Ian DeMartino: It is important to emphasize that you can still be early-adopters
Ian DeMartino is one of the bitcoin-evangelists, co-founder of CoinJournal and author of numerous fintech-related articles and a newly pubished book “The Bitcoin Guidebook: How to Obtain, Invest, and Spend the World’s First Decentralized Cryptocurrency”.
You are aiming to reach a wide audience of neither IT nor financial guys with your book. However are those people and the technology itself ready to change the ‘rules of the game’ in finance? Isn’t all this premature, as some experts have claimed?
Well, yes and no. It is actually fairly easy (at least in my country) to buy and sell bitcoin. It isn’t as easy as one would hope, but that is the gap I tried to bridge with my book. I do think it is a bit early to expect Bitcoin to replace Apple Pay or something like that, but I also feel that it is to a level where people can handle it and get some benefits from it in the long term.
It is a comparison you hear so much that it is almost a cliché, but Bitcoin is where the internet was in the early to mid 90s. A lot of people would have said the internet wasn’t ready for the mainstream but that didn’t mean email and chatrooms and all these other things weren’t useful.
You have once written ‘While there have been plenty of attempts and even a few launches, a decentralized cybercurrency exchange still has not been done right’. So what are the necessary integral parts of a successful decentralized cryptocurrency exchange?
For the most part, I think they need to be easier to use. The early attempts always required you to download the coin’s software and its corresponding blockchain. People don’t want to do that when they can just sign up for bittrex and be trading in an hour. I think speed is also a factor, can a blockchain system really keep up with a traditional trading platform? Most traders want instant trades. There is also the chicken and the egg problem: Traders want liquidity, but in order to get liquidity, you need traders.
I think it will take someone far more intelligent than I am to solve those problems, but I have hope that someone will. In the meantime, services like Shapeshift, which is centralized but doesn’t hold any consumer funds are useful.
If an exchange somehow allowed people to hold their coins on their own computer with their own private keys that they generate themselves, but still interacted with a centralized trading ledger, that might be a solution that is more attainable and is less vulnerable to hacks.
As you have once written in one of the articles concerning the Greek BTC community, For bitcoin to succeed, it only needs one currency, one major financial institution or one nation to fail. But how do you think it will happen? How the whole population of a country can defy its national financial system and ‘to take refuge’ in BTC?
Well I don’t think it will be an all at once kind of thing. I want to stress that I have no desire for this to happen, especially not to a country like Greece, which I’ve been to and really love.
But we have already seen bitcoin grow in popularity in countries that are in dire financial straits. All you have to do is look at Venezuela. As its currency has hyper inflated, bitcoin has become more popular there.
Now, imagine if that gets worse. It stands to reason more people will hedge their savings with bitcoin. Now, let’s fast forward five years and say the government falls. What then? Will people stick with a currency from a government that no longer exists? Will they trust the currency of a new government that hasn’t proven it can hold onto power and run the economy effectively?
Or will they want to get on board with Bitcoin? By that time it may be a currency they used before, or at least knew someone who used it.
The idea of a government-less currency seems crazy to people who haven’t spent much time thinking about it. I know that was my reaction the very first time I heard about Bitcoin. But if your government collapsed recently, it will probably seem a lot less crazy.
In most countries in the world cryptocurrencies are still lying in legally unregulated sector. So for example, not being any IT of financial professional, I am thinking about going into cybercurrencies. Should I wait until my government instills any regulation? Or there is no need to worry? There is a number of enthusiasts who are not decided yet, in fear of prohibition in their countries.
I think it is pretty safe to buy bitcoin in most places. Selling bitcoin may be a slightly more complicated issue, since it could run be perceived as facilitating money-laundering in some of the more strict locales.
I know Russia has been less than friendly with bitcoin, but generally, I think buying bitcoin and holding it, or selling it to an exchange should be safe pretty much anywhere, unless the government there has specifically said otherwise.
What has changed in cybercurrencies with the advent of ETH? Has it changed the position of BTC?
It has changed the situation in that you can now foresee a scenario where ETH surpasses BTC. I still think that is unlikely but it doesn’t look as impossible as it did two years ago. What I think is more likely is that ETH will fill some niches and BTC will fill others. BTC is safer, the DAO hack proved that in my mind. Ethereum is more powerful but with that power comes more complexity and more opportunities for it to be attacked.
There are also a few other differences, ETH doesn’t have a limit on the amount of Ether that can exist, whereas BTC is limited to 21 million. I’ll let the economist argue over which system is better, but I believe different aspects will appeal to different people. That hardforks like the one we saw in the DAO hack can happen in Ethereum has also soured a lot of people on it. That kind of adjustment to the blockchain isn’t feasible in bitcoin.
Ethereum may end up doing a lot of the smart contract stuff, asset exchange and stuff like that. Or maybe that stuff will be done with apps built on-top of the bitcoin blockchain. All I know for sure is that the banks seem interested in Ethereum, so I wouldn’t ignore it. That said, bitcoin is still the more popular digital currency, by far.
Aren`t you afraid of all the hype around cybercurrencies today? Will it finally lead to something similar to that .com bubble and should I as a safe investor wait until it is all settled down?
Well the situation is quite different in that sense. I would be cautious when investing in cryptocurrency businesses. I’m not saying people shouldn’t do it at all. The industry needs that investment and infrastructure development, but I would suggest that it be left to VCs with large disposable incomes who can survive a loss and have time to research them thoroughly.
Same could be said about investing in alts, only more so. You may get lucky with a coin like Ethereum but you are far more likely to lose everything.
But investing in bitcoin by simply buying bitcoin is different than investing in a .com or bitcoin business.
Bitcoin is a currency, an asset and a network. It would be like if “the internet” had a stock you could buy that just represented the entire thing. If such an asset existed, it would have been a great investment regardless of when you bought it. It may have gone down after the bubble burst but it definitely would have recovered and gained 100x by now.
But there is no asset that represents “the internet” but if Bitcoin succeeds, then bitcoins will raise in value. Companies may rise and collapse in the meantime but that’s like AOL and Myspace falling, not the internet itself.
Cryptocurrencies are starting to attract more and more attention of general public, so which related resources/site(s) do you find yourself spending the most time on to have the most relevant information? What would you recommend for newcomers?
Well, there is my site, CoinJournal.net. There is also a lot of writers I respect for CoinDesk and BitcoinMagazine, and of course, I hope my book is helpful to people.
I do think that there is a dearth of really good, honest bitcoin journalism out there though. I saw some of the seediness when I worked at CoinTelegraph. I think it is important to note that just because a media organization covers a coin or company, that doesn’t make them legitimate. I have heard that several people claiming to be “bitcoin journalists” take payment from companies for their articles, and I’m inclined to believe those rumors based on the stuff I see put out regularly.
For newcomers, I would suggest that they stick to BitcoinMagazine, CoinDesk and my site. And even still, I would suggest that they don’t invest in anything other than Bitcoin and/or Ethereum unless they feel like they have gotten to the competency level where they can do their own in-depth research.
What problems have you personally faced in regards to cybercurrencies in the beginning of your work with cybercurrencies and how have you solved them?
Well early on I came into it thinking that everyone in cryptocurrency was going to be friendly. That it was a community working together to change the financial world. But while the majority of people are honest and are trying to make a difference, there is a small but significant segment dedicated to scamming newcomers. There are a lot of awesome sounding projects that are run by people who have no intention of seeing them through.
So the problem I see is the number of seedy people running Ponzi schemes and things like that. I have just been trying to expose them when I see them, and I think that should be the primary goal of all bitcoin journalists.
Today the chain of intermediaries between an individual and a capital market is too long. With emerging cybercurrencies exchange with an integrated payment gateway as an all-in-one solution, do you think investors will more actively go into cybercurrencies? Can such a structure change the existing status-quo in the sector?
Definitely, and I think that is what we are seeing with big financial institutions’ interests in shared ledgers, blockchains, Ethereum, Ripple, Bitcon etc.
I think large financial institutions only explore technologies that will save them money and if they can trade stocks internationally for a cheaper rate and with faster settlement times, then they probably will.
The only questions in my mind are (1) When will it happen? and (2) Will consumers see significant benefits?
I certainly didn’t get into cryptocurrencies because I dreamed of a world where bank2bank transfers are a little faster and a little cheaper. I dreamed of a world where financial system is more fair to everyone and our money is free of government influence.
To answer your question: I think that the individual investors will go where the money is If the big financial institutions make a system that works really well for investors, I think they will go towards that. That will be nice, but I don’t think it will be revolutionary in anyway.
But maybe an independent developer somewhere will make a better system because he isn’t restrained by the desires of the Financial Institutions and can better cater to stock brokers and the like. I think it is really interesting what Overstock.com is doing and that’s an example of something that I think could be more revolutionary than just some backend private blockchain run by a consortium of banks.
But again, it will all depend on which is the easiest to use and the most beneficial for the traders. That is more important than any ideological qualms I may have about banks and their private blockchains.
Our project EXSCUDO is the new gateway between the traditional financial market and the world of cryptocurrencies. Can such a project be attractive and useful for both the cybercurrencies community and traditional institutional investors? Have you used any similar services?
Yeah, I think that could be very interesting, for both sides. I used Uphold to buy gold and a few foreign currencies and I thought that was pretty cool. Of course I can’t possibly know if your project will be a success or not, but it is definitely a sector that Bitcoin has a chance to make significant progress in.
The opinions expressed in this interview are private and do not reflect the view of the Exscudo team.