[0:00:11] All right. So hi, everyone. As has been established, I am Greg Brockman. I'm the CTO at Stripe. And just to get a sense, so how many people here actually currently own Bitcoins? Raise your hands high. So pretty decent number, it seems like, majority of the audience. How many people have actually purchased something with their Bitcoins? So not just exchanging currency, not just holding onto them and speculating, but actually gone to a merchant's website and bought something?
[0:00:41] Raise your hands high. Okay, cool. So a smaller number of people, but actually a non-trivial number. And I think that's actually fairly unique for this audience. I think that Bitcoin is still very, very early. And the question that I'm going to ask in this talk is, how can Bitcoin be useful for mainstream consumers? How can it be something, what would it look like once it's very, very usable and once it's out there and used by lots of people?
[0:01:11] Countries like the United States or the UK. And I think the place to start is to first examine what currency actually is or what money actually is. And so traditionally there are three functions of money. So the first two are store of value. And so basically just a place you can go and put your life savings or a unit of account.
[0:01:31] And so that's really just something like where you can talk about money. You can say, this year I made 30,000 euros, and that other year I made 40,000 euros. You can compare them, and it's pretty useful for your unit of account to be fairly stable so that you can make comparisons across time. And on those two fronts, Bitcoin has shown promise, certainly in high-inflation economies, places where you're not sure that you can trust the government, you can trust the currency over time.
[0:01:59] Once you're in a more stable economy, like something like the US or the UK, it becomes a much tougher proposition. It becomes a lot harder of a sell to convince a consumer to go and move their life savings into this thing where suddenly they have to think about key management and what happens if they lose their private keys and a hacker takes all of their money. It's a pretty tough proposition for people, especially when you think about comparing that to the various insurances that exist on most banks.
[0:02:27] And so then that leaves you with a third function, the medium of exchange, the ability to transmit value. And here, on the other hand, is something where Bitcoin really has some promise, right? That if you think about how value transport happens today, it's actually surprisingly painful that there are very few parts of the internet that look exactly like they did 20 years ago, and payments is one of them, right? For whatever reason, that the experience of paying for something online hasn't really progressed past the point of,
[0:02:57] You pull out your credit card and you punch in a bunch of details and you kind of hope that the person at the other end of the wire isn't sketchy and isn't going to run away with your credit card. And as well, if you think about international payments, that those are also something that are very frictionful. And this is something that's probably less top of mind for a mainstream consumer, but there's definitely a segment of people who have real problems with this and who think about this on a very daily basis.
[0:03:27] And I think that for the first time, we're really in a position to solve these problems. I think that before cryptocurrencies, there were a bunch of things you could imagine building, but in reality, it was too hard, and that's a lot of why it didn't happen. And there are a lot of reasons that I think cryptocurrencies could solve these problems.
[0:03:45] You know, one is that they're built sort of in the right way technologically, right? That they're built on top of cryptography so that you're not sharing your secret and that you can actually specify policies as to how much money someone can take or you can imagine building some sort of recurring payments into something like the blockchain and going down those routes. And so that there's a lot more rope given the actual sort of underlying primitives. But I think that the really important distinction is the fact that it's an open system.
[0:04:13] And time and time again, we've seen that open systems just get way better, way faster than their close counterparts. And the relevant bit there is that any developer, anyone who's out there who has an idea can go and just build. They don't have to think about, oh, how do I actually get a deal with this bank in order to be able to build my application or whatever it is. You can just do it. And as a result, you see this explosion of an ecosystem.
[0:04:36] And very importantly, when you're building things at a lower level, at sort of the level of physically interacting with the blockchain or things like that, that you can start getting all the benefits of all the work people did before you. If you think about the internet, if you're starting up an ISP today, that you get all the benefits of the fact that everyone else has already built ISPs. And all of the work that everyone else did suddenly means that you can connect to all these other users on the internet.
[0:05:00] And so that's really what I mean by the fact that an open system is something where you'll see these compounding effects and sort of exponential growth of value. And I think that that's a very promising and very important thing. And so, okay, so what we want is Bitcoin to become
[0:05:16] A transport for value. But we don't want consumers to have to think about the fact that it exists. You sort of have no choice but to start thinking about building gateways. And so a gateway is a pretty simple thing. It's just something that allows you to get into and out of the network. And so you can imagine that what we do is we start focusing on let's build gateways, one in each country, possibly multiple in each country. It doesn't really matter. The important point is the consumer can go to their gateway's website, sign up for an account, and then just start transacting.
[0:05:45] And as far as they're concerned, they're just interacting in their local currency. You've signed up, you have your Canadian dollars, and maybe you want Canadian dollars to appear in someone else's account. Maybe you want it to be translated into euros. It doesn't really matter. On the back end, it's all going to be converted into Bitcoin. And when the two gateways talk to each other, they're going to be using Bitcoin and translating for their respective parties. And so why is this valuable? Why is this something that we want to do?
[0:06:13] Well, so if you think about back to the problem of international payments, the world's financial systems right now, each one sort of allows you to transact internally, but there isn't good connectivity across them, right? You have ACH in the United States, you have BACs or FPS in the UK, but these systems don't have any way of sending messages to one another. And as soon as you have a connective substrate,
[0:06:36] As soon as you have something like a Bitcoin or another cryptocurrency that everything is back-ending to, suddenly all of these systems become way more valuable because they can all talk to each other. You think about this just like before the Internet, right? Everyone had sort of a... They did have local networks, right? You did have the ability to kind of connect computers. But the thing that made it all way better and way more powerful was the fact that suddenly you had connectivity across all of these, and suddenly the entire network becomes a very, very valuable thing.
[0:07:04] And so from the perspective of how you actually build one of these, how you actually implement one, well, so one thing that's, I think, very important about them is that you just have to comply with your local regulations. If you're building one in the U.S., you just have to think about what are the U.S. regulations. You don't have to think about how do we get a deal with a correspondent bank across the ocean. How do you actually have a presence in multiple countries and try to make all this work? And that's something that's a big contrast to if you were to try to, say, build gateways that all back end.
[0:07:34] Thank you.
[0:07:54] Compliance at a local level without having to complicate the implementation and still mean that everyone can build on this ever more valuable growing network. And another very powerful thing is that the companies, the gateways that are going to be building
[0:08:12] On the system are all going to be technology companies. They're all going to be focused on how can we build a valuable user experience, something that works well. And once you're there, because everything is built on open protocols, you can start designing new open protocols that make the experience for users better. And so there's sort of no reason you couldn't build something like this, where every user is addressed by something that's more like a Twitter handle. And on the back end, when you want to pay, that
[0:08:37] The merchant's gateway or whoever you're paying's gateway calls out to yours and says, could I please have $10 or the appropriate number of Bitcoin? And then you get a push notification to your phone, you accept it, and the payment's done. And whatever the ideal payment experience is, suddenly you can build it because all of the players are in this open ecosystem and are companies that fundamentally care about this sort of experience. And once you're in that world,
[0:09:05] Suddenly, Bitcoin starts to look like something that's very familiar to us, IP addresses. If you think about what most users see, what most people who are interacting with the internet know about, it's not this lower layer, right? It's host names. You type in google.com, and that's what you interact with, even though on the back end, it resolves down to some opaque string of numbers. And similarly, you can start seeing that with Bitcoin, and that there's...
[0:09:31] There, suddenly you have a very transparent way of interacting with Bitcoin as a cryptocurrency. And then the other really interesting thing is that this doesn't tie you into Bitcoin in particular.
[0:09:43] A gateway could actually back into multiple cryptocurrencies. And so if there are competing ones in the future, if there are particular properties you want out of one versus another, this gives you a pretty good story for how you can still have a unified layer, a unified way of addressing everyone in the world and still be able to have multiple transport layers. Now, this wouldn't be the first time that someone built a global network. So PayPal is probably the first thing that comes to mind for most people. And I think the big difference between a system built on Bitcoin
[0:10:12] And PayPal, it all goes back to being an open system. If you want to compete against PayPal, if you want to try to make something that's more valuable than that or to try to get value from it, the thing you have to do is you also, in addition to building new technology, have to build an entire network. You can't build off the shoulder of the giants that came before you and got all these people using it. Fundamentally, a closed ecosystem doesn't give you that option.
[0:10:35] And so correspondingly, people sort of haven't pushed PayPal to get better. And correspondingly, it hasn't really gotten better in the years since it was first created. You could also look at things like Swift. And Swift also has the problems of being a closed network. But I think there's also another really interesting thing, which is Swift is just a messaging layer. There isn't really the ability to move funds built into it. The way that it works is effectively that if I'm a bank and I want to send money to another bank, I send them a message saying, hey, I'm going to be sending you all this money. And then kind of out of band, you have to find
[0:11:05] A pathway through some correspondent banks. And along the way, some of those banks might take some fees. They might have some surprising foreign currency exchange. There are a lot of weird things that happen because that layer, the actual movement of funds, the actual translation into various currencies is not baked into the protocol.
[0:11:23] And so the more that you can do to sort of bake the rules of engagement, the actual way that everything's going to play out into the protocol, the more certainty you can have and the more you can make sure that intermediaries in the process aren't going to abuse it or sort of do unexpected things. And there also are cryptocurrencies that sort of have been built around this model. And I think the most important thing, the thing that really defines success, is going to be the network effects, right? It's all going to be about the number of users you have.
[0:11:51] And so I think that building this on top of Bitcoin is a very promising thing because Bitcoin is by far the most successful cryptocurrency right now. I think that if another one comes along and is able to get users, that I think that that would also be a plausible alternative for building things according to this model. Now, I think it's worth comparing what a system built on these gateways would look like compared to something like Visa. Is that all we need? Did we just replace Visa and we're done?
[0:12:18] And so it turns out that Visa does many things, which should not be a surprise. But three sort of, you know, you could kind of roughly categorize them into these three things, where first of all, they're a network, and that something built on Bitcoin, totally that.
[0:12:30] But it's also a consumer trust and protection provider. It provides the guarantee to someone that if you see this Visa logo and you swipe your card or you're punching your card number and the merchant does something bad, whether it's that your card ends up getting stolen or that the merchant doesn't deliver the goods or it turns out the goods are defective.
[0:12:50] You will be made whole. You are protected. You can trust that you can just interact with this ecosystem and do the things you want to do, and you don't have to worry about bad things happening. And that's really important because people end up spending more and that the whole ecosystem becomes much more valuable when you have that kind of trust built in, when you don't have to constantly think, is this someone that I want to trust or not? And then correspondingly, Visa ends up setting rules and regulations and making sure that only good actors are allowed on the network.
[0:13:19] And the thing that's going to happen with Bitcoin is that I think that you have that network piece. You don't have those other pieces. But those other pieces are really valuable and sort of necessary, especially in an open ecosystem where you can really apply free market economics. And because they'll make people pay more, because there are things that will make the ecosystem more valuable, they just will sort of necessarily have to emerge. It's a market opportunity for someone if they don't.
[0:13:48] It's possible that we can solve decentralized reputation. We can come up with some way of solving this through a blockchain-like system. Some people are trying it. I'll be very curious to see where it goes. But if that doesn't happen, I think that really the only solution is that you end up with a few centralized reputation providers or consumer trust providers. And the reason you can only really have a few of these is the fact that they have such a strong brand, that their asset is their brand, and so there are network effects associated with that. And so it always makes sense to consolidate.
[0:14:17] If there's like kind of a fragmented ecosystem of them. And you can also see a little bit of evidence of this and the fact that escrow is something that's really starting to become prominent and prevalent in Bitcoin. But escrow isn't quite what I'm talking about here.
[0:14:32] I think that the fundamental thing about escrow is that it's not actually a solution for how can you make people trust. It's really a way for you to say, I don't trust you, and I'm going to hold on to the money until I've gotten my goods and have been able to inspect them, and I'm sure that things are up to par.
[0:14:49] Escrow, first of all, is only really a partial solution. What do you do in the case of things that aren't shipping you some goods? What if it's a service of some form? Or what if what you're really trying to do is you've been sent a TV and after you raise the money from escrow, two days later, you discover that it was built with faulty parts and now it's destroyed. And fundamentally, you need something that is able to provide that trust layer.
[0:15:15] And I think that you can imagine these companies bootstrapping themselves by having this very simple value proposition of you go to merchant, you say, hey, if you use me, if you put my logo on your website, then I will boost your purchases. I'll boost your conversions. And then at that point, it becomes a very simple business case. And that's a really easy way for these companies to start building their brand and start becoming something that's very prevalent. And you can imagine the user experience starts to look something like this.
[0:15:44] Where these providers, they have this very strong brand that there's something where when a consumer sees it, that they know that they're protected. They know that if anything goes wrong, that they'll be made whole. And once you're in that world, then you have these dominant players who have this brand, which once again is their asset. That's the thing that they really care about and hold on to. And everyone else in the ecosystem will also want to be able to
[0:16:13] To benefit from that, be able to get value from that. And particularly, imagine you're starting a gateway tomorrow. No one really knows who you are. The obvious solution is that you go to one of these providers and you say, hey, can I put your logo on my website? This is something that consumers already understand. You're in the business of sort of vetting people and making sure that they're doing good things. I'm willing to let you come in and do whatever auditing you need to do. And then at that point, can I sort of do business under your logo?
[0:16:41] And if you think about it, this is actually very similar to something that happens today with co-branded cards. If you think about something like this, you get a card from your bank that has this Visa logo on it, and there's a very clear dominant brand in that relationship. You always think about it as a Visa card, not a HSBC card that has this random Visa logo on it, and you're not sure why. And once you're in a world where there are some people who get to put this logo on their website and some people who don't,
[0:17:10] You're going to need to start to have rules for those. The providers will have no choice but to start setting up a set of rules and regulations and enforcing those and making sure that bad actors are not able to partake in this ecosystem. And so suddenly you're back to something that looks a lot like what we have today. All the pieces are there and they all sort of fall out of the fact that it's a free economy and people will start building the things that are valuable and that there are market opportunities if people don't build them.
[0:17:42] But there is one thing that's fundamentally different, one thing that does not change even in a world like this, which is the fact that it remains technologically open. And that is such a fundamental shift, that is something we've never seen before, that I think it's really hard to predict what that world will look like, except that it'll be whatever sort of is the most valuable or the best from a technological standpoint, because anyone can come in and start building things that are better, start building really good technology. And that's totally what happened with the internet. A second thing that...
[0:18:11] That has changed here is the fact that you went from something that used to be a single provider owning the entire stack to individual pieces of the stack provided by different companies. And one place where you can contrast this against is against, say, the mobile carriers in the United States who traditionally have owned the entire thing, right? They've owned the hardware. They own the operating system. They own the applications that were run on top of it. And correspondingly, it just didn't get that good. And especially when you had something like
[0:18:40] SMS is the majority of someone's revenue, and you have a choice of cannibalizing that and letting people run applications that bypass SMS. There's going to be a very clear answer if all of those components are run by the same company. But as soon as you split them up, then you can start having people who optimize for each individual layer and make sure that if there are any conflicts amongst them, that no one compromises the user experience. And I think that another...
[0:19:09] The flip side of this is net neutrality. As soon as you take the ISPs and allow them to start getting their hands into the application level, then everything starts to get worse for everyone. So I actually think that the decomposition is something that's very valuable and very important. And this would also be the first time that we really had a fully open ecosystem that allowed for both peer-to-peer and consumer-to-merchant transactions. This was something that really stretched across the world.
[0:19:35] And so that's, I think, where we want to end up. I think that's where the ecosystem needs to go. And the question then becomes, how do you get this started? How do you get the ball rolling? And I don't know the answer to that. I do think that there are a couple
[0:19:48] Thank you very much.