Great Interview on the Future of Money, Bitcoin – Trace Mayer at Inside Bitcoins 2013 Las Vegas

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Transcript Greetings and thank you for joining us at  I’m here with Trace Mayer. he was our very first person that we interviewed about BitCoin back in September of 2012 at Casey Summit in Carlsbad. Trace was telling me to buy BitCoin, it was at $11. I was totally overblown and kind of confused by the whole thing and I’m not even going to deny I’m still a little confused about it but I do now see the infrastructure build out for bitcoin. He’s travelling the world. He was crazy enough to say it was going to go to fifty bucks when we first talked to him. So anyway, he was obviously wrong. It did not go to fifty, it went to twelve hundred. Trace thank you for joining us.

Trace Mayer: Thanks Daniel Trace, what’s the future for BitCoin? I’m here and I got to be honest with you I’m overblown by the infrastructure. I think people on the internet think it’s just some bubble from internet junkies or something but this is… people are building real businesses.

Trace Mayer: Yeah, I mean I just flew up from Beunos Aries, we had a conference just like this down there, just as many people. They’re building stuff out in Spanish, meeting Argentinian needs, Chilean, Uruguayan, Brazilian needs. It’s happening in China, it’s happening in Singapore, Hong Kong, Japan, all over Europe. Here we’re building out in the U.S. This is actually very muted because we’ve had a very chilled effect on the BitCoin infrastructure build out in the US due to the regulatory environment. And I think that the U.S. Senate hearings are going to help thaw that a little bit and we’re going to see even more activity. So I think what you’ll see here is just scratching the surface of whats going to happen internationally. Top question from people I get about BitCoin, when they either get a report or just talking to them, is how do they initially buy it? Everybody can get the wallet, and that’s a pretty easy thing. But besides doing it locally, Like if I gave you cash and you did a transaction with me, how does someone easily just wire money? I mean, do you trust any of these little exchanges here in the U.S.?

Trace Mayer: Well there aren’t very many exchanges if any in the U.S. We got a few like Coin Market, Kraken, but really it’s still very difficult to get BitCoins if you’re in the U.S. There’s Coin Base, that’s ACH with your bank account. I like them, but they had a bug in their system with how they were recording transactions, and a buddy of mine, they lost fifty of his BitCoins. And he had to go through and eventually they got it back to him but it’s just kind of annoying. So we are seeing some growing pains and stuff like that but what do you expect when it’s up 6000% in the last year?  And that’s Bit Pay’s payment transaction processing amount that’s up 6000% in addition to just the price. So I mean, BitCoin it’s growing, it’s growing really fast, really rapid, and you know we’re trying to make it easier for everybody to use and for every body to store them and save them safely, and to be able to spend them on stuff, but I agree. And the regulations are really what make bitcoin difficult to buy if you’re trying to buy from a third party because there’s money transmission and money service business and all that. So if you’re not able to jump through those hoops, just keep in mind the problem’s not with BitCoin, the problem’s with the government. And they’re the ones who kept you from being able to buy coins at 200 before they went to 1200. They’re the ones that caused you that financial hardship. How do you protect your BitCoins. So like, with everybody it’s a trust issue. For people like me, I’m not software savvy or tech savvy, so I just want to make sure my E-Mail, that nobody’s going to hack in to it and mess with it. So how do you protect them?

Trace Mayer: So for the ultimate in BitCoin security I recommend Armory. We got a booth over there. You know Armory, it’s really the standard for protecting BitCoin securely. It’s not the easiest to use, hopefully we’ll get that built out, but it’s really there for that kind of Cadillac of BitCoin wallets. Then you know you just need to have good computer hygiene practices. Like if you’re going to use something else, like there’s a crypto kit there’s block, the bitcoin QT wallet. There are a lot of options but you just need to make sure your computer is safe and secure if you’re using those. For somebody who kind of saying “hey you know this is interesting, businesses are popping up, people are accepting it more , more merch,ts and individuals are using it,” and they go. “but look at the chart. It went straight up parabolic.” Is it too late? Or is this still in it’s infancy?

Trace Mayer: Well, there was a great YouTube video by James Di Angelo about the S-curve adoption of BitCoin. I bet if you search S-curve adoption on YouTube you’ll find it, BitCoin. And he talks about how it kind of ramps up like this, really quick. And we could very well be in that type of a ramp up where bitcoin goes viral and starts getting more and more accepted just like FaceBook did or YouTube or Snap Chat or Google or Yahoo or any of the internet protocols themselves, because bitcoin is just a protocol. And you know we’ve got a lot of critical mass, we go companies starting. VC funding coming in. Like all of that is just feeding on itself. So when you look at where the price has gone to where its gone to, I mean that’s tiny in the grand scheme of things. If one percent of the Chinese, every Chinese person, if one percent of them put just $20 US in to bitcoin, it would move the price about ten thousand a coin. So I mean BitCoins still tiny compared to like, i mean this is global. You got Argentinians, it meets a very specific use case in Argentina. I was talking to a guy who owns a hotel and if a guest pays with a $100 bill, depending on the route of where that $100 takes to get to his pocket, he gets between 1000 pesos and one 150 pesos. Because there’s like 25% of it if use their credit card and 4% if its  a visa and you got to pay 45% income tax on the remaining and you got the currency control so you get the 6 pesos to the dollar exchange rate instead of the 9.3, so I mean like Argentina is a great use case for BitCoin because there’s this huge difference between getting  150 pesos and 1000 pesos. Use BitCoin and you’re going to get a 1000 peso’s for the same $100 you’re changing the end consumers renting the room. So worldwide we got a lot of problems with money and banking and money transmission and remittances and infrastructure, and that’s what everybody’s working on. They’re working on solving these problems that people in the market really have. And those tuition’s haven’t been provided because regulation has stifled monetary evolution and BitCoin is censorship resistant so it just honey badgers its way right through all of that regulation one way or another. With Chinese not being able to purchase actual goods and services in China, except peer to peer, you know… how big of a road block is this? Because if other countries do this essentially then BitCoins are just speculative.

Trace Mayer: Well, they can’t buy it officially, right? I mean that’s what I’m talking about right, it honey badgers through all this because it’s censorship resistant. You got a ton of Chinese exporters who are going to be taking BitCoin as payment, because it’s faster, cheaper, more effective and similarly settled, and they’re just not going to turn it in to Yuan. They’re going to keep it in BitCoin. And Chinese are notorious savers, 30-40% of their salary gets saved on average. So, I mean even thought they can’t necessarily spend it as easily, bu then also I think it’s a gradual transition that the Chinese government wants to have in to this virtual economy. And so it plays right in to their overall plan. I know free market solutions will arise and we’re still in the infancy of this whole thing, so I mean the sky’s the limit for how many businesses could come out of this thing, but one of the things I could think of, is if somebody dying. You know is there any companies out there yet that are trying to accommodate this situation? If somebody dies how do you leave the BitCoins to your family without, you know because you’re trying to keep everything private. Or also a rogue employee. Lets say you’re a merchant and you’re accepting BitCoins and some employee could literally just take the BitCoins and throw them in another wallet and you wouldn’t know where the hell they went. IS there any companies that are rising up or that you talked to that are trying to address these problems?

Trace Mayer: You’re like, leading right in to Armory there. I mean we’ve got the most advanced wallet. I was a seed round investor to fund Armory. And we’ve actually released the new version, .9, and it’s got fragmented back ups built right in to it. So if you wanted a BitCoin estate plan you could take the key to the wallet, and you split it up in to five different fragments, and you can specify you need 3/5 fragments, and then you distribute them to your family members. None of them could individually get your keys, but combined they could. Snd if you trust enough of them and you pass away they can re-combine those keys and then pass the BitCoins. So yeah we’ve a trust or estate type planning solution nativly in to Armoury that way. And then we actually want to innovate out. The real race in the wallet space right now is multi-signature. And that’s where you can actually split the actual wallets up and then 2/4 need to sign off on the purchase order to move the coins. So I think that will help with corporate adoptance, and all of those solutions gotta be built. And whoever builds them, whoever holds the most value, makes the most money and this is just a gold rush of money right now. Last night you said something that scared me a little bit. You were a seed investor for Armory, you built something that’s really great, its a high quality product but then I asked you what the business model was and you said we don’t have a way to make money on it yet. Well that’s a problem because actually because it actually reminds me of the whole dot com thing. Remember you had all these tech companies and none of them were making any money. I mean, how many of these companies actually have a business model? Because I remember you were a seed investor you had BitPay. Now BitPay is making money.

Trace Mayer: BitPay is making money hand over fist, like BitPay, they are knocking it out of the park. But with Armory. we have a lot of potential ways we can make money and interestingly when we funded it, I funded partially with BitCoin and those BitCoins have gone up tremendously, so we’ve got a fortress of a balance sheet with Armoury. So we just get to build really cool stuff that everyone in the bitcoin space is going to benefit from, and we’ll figure out how to monetize it later. But you know we need this key infrastructure so that we can have like, a Chevron, or Tecsaco, come in and begin using it. You know we can build that. On a side (11:01) note because you have very close ties with the Gold and Silver community as I do, did you know Rick Rule recently, I don’t know if he was on camera when he told us, but Rick Roll went through the process, and you.

Trace Mayer: Of buying a bitcoin? Yes, I was there when you told rick roll about it. And I think you spent like a good hour with him, in fact I think I was there when you first told Peter Shiff about it as well, who’s made a lot of news lately about bitcoin, but did you know Rick Rule had bought some?

Trace Mayer: No, last time I talked to rick roll he was “I’m not touching that thing that’s used on Silk Road,” but maybe the senate hearings maybe helped thaw that. Well you’ll have to get the story from him, I think it was like four months ago, and all he wanted to do  was  buy something with it and in between the time of him buying it and buying gone up it was a ten dagger by the time he had done his transaction.

Trace Mayer: Well actually I had floated the idea because Eric Sprott’s got that gold ETF and the Silver ETF and I was kind of floating the idea past Rick. I’, like “look, somebody should come out with BitCoin ETF” and he was like, “I’m not touch that with ten foot pole!” And Barry Silver came out with this ETF and I was helping him with it a little bit. It started with two million dollars worth of BitCoin in it in September, and two months later, in November, it’s got over $70,000,000 in it. That’s making a ton of money. That leads me to a great question.

Trace Mayer: You know, so like Rick Rule you just missed the boat. You should have paid attention to me to begin with. Like Peter Shiff should have. Somebody who says, “you know what the whole thing is just too damned complicating, I’m still reading a newspaper and subscribing to Times magazine,” what if they’re just like “hey I just want to write a $10,000 cheque, and I want some hedge fund or somebody to invest in BitCoin. Is there somebody out there that you can recommend or trust?

Trace Mayer: Yeah, that would be the BitCoin Investment Trust. Is it

Trace Mayer: Yeah, I mean if you Google “second market BitCoin” it’s going to get to that investment trust. Surprisingly some of those guys, as tech savvy as they are, they suck at SEO. Like I’ve searched their business names and what the hell, they don’t come up.

Trace Mayer: The BitCoin Investment Trust is second market. That’s who someone like that would do it. But yeah, like if they just want to read a newspaper, I don’t want to buy a newspaper, and their revenues are gone, right? BitCoin’s where the entrepreneurial energy is, and Bit Pay’s payment processing is up 6000% year over year, up 390% October to November, $35,000,000 of processing in November, so I mean this is getting to be real. Yeah I know. The biggest thing coming out with this is not only the infrastructure but it’s all entrepreneurs, all entrepreneurs in here. So, I mean just the DNA, there’s very smart people. Obviously, in my opinion, there’s probably the next Steve Jobs or Microsoft in here. Maybe the next Warren Buffet.

Trace Mayer: That’d be kind of fun. Except you wouldn’t know because my BitCoins, you don’t know how many I got. I mean, I don’t have any. (laughing) Trace, is there anything you’d like to tell the audience, just about as far as about the show, about what you’re seeing that people need to know.

Trace Mayer: Yeah, this is just the beginning. I was at a dinner with Barry from second market putting together 25 people that are top finance out of New York. You know, he’s doing the dog and pony show trying to get people in to this investment trust because he\s going to make some money with it. And one of the guys there was a senior vice president at Goldman Sachs and private wealth management. And he kind of put me on the spot like, you know the top upper-bound where BitCoin can go, where do you think that is? And I laid out the case for him. You know just 1% of tax havens in off shore bank accounts, if it came in to BitCoin? Which would be a great asymmetrical hedge to the current problems that are out there? $2,800,000 per BitCoin. So I mean, $800, $1200, we’re just in the initial stages of price discovery.  And there’s a lot of volatility because there’s so much asymmetric information. It’s hard to comprehend and understand and see where it’s going to go. But people are coming across, they’re doing their research and they’re like “this could be big. This could be really, really, big.” And you know, they get here, they start feeling the energy and like I was saying, it’s a lot more muted here in the U.S. then it is outside the U.S. Because they don’t have the regulatory trammelling that’s going on that we’ve had over here. It’s big. And it’s worldwide and it’s global. And its going to be exciting to watch where it goes. A lot of these Gold and Silver bugs, they think, “oh there’s going to be the massive wealth transfer to holders of Gold.” Market’s saying it’s going to holders of BitCoin. You know, a year ago I wrote an article about why people should switch some of their Gold in to BitCoin. And three weeks later someone wrote a Reddit post about it. That person switched sixty ounces of Gold in to BitCoin. Those sixty ounces were worth $95,000 at the time. Today those sixty ounces are worth about  $75,000, but BitCoins are worth $13,500,000. So he could re-allocate half of 1% of those $13,500,000 worth of BitCoins and re-acquire 60 ounces of Gold. You know, that’s a rough one for Gold investors because they don’t trust the dollar. So then they’re going to this physical asset that’s proven. We both know that Gold is not going to zero, it will be worth something in a hundred years from now. So with BitCoin it’s just being so early. I don’t want to be too hard on them. There are people out there who are like “its a conspiracy.” I know there is a very good person, who means well, who says that BitCoin is from the CIA.

Trace Mayer: It’s open-source software. Anyone can review the code. I mean it is what it is, anybody can read it, download it, watch it. So personally, I put it in the same class as Gold and Silver, in the sense that it’s equity based, it’s open sourced. It’s different in that it’s extensible, you can change it and add things to it like the payment protocol, multi-signature, all this stuff. I think it’s a solution to a lot of our market problems. Maybe not the only solution, but part of the solution. I think Gold is part of the solution. But the crypto currency as a whole is an empty storage tank. There’s trillions of dollars in real estate and bonds and Gold. If just small percentages of that bleed in to the crypto-currency storage tank to fill it up, so that it is got trillions of dollars, so that the capitol pool can flow between all of them. You got to fill up that empty storage tank. And in the process prices are going to go through the roof. Yeah, in the early days of America, there were over a thousand currencies probably. Do you think we’re going back to that?

Trace Mayer: I think we’re definitely going. We’re decentralizing the currency market. The dollars been nationalized for a hundred years. The economy is way too complex in the information age. We need a much more malleable, much more… when we transfer information over the internet we don’t only use Twitter or only use E-mail, or only use blog posts, or only use YouTube. We have a lot of different ways to serve market needs depending on what the individual use case is. I think we’re going to see the same type of thing happen in the monetary and the financial systems. And BitCoins got smart contracts that you can build out, atomic trading of shares, you can abstract on top of it with colored coins. All of these are solutions. Pretty much everything that wall street does we can do in BitCoin and automate it in to the software code. I mean it’s really amazing. And so where it goes? It will be interesting to watch. I think we got a very fascinating ten or twenty years with this math-based currency system that is being developed. All right, I’m going to put you on the spot. This is the most important question I’ve ever asked anybody. A year and a half ago, you told me, “hey, I’ll give you some BitCoins.” And I didn’t respond to you. Is eighteen months too long to take you up on that offer?

Trace Mayer: Yeah, yeah definitely, definitely. You know, yesterday someone brought up Peter Shiff, and how Peter Shiff was saying “all these early adopters are getting lucky.” And I just lit in to this guy, I was like, “look, luck is when preparation meets opportunity. And people who saw something that other people didn’t, they took entrepreneurial risk, they started building out the infrastructure like BitPay and Armory, like before any body saw any of this materializing. We took a lot of entrepreneurial risk, we saw stuff  other people didn’t see. There’s no luck about it, the value is going to the people who deserve it.” And if you can hold those private keys of wealth in your own Armory wallet. There’s nobody between you and that wealth, we’re building that out. That’s a big big deal. You can’t seize it, you can’t confiscate it, I mean people should have been able to see this. I wrote a book about it, The Great Credit Contraction, people should have seen how BitCoin plays in to all of this. And like I said we’re still in the early adopter phase. There’s seven billion people in the world. Trace Mayer, you’re an advocate, cutting edge, and possibly the first BitCoin Warren Buffet, although you do not confirm that you have any BitCoins. But thank you very much.

Trace Mayer: Right, thanks Danny

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