they see it as kind of that, that missing piece, that second wave that we’ve all been waiting for and I always ask them the same question, which is okay, if you want me to believe this is kind of the second coming of this great technology, then what year are we in, in comparison?
And interestingly I have only met one person of all of the hundreds of people I’ve asked who have gone past about ’92, ’93, and I think it’s fascinating to hear that because it’s a really important marker for your audience and for all audiences out there. Again, this is not a scientific survey, but it is interesting that most everybody stays in that space and they all say it’s moving a whole faster, but it’s still really, really early so I’m not saying that there’s going to be a bubble, but I am saying that it’s going to be a journey and maybe there will be some serious ups and downs, but the naysayers of this technology will love those downs and they’re going to hop on them and say see, I told you so but if you look at the trajectory of Bitcoin over the last nine years, there’s a lot of jagged edges in that arc, but that arc just continues going up and up and up and I think it will keep happening.
I really, really do as you think about how the data is stored on each one of these tokens, the value is just…it’s not just a belief, it’s where people are putting their actual information, which means you know…everybody knows information is worth a lot of money so I think that we’re going to see some dips along the way, but that arc will keep rising.
Amanda Gutterman:
I agree with a lot of what you said, Jamie, and we get that question sometimes as well. You know, isn’t this like the original web bubble, and around an exciting new technology there will be a lot of enthusiasm. There will be a lot of speculation.
There will be a diversity of projects in this space that are backed up by good technology and good teams and ones that are backed up by bad technology and bad teams. There will be projects that don’t turn out well that will end up having a chilling effect on the space certainly.
There will be excellent pieces of software created and we are very committed to standing up teams and software projects that are going to contribute value to this space and value to users, and we think that as things shake out the value of those software projects and of actually giving people technologies that they can use and that they like will be what drives the expansion of the ecosystem and many of those are coming online every day and really connected to the value, we see the utility, you know, as more people are using what we call the Web 3.0 and are needing fuel in order to power their usage of those applications. That’s a reason that a lot of people who are excited about Ether imagine that it might increase in value.
Jamie Smith:
And can I add one thing onto that, Laura?
Laura Shin:
Yeah.
Jamie Smith:
I just wanted to say that I could not agree more and it was really interesting I was very recently listening to an interview from 1995 I think, maybe ’94, with Jeff Bezos and it was incredible listening to him talk about basically what Amanda just said is that there’s a desire, there’s a functionality, there’s a need for people to be able to send these assets around the world and buy the knowledge that they want, which is what in his case was books, and that is how he created Amazon and it’s just…it’s so telling that you know if I had 2 minutes in a room with Jamie Dimon, I would say you know what, what why don’t you listen to this interview and then give me a call? Because you know it’s been a long journey for Jeff Bezos.
You know, that was 1995 and now it’s 2017 but when you have a vision and there’s a real desire in society for systems to change and become more efficient and you have a product that undoubtedly offers that, I don’t think you can stop that force.
Amanda Gutterman:
I think the comparisons to the early days of the internet are absolutely spot on. The same way you know I’m glad you brought up Jeff Bezos because the same way that people in the early days of the internet thought you know consumers will never use this, there will never be commerce on this platform, it’s too complicated for normal end users, boy, were those people wrong.
Eventually once the security and scalability issues were solved, eventually those things all happened. So I think we’re seeing a lot of similar, especially in our line of work, Jamie, comments about blockchain and cryptocurrencies, which is you know these are complicated, these are narrow in their focus, they are for a very small group of people, no one will be able to understand how they work. There aren’t you know broad consumer use cases and the same way we are working on security and scalability solutions that will allow people to create platforms that ultimately do let more people in.
Jamie Smith:
Exactly.
Laura Shin:
Okay. So let’s take this second to take a quick break. I do want to come back and discuss security more and some of the other issues, but first I’d like to tell you about our fabulous sponsor Onramp. If you’re starting up a new project or need some design or branding help on an existing one, Onramp has you covered.
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Focus on your core technology and leave the rest to Onramp. To learn more and see how they’ve helped passionate entrepreneurs achieve their dreams, go to thinkonramp.com. Thanks, Onramp, for being a supporter of this podcast and all of our listeners. So one question that I have for you guys is what do you say when people are wondering what backs the value of something like Bitcoin or Ether or any other cryptocurrency?
Jamie Smith:
Sure. Again, I hate to go back to this, but I think that the value lies in the security. It lies in the usability and the clear desire in the marketplace for systems to work better. You know, I…
Laura Shin:
And how do you explain the security to people? Could you help them understand that it’s very difficult to hack?
Jamie Smith:
So what I like to say is that every 10 minutes or so all of the transactions that are happening on the Bitcoin blockchain get put in a block and going back to that analogy of breaking into a house or breaking into a town so imagine that basically every 10 minutes a new house is built and so in order to break into this distributed network that has been broken up into all these different mini houses as opposed to just one big silo of data, every 10 minutes it gets more and more secure and that is you know…I mean, there’s one simple fact, which is that it’s been around for 9 years and no one’s been able to hack it, which is really phenomenal given how hard people have tried.
So I would never look anybody in the eye and say there’s no chance this can ever happen, but it is so much more secure than anything we know of today and there are some serious security experts out there who are sitting in meetings saying I get this, I get why you’re saying this and this is very appealing to me and it’s therefore worth it to me to consider moving the technology that we’re using over to this because it’s in our interest both security-wise and cost-effective-wise.
That’s for the business proposition. For the regular user, you know, there are just so many different applications that you can use. As I was saying about that train track with the car, think of all the things that you could attach to that digital token and send and know that when you did that that record, that record of that transfer, that movement from A to B cannot ever be changed and you think about that from the smallest things from electronic health records to you know a movie or music or some sort of asset that happens on a day-to-day basis but think about something like having a baby.
From here on out, if you have a child you can timestamp the birth of that child onto this system and there are 2 billion, not with an M, a B, billion people according to the UN in the world who do not have a legal record that acknowledges their birth. These are major, major problems that we’re trying to address and if you have a system now that could actually track some of those assets and not actually be able to alter the records, these are pretty mind-boggling so once you get through the security piece, you can really start talking about all these various possibilities.
Laura Shin:
And Amanda, yeah, how do you describe like how it’s backed or what makes it secure and especially in Ethereum’s case because you guys are switching from proof of work to proof of stake, I imagine it can get technical, how do you handle it?
Amanda Gutterman:
Sure. So I find every well publicized hack of a large company another opportunity to have a conversation about blockchain security, so something like the Yahoo hack and these are happening all the time and it’s actually pretty intuitive kind of visually thinking about it. If we store our information on centralized servers that are usually protected by perimeter security, the most common manifestation of which is a firewall, then you have a honeypot of data for hackers inside and once they get through that firewall or that other type of perimeter security, they’re in, whereas if you make it a town and I love that, Jamie, I might steal that…
Jamie Smith:
Please do.
Amanda Gutterman:
…if you make it a town or if you store that information instead of in that central server in a decentralized network of nodes, you can try and tamper with a huge proportion of those nodes and still not disrupt the functioning of the main network, which is a much more secure way to store your data. It just raises the bar of what would need to happen in order to hack it extremely, extremely significantly. I mean, proof of work and proof of stake are updates that are being made to the Ethereum blockchain, updates to our protocols.
They’re quite technical, but the roadmap for Ethereum, which includes proof of stake, which includes sharding is really oriented toward improving the security and scalability and one great thing for security that proof of stake was…does is make the network less vulnerable to something called a 51% attack, so we are putting in place and the Ethereum Foundation’s working very hard to put in place measures that will kind of similar to the early internet convince governments and enterprises and players that this is a secure public commons and a secure place to put your data.
Laura Shin:
And so from what I…
Jamie Smith:
The other thing that I would add, sorry, is that when you are…you have to figure out your audiences too. There are super highly technical audiences and that conversation is very different, but when you’re talking to most policy makers or as I like to call them kind of the top layer, anybody who’s in a significant position of influence to influence others, whether it’s a reporter, an editor, a you know policy maker, regulator, a business leader, it’s a different conversation and I think it’s really critical that you make it clear to them that it’s actually not that hard to understand.
Yes, there are things if you really want to get down into the weeds that are much more complicated but taking siloed data and knowing that it’s all in one place is something every CEO understands because that’s what they’re doing. They’re paying many companies a lot of money to basically build tons of barriers around that siloed information, and so what you’re proposing to them essentially is again taking all that data and breaking it up into a number of different pieces so that it’s so much harder to break into all those different pieces than it is to break into one and you’d have to do it in such a coordinated way and it would be so cost-prohibitive and as Amanda said even if you got into a little bit of it, you can’t actually break the main network anyway so it’s not even worth it.
Then they really…they understand that and there’s a moment in a room that is so awesome that I really enjoy over the last two years where all of a sudden you can see people in the room have this like aha moment where all of a sudden they’re kind of cooking with grease and they say, okay, so I get what you just said and then they’re ready to go into a much deeper conversation about it.
Amanda Gutterman:
And looking forward there are companies that are you know assembling huge amounts of data and it almost seems like there’s a very long-term kind of quest to have all of the data in the world in one place and if you’re going to have that the more data that you have, the more that you have access to, the more you collect, the higher the risks are because the rewards are higher and so if we’re going to be comfortable collecting this much data and storing it and having it exist somewhere, what form is it going to be in? How are people going to be comfortable with a future that looks like that and having one entity, having access and control over that data and putting perimeter security around it, shouldn’t make anyone sleep in their bed comfortably at night.
Jamie Smith:
Yeah.
Laura Shin:
And so but to get to this point that Jamie made about talking to different audiences, so I am wondering, there are probably people who will want to know more details about how it can be secure and so for those audiences, do you even go into things like mining or proof of work or you know and if you do how exactly do you explain that to people?
Jamie Smith:
Sure. You know, Bitfury does a number of things, software and hardware, but we also have mining facilities all over the world so we talk a lot about mining, but we don’t talk about it with every single audience, you know. It just depends on who you are meeting with.
There are…we always touch on it, but it is almost like we sometimes joke that we need a whole separate bottle of wine for that one, right? There’s a whole other conversation to have about how mining works.
My main gripe with the whole conversation is the word mining. We don’t even call it mining in our company. We actually think it’s kind of just a silly word that doesn’t convey what’s actually happening and in some parts of the world it sounds bad. It sounds like little trolls that are kind of stealing your money and it’s the exact opposite.
Laura Shin:
So what do you call it?
Jamie Smith:
We call it securing the blockchain because that’s what we do. We provide security for the blockchain or we call it transaction processing because that’s what it is as well. I mean, once you can kind of compare it to what happens in the world today, you know, your Mastercard kind of comparison, then people really understand okay, so it’s a way of processing and securing my transactions.
And once they understand that, then you can say yes and here is why it’s so important that you understand the price of Bitcoin again in my mind is connected to people valuing the security that it offers because once you understand that the “mining” is really just securing these transactions, then naturally there should be a price for doing that process and you know if a Bitcoin’s worth $20, then it’s really not in people’s interest to continue securing the system.
When a Bitcoin’s worth $4,000, it’s definitely in people’s interest to keep the system more and more secure so the more the price of Bitcoin goes up, the more secure the system becomes and so I think that once people kind of see that value chain and how those two pieces are interconnected that’s the kind of discussion that we have.
People who want to get into the real intricacies of how immersion cooling works at one of our data centers, which is by the way super cool and we’ll come back on your show and talk about that, we have other experts who can do a whole demonstration of the deep technical nature of how we’re making our data centers work and how the process happens but generally people want to continue to bring it back to what are they actually spending money on and how can they reduce their costs and gain a higher level of efficiency and they’re spending a lot of money on cyber security measures and you know they always will but how…there’s a much better way and most audiences want to just hear what that better way is.
Laura Shin:
Yeah. Well, so this is actually something that I was a little bit curious about, like the way crypto economics works is very complex to explain to other people, and I love what you said about how the more expensive the Bitcoin is, the more secure it is, because I have tried to explain that yeah, technically it’s not like you can’t hack a blockchain but because the economics are built into the system very intricately, like it just financially won’t make sense at certain points, so how do you explain how crypto economics works its way into the security of these systems?
Amanda Gutterman:
So one thing that’s really important is that every cryptocurrency and every token really think hard about the game theoretic incentives involved with mining it or trading it or as Jamie says, which I like, securing the network and to make sure because there isn’t just Bitcoin and Ether, right?
There are all kinds of tokens being built on top of the Ethereum platform and to really design those and each token can be designed differently to align the incentives of the people that are purchasing it and mining and trading it with the ultimate goals of the actual blockchain being able to be secure and scalable and continue moving forward, and I think Bitcoin and Ethereum have both done that in different ways that are both really interesting and that most security experts in our company and that we work with on the government and enterprise front are really excited about.
Laura Shin:
And also I have another question, which is a lot of people and this is what Jamie initially thought when she learned about Bitcoin, she thought Bitcoin is criminal money, what do you say when people say things like that, that they think only criminals are using cryptocurrencies?
Amanda Gutterman:
So there are criminals using cryptocurrencies. There are criminals using normal currencies. Like almost any technology, there are going to be people using it for all kinds of means.
I think it’s also relevant that blockchain technology is also helping governments provide higher quality services to citizens, and it’s helping the people track all of the transactions globally in a way that actually makes to easier in many cases to identify criminal behavior.
Also, the use cases of blockchain are so enormously helpful and value providing to humanity in a bunch of cases and I think that deserves to be in the same conversation. For example, and the former Prime Minister of Haiti was actually at Ethereal Summit, which we had in New York and we were speaking with him.
Female Speaker:
Yeah, Laurent.
Amanda Gutterman:
Laurent Lamothe. He…I think he was the longest-serving Haitian prime minister and he served in 2010 during the time of the…there was a really large earthquake in Haiti that destroyed all of the buildings that housed the municipal records.
This is what he told us, so it was terribly difficult to reconstitute the land registry and figure out who owned what and of course if a government is struggling to provide continuity of ownership to its citizens who have property, that’s a real problem and that’s how he got really excited about blockchain and Ethereum in particular as a mechanism for storing and transferring things like land titles, something like creating a land registry as a way to ensure that a government can preserve people’s claims to ownership even through natural disasters and there are amazing people like Elizabeth Rosiello and like Ola Doudin in the Middle East, who are using, who are creating companies and systems using cryptocurrencies, using blockchain that enable people to…people in emerging markets, people who otherwise wouldn’t necessarily have access to actually participate in a fuller way in the global economy, so I think the social good use cases are so enormous and significant that those definitely are a part of the conversation.
Laura Shin:
Yeah, and I know Bitfury is working a lot on land titling so I don’t know, Jamie, you can talk about that briefly but actually because of time I want to move on so why don’t you just kind of talk quickly about what you guys…
Jamie Smith:
Yeah. No. I was actually going to chime in on your other question, which was on the security piece and the bad guys using Bitcoin, and I think it’s really important for people to know and this was a very important process for me because before the White House actually used to oversee communications for the entire US intelligence community so not only am I an intelligence officer formerly, but national security is really important to me and security overall, and again I came into this system looking at it from a security standpoint, that like it or not, and this was something I really needed to accept, when there are bad people trying to use technologies, they usually if your technology is working, they like to use it, so it’s in a weird way kind of a seal of approval that it’s actually working.
They’re the first…they’re the early adopters as it were and it’s important to remember this is a technology. It’s not a panacea. When we look at the world today, you know, ISIS is using Twitter and Facebook so we can’t…we should not convince ourselves that because we have this amazing technology that therefore you know bad people aren’t going to try and use it.
What is amazing to me is actually this whole storyline never gets covered and I hope in the years to come that it really will is that what we are describing when we think of blockchain is a secure immutable ledger of an asset transfer. That is what it is and so from a law enforcement perspective, this should be the greatest thing in the whole world.
It’s so much easier to track cryptocurrencies than it is track a bag of cash so we’re in a position as a company and I know there are so many other companies involved where we’re really active in something called the Blockchain Alliance, which was started by one of our board members and he was the former chair of the White Collar Criminal Division at DOJ and what he and another guy named Alan Cohen from DHS started was this really simple concept of saying you know in the ‘90s law enforcement and industry worked together to figure out how to use the internet.
We need to go to law enforcement really early on and teach them how to use this technology to track bad people and it’s turned into this you know regular call with not only US agencies, of which all of them are a part now but Interpol/Europol/Australian police/Canadian, etcetera, there are so many countries glomming onto this blockchain alliance to try and use this technology to actually fight bad guys and hopefully as more people get caught and they will and we know that, there’ll be more stories to tell but there are actual people sitting in jail today for…that their crimes were solved by using blockchain technology and I think that’s extremely fascinating.
Laura Shin:
Yeah. I have had this conversation with several people where people say but you know criminals they’re demanding ransom in Bitcoin _____ 41:50 and I honestly every time I see a headline like that I just think those criminals are stupid.
Jamie Smith:
Well, they really are and if people…once people actually understand it, I think law enforcement over time would be honored if they used blockchain for that because then we can find them, so you know don’t tell the bad guys but it would actually be great if they were doing that.
Laura Shin:
Yeah and for listeners I actually did have some people from the Blockchain Alliance on this show in season 1. I don’t remember which number episode, but if you just scroll back through you’ll see some reference to the Blockchain Alliance and that’s the episode and also I have…
Jamie Smith:
We should do an updated interview with all those folks because there’s so much more that’s happened in those couple years, that would be fun.
Laura Shin:
Yeah and Kathryn Hann was also on the podcast. She’s a former DOJ prosecutor that figured out a couple of the federal agents had stolen some Bitcoin from the Silk Road investigation.
Amanda Gutterman:
That was a wonderful episode.
Laura Shin:
Yeah. Yeah. She’s fabulous and I also had Elizabeth Rosiello on who you mentioned so and she was the very first episode. She was great too so everybody should go back and listen to all of those. So moving on, one thing that I wanted to talk about was another thing that people often say, which is that they feel like Bitcoin is a Ponzi scheme.
This is people who don’t know Bitcoin and I was thinking that what’s interesting about these networks is that they’re often designed in a way where early investors or participants are incentivized to get their friends and family to also join in, so how do you convince people that these really are not Ponzi schemes?
Amanda Gutterman:
So let me just start with some of the tokens that are being built on Ethereum with using the ERC20 token standard. These are actually fertile ground for network effects because instead of just offering users a product, you are incentivizing them to have a set of behaviors and so you can actually bring a really large amount of people into a process of behaving in a certain way who are token buyers.
So just an example of that, we worked on a project called Add Chain that had a token called Add Token and the software here is a registry of white-listed media properties websites that advertisers can then use to make decisions about where they want to put ads, but everyone who has the ad tokens is incentivized by means of the token structure to participate in making sure that the registry is high quality.
So you can actually get a higher quality product by giving people tokens that incentivize them to do a certain thing, so network effects. The way that a lot of tokens are designed does incentivize people to do certain things and that’s a great way for software products to immediately have users and to pick up speed and to accrue quality and so that’s actually something that we’re excited about, that particular property of tokens.
Jamie Smith:
The only other thing I would add is that there are…looking at the very definition of a Ponzi scheme, when you understand what a digital currency is, it’s by definition not a Ponzi scheme. Now it is a digital token that has value and just like the dollar or the yen or the franc, there will be people who try to take that currency and do a whole bunch of things with it, good, bad, indifferent, hopefully mostly good, but you know going back to the answer before, there…you know, we don’t live in a perfect world.
We live in a world that is empowered by technology and it’s up to us to harness that technology correctly. It’s also up to us to work with regulators to help them understand the technology so that they can properly regulate the good from the bad and create you know some rules of the road over time that actually allow the right companies to do the right things.
You know, the Seci thing has been making some noise on this whole token sale process and I think that they are in good faith trying to set up systems very early on, kind of going back to that ’92, ’93 concept of where we are in this movie, of saying you know we’re not against people trying to out-innovate and do really cool things but let’s make sure that we’re…that regular people aren’t being defrauded and so I think you know at any stage in any early technology we…I would say to all of your listeners to stay smart and stay educated and make sure that you’re working with reputable companies because there are tons of really, really reputable companies and they’re really doing unbelievable things and you know there’s always going to be snake oil salesmen in the bunch.
Amanda Gutterman:
I couldn’t agree with that more and actually we who are you know very committed to this space are kind of incentivized to see really good players and really good technology products flourish here and to weed out by various mechanisms ones that aren’t so we would all like to see credible high quality products and token designs in this space.
Laura Shin:
And so when we think about kind of like where this technology is going because we understand the technology on a deep level, we can maybe come up with some vision of what that future looks like but how do you describe that to an everyday person?
Jamie Smith:
Yeah. Look, I think going back to my original comment, which is that we’re going to live in a world really soon where there will be global WiFi and where everybody…most everybody in the world if they want to will have a pretty inexpensive phone and the world is wired for this type of technology and most importantly there’s just a gigantic desire.
No one has challenged me on this statistic yet so I’m just going to keep saying it but I would be willing to bet based on the research that I’ve seen that some 60, maybe even 70% of the world’s population is living under some pretty broken systems and people are upset and there’s no coincidence to why this technology kind of came to life around 2008-2009 at the start of the Great Recession.
People really want change. They need…they want to provide for their families. They want to set up businesses and they want to work. They want to do whatever they need to do to provide for the people that they love and stay safe and do what…
Laura Shin:
But how do you explain how blockchain will make that possible?
Jamie Smith:
Well, I tell them that I think that there is a new tool in our tool box, one of the greatest that we’ve ever seen since the creation of the internet that will allow you to do what you need to do.
If you want to start a business, if you want to move money, if you want to start a business where you sell art and you want to move that art around the world, you can do it now with this secure immutable ledger and it creates just much less friction in the system and I think that that is really exciting.
I don’t know if there’s going to be 25 different public blockchains with a million private blockchains attached to them. I don’t know. Maybe it will be like a VHS thing where 1 or 2 win. I don’t know, but we’re definitely at the…right at the beginning of something really different that is going to allow for a new level of fluidity around the world, a little bit more borderless.
Laura Shin:
And Amanda, how do you describe this future?
Amanda Gutterman:
So I really agree with what Jamie said, highlighting all of the individuals around the world that have the misfortune of being born into broken situations in terms of the services that their governments are able to provide for them and I don’t know whether as you said 2 billion earlier, I’ve also heard 2.5 billion people who are currently unbanked or who don’t have access to government-provided identity and it certainly makes it hard to open a bank account and if you don’t have access to basic identity and to banking services, it’s very difficult to get yourself included in any way in the global economy.
And just at the baseline level, at the foundational level, offering people the possibility of creating blockchain-based identities for themselves that they can create without that government infrastructure necessarily being there to provide that for them, creating that identity, then attaching reputation to it, gathering attestations from their community, people that trust them, people that know them, and then using those attestations to build a reputation that makes you trustworthy enough to have someone halfway around the world perhaps loan you a small amount of Ether that you can use to execute smart contracts, to pay employees, to start a business.
That really allows human beings the potential to bootstrap their own financial inclusion and begin if they choose to capitalize on their desire to create and contribute and I think the amount of potential to be unlocked there is enormous.
Laura Shin:
Speaking of inclusion, I actually wanted to now switch to the two conferences that you both organized because they are easily far and away the two most gender-equal or at least not completely gender-lopsided crypto conferences I’ve been to and so I wanted to ask you guys, how you were able to do that in this space, which just from my very unscientific surveys, it appears to me as maybe about like 85% to 90% men?
Jamie Smith:
Well, I think that you just have to make it your mentality. You know, I have a thing for strong, smart women. I have always worked with them and around them and for them and I just you know my…it was very clear that the people who were organizing this event and that was me but a number of other folks that we wanted it to be 50/50 women and men and anybody who came with a new suggestion of another name because our event is only about 45-50 people, if it was going to push us over the percentage line, we just said no, and you just…that’s the…we sort of had that luxury of keeping the line on the number because we literally couldn’t go past it, but you just have to be clear about what your priorities are and we just…we didn’t want it to be 50/50 because we think women are you know important to have in the room only, it was because we know that they offer just the same amount of value and it should really unfortunately have nothing to do with gender but it does, but there’s just so many new perspectives and what made it possible is that there’s so many amazing women in this space, I mean just in this interview we’ve now named like seven women.
Female Speaker:
Totally.
Jamie Smith:
So it wasn’t hard to do. The only hard part was holding the line and saying you know I know that that guy sounds really awesome but sorry, just we’re going to go into the 55-60% range on men and we just can’t so that you just got to hold the line and open your eyes because there are amazing women all over this world doing incredible things with this technology. They’re not hard to find.
Amanda Gutterman:
So Laura, I’ll confess that mine was an accident. We did not engineer 50/50. We just sought in Ethereal to host as awesome a blockchain conference as we possibly could and we’re doing another one if I can plug it very quickly.
There are going to be a lot of women there, though I’m not sure what percent, in San Francisco on October 27, but we had really wonderful women and there are such great women in this space, it wasn’t hard to accidentally have what I think was a very even ratio.
Some panels had more women. We had you know amazing leaders like Amber Baldet at JP Morgan who’s our partner in the Enterprise Ethereum Alliance, the largest blockchain group on the planet, and Sandra Roe from CME Group who’s also part of that…
Laura Shin:
Who was also on the podcast. Yes.
Amanda Gutterman:
…who’s amazing and there are so many names I’m not going to even try and go through them, but there were so many individuals who just appeared as outstanding leaders in this space that it wasn’t…it actually really wasn’t difficult to have it end up that way.
What I’d also add is that by virtue of the way the technology works, it’s inherently a technology of inclusion and that means not just in franchising people that have been historically locked out of the global economy, which are disproportionately women, it does do that, and also adding a layer of transparency to how capital and funding are working.
You know, some of the mechanisms for capital raising or getting funding through blockchain and cryptocurrency aren’t happening in back rooms, they’re not happening in board rooms full of men who decide who should get funded and who shouldn’t. It’s about releasing your smart contracts.
It’s about you know saying this is my project and it isn’t as connected to the opinions or possibly biases of a small group so I really think that the way that more and more blockchain companies are finding themselves using the tools of the blockchain are offering enormous opportunities to women.
Laura Shin:
Yes. Yes. And that’s actually an issue that I’m hoping to dive into even more. I have written about it a little bit, but I also was thinking recently it definitely should be a topic for a podcast because sometimes I do look at what’s going on in this space and just think wow, it’s kind of interesting that this technology has so much potential to bring inclusion to typically under-represented groups like women and yet there… sometimes it feels that there aren’t that many women in this space but anyway so this has been such…
Jamie Smith:
I don’t know that I agree with that. I’m so sorry to cut you off but I think that it’s been really and maybe it’s just because I come from government where there’s definitely not very many women, but I think there are some really phenomenal women and not just a few.
There are tons of women in this space and they’re doing incredible things from Jemma Green in Australia to Marianna Dahan to Stella Marcon to…and not only that but you know Maja at GE, I mean there are…not only that but their stories are incredible. Not only are they in these big jobs now, but they are refugees in their former life. They are you know grenade survivors. They are Time Magazine’s Top 100 Most Influential Women. They’re really cool people.
Laura Shin:
That’s Roya who was also in the podcast.
Jamie Smith:
Roya Mahboob who’s _____ 56:16. There’s so many cool people in this space who I don’t know…I kind of have a different theory, which is that the first wave of the internet was obviously and continues to be incredibly male-dominated and so now that we’re in kind of this second wave, which I do believe we are, I think a lot of women are coming in with a lot of really strong opinions and they’re kind of over the ways of the past and they’re ready to out-innovate and you know become their own VCs and I just I think we’re going to see a whole new wave of kind of feminism in this new space. I really do.
Amanda Gutterman:
Yeah. I couldn’t agree more and also just another thing I’d add in terms of learning to work with blockchain technology from the more technical front, this technology is so young that if you start learning to code in Solidity for example right now nobody has that big of an advantage on you.
Jamie Smith:
Yes.
Laura Shin:
Yeah.
Amanda Gutterman:
You can still be one of the first people to learn how to do this so it’s not like there’s an entrenched hierarchy of people that have spent a long, long, long time knowing about this. If you start now, you’re in a good position. There’s no door to knock on. You can start doing it immediately.
Jamie Smith:
No. That’s so true because that seems to be the hardest kind of ceiling to crack in a way is the engineer side, the developer side and it’s so…it’s ripe for people who are just starting out because you will have a running start in years to come on everybody else after you.
Laura Shin:
Okay. Well, so for all of the women who are listening out there that’s some career advice.
Jamie Smith:
Get in the game. Get in the game. We need to you.
Amanda Gutterman:
Apply to ConsenSys Academy. We’re training lots of developers.
Laura Shin:
Yes. Actually that is true. I do know about that resource. Okay. Great. Well, I’m so glad that you guys both came on the show. Why don’t you guys let people know how they can get in touch with you?
Jamie Smith:
Great. I am @blockchainsmith, which is my Twitter account. So feel free to reach out. I’m on LinkedIn. Again, it’s Jamie Smith and look us up on our website also for the Global Blockchain Business Council, which is gbbcouncil, so the c has like a double play but thanks so much for having me on. It’s been a lot of fun.
Laura Shin:
And wait. You said gbbcouncil. Is that on Twitter?
Jamie Smith:
No. Sorry. Yes. That’s on Twitter as well, but that’s the website as well. It’s the same Twitter account.
Laura Shin:
Okay.
Amanda Gutterman:
If you’re listening, feel free to send me an email. It’s [email protected]. Also you can meet me in person at Ethereal. You should definitely come if you have a chance.
Jamie Smith:
I didn’t realize we were giving email addresses also. I’m happy to do that too.
Laura Shin:
Well, if you want.
Jamie Smith:
It’s [email protected].
Laura Shin:
Great. Well, thanks, both of you again for coming on the show.
Jamie Smith:
Absolutely. Thank you, Laura, for all that you’re doing. It’s really exciting.
Amanda Gutterman:
Thank you for having us. This was awesome.
Laura Shin:
Thanks so much for joining today’s episode with Amanda Gutterman of ConsenSys and Jamie Smith of Bitfury. To learn more about them and to find previous episodes of the show with other innovators and thought leaders in the blockchain and crypto space, check out my Forbes page, forbes.com/sites/LauraShin and be sure to follow me on Twitter @LauraShin.
New episodes of Unchained come out every other Tuesday so if you haven’t already subscribe on iTunes or wherever you get your podcasts. If you liked this episode, share it with your friends who are looking to learn more about this rapidly evolving space and rate, review, or send me feedback on who you’d like to see interviewed on the show. Unchained is produced by me, Laura Shin, with help from Elaine Zelby and Fractal Recording. Thanks for listening.
