Hello, welcome back to the Dr. Nilda Business Foresight Show. Today I have with me my co-host Rachel.
Hi everyone. How are you?
I have a special guest whose name is Sergio Marrero. He considers himself a serial entrepreneur. He’s a facilitator and he’s a researcher. He graduated from the Harvard Business School and the Harvard Kennedy School of Government. He has worked on strategy and innovation at firms such as PepsiCo, Deloitte Consulting, Doblin, and Teach for America. He leverages his background in business, technology, and design thinking to help companies aim in shaping the future of industries by identifying market opportunities and launching new ventures. He works with company founders globally with assisting them to create the future by accelerating innovation and launching disruptive ventures for a better world. What a resume. Welcome Sergio. How are you today?
Very good. Thank you, Nilda for having me. I appreciate it.
I’m very excited about this Bitcoin subject that is what we’re going to be talking about today. I’m really going to jump in because I have so many questions and I want to make sure that we use time efficiently. I will start my first question which is of what specifically is going on with this blockchain Bitcoin space?
I’ll start with what is blockchain and what is Bitcoin. So, blockchain or decentralized ledger technology refers to the application. Just like you have word, word is an application. Applications that use a decentralized database. What that means is imagine there’s a person that has an Excel spreadsheet and writes down something that happens. Then there are a group of people in the applications they’re usually called nodes that when something happens it’s replicated across each of these nodes. So, everybody has a duplicate and the reason that the centralized ledger is powerful is that if you get rid of one ledger or one node it still exists. It’s a network and there’s no centralized authority. So, the reason it’s all the craze now I would say is really because people are using it to make money and I can go into how they’re doing that. But, before I do that to talk about Bitcoin, Bitcoin is a specific application that uses a decentralized ledger. Everybody knows it as the primary cryptocurrency. It’s not really a currency they’ve been calling it a crypto asset. The reason people have been using it as a form of money or something to transfer they give their local currency to get Bitcoin and then actually pay for things across countries. Because you don’t need to go through a central authority like a bank and if it takes days to go through that process this is something that can take a couple hours to execute a transaction on a global level. People are excited because this no longer depends on the government. There is no central authority that can be hacked. You’d have to hack all those computers at once so it’s secure. People are excited because it moves from these big businesses and governments from having control over these fiat currencies. Now a decentralized system where a network controls that and it’s this notion of the power shifting to the to the people or to the masses. That’s elements of why people are excited about Bitcoin and blockchain.
Would you say this is more like a prepaid digitized barter system because you’re saying it’s not necessarily currency? Would you say like you’re prepaying?
The reason I say it’s not technically currency is because currency is backed by a government. This is not backed by any government. This is a decentralized system. If you are in a loyalty program and you’re getting points let’s say you fly for an airline or you go to a hotel or you go to your local vendor and they’re giving you points every time you spend money. That’s what this is. This is a digital point system that the difference is in that case there’s usually a central authority. That company governs the points and can give out more points. The reason this is a big shift is because this application is set up and nobody can just issue more points. There are rules in this system and there are a scarce number of bitcoins available. What that does is it creates scarcity. That way let’s say you pay a hundred dollars for for some Bitcoin somebody just can’t create more out of thin air and devalue your Bitcoin. Which we don’t realize because we trust in these governments for the most part that’s exactly what governments do. When they need more money, they print more money which actually devalues all the currency that we have. That takes place on a cycle over long periods of time. We just trust that that they’re acting in the best interest of the whole. This is a different type of asset it’s digital, it’s scarce and I will also say Bitcoin is not the only type of digital asset. There are over 1300 coins crypto currencies at this point and I would I would bucket them into three different types. One is the bitcoin type technology. It’s public it’s open and different people can participate in it. Then there are tokens which are like airline miles for a specific company or project that they issue. But the thing is that tokens usually can only be used for that application or that team that’s using it. Then the third is companies are setting up these blockchain systems so that they can use them internally. So, they’re not public they’re private. Those are the three different categories the major categories. There are others if you want to get more technical. But, those are the three major categories for blockchain, technology and decentralized ledger technology that’s being deployed.
I’m going to take some steps backs. I don’t want to go forward I want to take some steps back. I understand the miles. You said that if you buy a hundred dollars they can’t make more. But there are people that are making money because here’s a thing I have miles and I know this because of my credit card. So, there’s the miles of the credit card. I also have points with hotels and those don’t go beyond that. It doesn’t give me more money I won’t get more. But, I hear with blockchain or with the bitcoins people actually make you more. So, they may put a hundred dollars in and they’re making like $1,000 so explain that.
What’s happening now is because bitcoin and some of these cryptocurrencies are scarce meaning that the number being mined or created is capped. The more people that want it that’s what’s driving the price up. So, that’s exactly what’s happening now is everybody that starts to read about it and gets pulled into the research realizes that this can be a substitution to a global Universal currency if you will. When that potential exists and there’s a limited number of them people right now are using it as an investment vehicle. They’re saying oh wait if this is going to be used for banks to transfer between each other and people to travel around the world and pay for things and if this is going to be that universal conduit or Universal currency I’m going to buy some now. Because later everybody else is going to want some. So, that’s what’s happening. That’s the reason the value went up.
I’ve read about this many years that one world currency. Do you think that blockchain is kind of closing that gap and making that happen? Do you think this is on the onset of that?
I do. I think if I take a step back. We are in the, if you follow, there’s something called the gardener technology hype cycle. We are in a hype cycle right now. Meaning that everybody’s excited about this technology has the potential to be that but it’s just not there yet. Technically to give an example it’s very difficult to hack. But, with the rise of let’s say quantum computing in a couple years there may be elements where smaller networks or less sophisticated currencies without security may be hacked. Which would render them probably null and void which that that risk is there.
But right now, I know that less and less but right now the US dollar has a lot of value. I know when I’ve traveled overseas that US dollar has rendered me a lot more for my money. But by making it uniform and making it a one world will that kind of flatten that?
Fiat currencies such as the US dollar aren’t going away. Governments will have their currency because they could control the economy inside their countries. But, when you talk about the US dollar and several other you talk about the euro talk about the yen some of these end up being default currencies. That when people are trying to transact globally they’ll take some of their money and they’ll put it into that currency that gives that country an unfair power and leverage over everyone else. Yes, because it’s more stable but also, they’re able to have more global influence. What this is doing exactly what you’re saying is this is going to erode some of that over time. The real question is, is Bitcoin the universal currency? Is it going to be that? We don’t know there are like I said before there are over 1300 currencies. There are different teams working on different technologies and trying to win. And we don’t know and that’s why I say it’s early in the process we just have to see how these teams advance. They have to overcome things such as speed that’s the number one thing. Right now, Bitcoin can only transact at seven transactions per second. You look at a Visa or MasterCard there are thousands of transactions. It’s just orders of magnitude off. But like I said like any early technology it starts out and they’re experimenting and do I have faith that the thousands of developers that are working on this technology are going to figure out how to speed it up? Absolutely because of the promise that it holds one to make a universal currency and put more power in the hands of people. And then also people that can’t get credit or access to the visas the master cards and the banks they will now be able to engage in the global system like in this global society and this global economy. So, it’s going to change things quite a bit and it’s a matter of time.
I think in that sense it would be great. Now we know that the government always wants to have their way. I guess my question is how much do you think or do you see that they’re going to eventually get involved in in controlling some of this. That’s a concern of mine because we want to be able to invest in it because it all sounds great. And yes, I think you’re exactly correct that it’s leading into that one world currency. But my thing is I know right now it’s not regulated by the government so will it be? Should it be?
In terms of regulations the reason it’s very hard to regulate is because it’s decentralized. The early life of Bitcoin was in the black market. That’s what originally gave it life. I’m not going to skirt that issue that’s the challenge. When you create this decentralized system that anyone from anywhere can transact and doesn’t need a central authority or permission to do so, you create a place and, it’s secure so you don’t know who is transacting. Now let’s say they talk about laundering, drugs, human trafficking issues but in the in the beginning of Bitcoin there was an application called Silk Road where people would go on and barter if you will. They would buy drugs and there would be all these things happening on that that has been cracked down. There has been a crackdown on Silk Road and it no longer exists. But that was the early days of it. Yes, it’s a concern, governments want to make sure that illicit activity isn’t happening. But I would also say they have developed tools and there are tools that they’ve started using to track. Which is why they haven’t let’s say tried to crack down on it even further. It’s hard to control but now that they can at least track back so I’ll give you an example. Let’s say you and I were transacting. Everybody doesn’t know who I am but on this ledger, it says I’m number one two three four or five. It says one two three four five sent the transaction to four five six seven eight. Four five six seven eight is you. Nobody knows our numbers but everybody knows the transactions. Even though you think oh wow that’s private no one knows what’s going. But think about the moment you can prove that I’m one two three four five you know all my transactions. There is a dichotomy here. Yes, it enables complete privacy but if you can prove that someone i’s tied to that transaction or that wallet suddenly there’s complete openness. Even though it’s radically secure it’s also radically transparent. I think that’s what the other types of currencies are trying to address. They’re trying to make sure that they’re secure. That we can account for money laundering and these edge cases. But that’s like anything else the money laundering, human trafficking and these other illicit activities they’ve been using the US dollar and physical money for years. We’re worried that we just want to make sure that the digital system doesn’t account for that but initially it hasn’t. I think with everything new you create you can’t address everything at the onset.
That’s why they have lawyers who are getting involved and I guess they’re making sure you fit the bill.
I would actually say the lawyers are getting involved because there’s a lot of money to be made. Everybody’s getting involved because there’s money to be made. One thing that’s happening specifically is there’s crypto currencies and we’ve talked about this universal technology the other area is ICEO’s or Initial Coin Offerings. That’s when a venture launches a token. It is just like what I said going back to the airline miles it is like an airline that doesn’t exist issuing miles and saying these are going to be valuable in the future. The reason that’s a little concerning is because you’re depending on that one airline. You cannot spend those miles anywhere else only with them. So, I would say tokens are a higher risk but what’s happening is it’s making it really easy for small start-up teams to raise money. There are many legal considerations and that is why lawyers are getting involved. One of the major considerations is when you raise money via a token then that that may make, let me rewind. If you’re raising money via token it could be considered a security and if it’s considered security you have to file and be as transparent as a public company. That’s where there’s a lot of new regulation that needs to be developed in this space right now. That’s why the lawyers are in there because they want to be a part of shaping the space and make sure that it doesn’t stifle innovation but at the same time it addresses the considerations of regulatory bodies.
Got it. Now let me ask you this and since you’ve explained this a little bit more and I’m sure since this is all the rage how do people get started in this?
What I would say is just jump in. One of the first places that they can check out is Coin Base. There’s another website called coinmarketcap.com and coin desk. Those are three of the most common sources. I will say also be aware a lot of this is biased very biased because these companies have invested interest in in these technologies doing well. Also on our website rebelmethod.com we’ve covered an extensive number of events with leaders in the cryptocurrency space. So, you can hear what they have to say. Those I would say are the major areas to check out as you’re trying to get informed. If you’re going to jump in what I tell everybody they’re like oh I don’t know I’m not sure yet. I said look if you’re going to spend $50 on a nice dinner or XYZ maybe you don’t spend it on that dinner and you put it into bitcoin or another cryptocurrency and experiment. Treat it as a learning experience. Say I’m spending this money to learn about this field to understand how it works, how I can transfer funds, how I can move it around. Because in the future there will be some sort of digital currency. Will it be Bitcoin, aetherium litecoin like one of the major ones that are happening now? We’re not sure but there will be one. So, the question is if you if you’re interested in staying on the edge of the market and potentially profiting from it I would recommend. But don’t put anything that you’re not willing to lose. This is a disclaimer this is not investment advice this is what I think of when I’m thinking about this space.
Can you repeat those sites again?
You can listen to experts on our website rebelmethod.com. That’s one. I would check out one of the premier exchanges in the US and I guess most respected is coinbase. For the latest information is coin desk and coinmarketcap.com. But also keep in mind like I said coindesk, coin market cap that the news that you read on these other sites they’re extremely biased and it’s still a nascent space. Meaning there’s a lot of independence that are offering information and telling people buy this token it’s the next thing. And it’s very immature right now. It’s because it’s a new market not everyone understands how to measure or assess projects when they’re putting in money. This is how I think about it crypto currencies are something that I think makes a lot of sense to me. There will be crypto currencies I think the tokens everybody’s excited because they’re appreciating in value really fast but I think they’re just a much higher risk. It’s the same as investing in a startup you have single digit percentages of probability you’ll get any of that money back. So, I’ve kind of steered away from tokens even though there’s a lot of money rushing into that space.
Right now, you mean? That is all the rage at the moment?
I mean all this is a very hot space because it’s appreciating in value so fast.
But coins more so than anything else?
I just want to make sure that what I’m saying is not taking as investment advice because I am NOT in investment. That’s more of a legal thing. But what I would say is when you’re investing in crypto currencies or tokens just do the same research you would do as if you were investing in a start-up. Buying one of these digital tokens is no different than going to a startup that you know and giving the money. It’s the same now it’s just easier. That’s the reason that a lot of people are doing it because now it’s a few clicks and you’ve given them a few dollars with the hope that that’s going to be worth more in the future. But it’s no different than giving money to any startup. I mean granted you can argue that okay I may be able to sell these tokens easier than before. But it’s still very risky. That’s what I mean by the same.
You’re saying also that people can start with as little as $50?
Or they could start with $5 $10.
Unlike trading because when you’re trading one of the things that they suggest is that you put at least $5,000. That should be the baseline you should start with about 5,000. With blockchain you could put as little as $25 $50 anything that you’re willing to give up. So, you’re saying giving up a meal maybe a meal a month and putting that money into it, if you do that consistently there’s a potential that their money will grow?
There is but at the same time that’s why I say I would think of it like a learning experience.
That’s why I said potentially this is going to happen it’s not a sure thing. But there’s a potential that that will grow. If it doesn’t you just lost $50.
Most people waste money on lotto tickets.
I mean don’t put anything you’re not willing to lose. I think that that’s one. Then I think two also because you’ll get to see how it’s being used. Example like I have a Bitcoin and I have it accessible via my mobile device. Then when institutions here start taking that as payment I’ll start using it. And that will happen. It’s already occurring on some of the episodes that we’ve done. We’ve interviewed people from Nigeria from Venezuela where it is hard to move money from US dollars to their local currency. They use Bitcoin as a matter of necessity. Especially in Venezuela where a hundred dollars at the beginning of the year is now worth about four or five dollars. People complain in the US about Bitcoin being very variable and fluctuating in value that is much more stable than even their currency. Which it’s something that we take for granted here in the US and around the world people are getting extremely excited by this as a substitute to their own currencies.
If I’m doing business with somebody in Venezuela or Peru and I owe them a hundred dollars for their service or their product, I put $100 of the Bitcoin and they could cash it in for $100?
You would buy Bitcoin or whichever digital currency you want to use and then you would ask them for an address. Which is that address that I talked about it’s their key. Then you send it there and they would get it and that’s it. Then now they have it.
They’re getting $100?
They’re getting the equivalent in Bitcoin. Which it can change in value once you transfer it into Bitcoin. But they’re getting that number. Every Bitcoin, this gets a little technical, can be broken down into 1 million satoshis it’s called. One Bitcoin right now is more than about the same or more than a hundred dollars. You’ll get whatever fraction of that. So, you’ll have those and you’ll send it and they’ll get that.
Fantastic. I’m always interested in the future I would like to know, because you study this well, where do you see the impact of blockchain in the future?
I think the most immediate thing companies are using it for is to make themselves more efficient because it’s a decentralized ledger system. It makes it very easy to transact across information internally. So, they’re starting to do that. So, operational efficiency is one. An example of a start up doing that storage and file coin are connecting people with empty space in their computers and people that want to upload files and enabling them to collect money in the middle. So, that’s an example of that. So, operational efficiency. The other one is the one I mentioned before which will take time which is the whole form of currency or some Universal currency. The third area is they say tokenization of physical assets. What that means is imagine you have a piece of property and we can’t afford to buy that property. But there’s a custodian that says you know what this property I’m going to break it into a hundred pieces. I’m going to make a hundred coins and for every one person that buys the Nilda coin can get a piece of that house or they can buy five like it’s up to them. And they’ve linked a physical asset to that. That’s going to start to happen. You’re going to be able to invest in very micro pieces because this makes it more efficient. Then the fourth is fundraising for new projects. It is just so much easier for people to invest in new ventures and new startup projects. Yes, a lot of regulation needs to be put in place so the market could be more mature but the speed enables new startup projects to get off the ground faster. And yes, like in all these areas a lot needs to be done. But those are the four areas I think that holds the most promise.
Thank you so much. I’ve been looking into this. I’ve been reading into this. My nephew keeps sending me information he’s like read this read that. He’s a millennium and he’s definitely interested in this so this was for him. This is for you Andrew. I’m really excited about it because I know this is something that he’s been fascinated with and as a result I’ve been reading up a lot about it. I want to thank you so much Sergio.
Of course, thank you for having me.
Of course, I want to have you back because you have a wealth of information and not just the blockchain. But in other areas that I want to be able to pick your brain on. I want to thank you for that. So, this ends this segment of the Dr. Nilda Business Foresight Show. Thank you so much for being here. Thank you, Rachel, for co-hosting and I will see you guys next week bye.
Sergio Marrero is a serial entrepreneur, facilitator, researcher. He graduated from the Harvard Business School and the Harvard Kennedy School of Government.
He has worked on strategy and innovation at firms such as PepsiCo, Deloitte Consulting, Doblin, and Teach for America.
He leverages his background in business, technology, and design thinking to help companies aim in shaping the future of industries by identifying market opportunities and launching new ventures.
He works with company founders globally with assisting them to create the future by accelerating innovation and launching disruptive ventures for a better world.
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