OODA CEO Matt Devost and Raymond Roberts, in a fireside chat on The Future of Money at OODAcon 2022, discussed the origins of their interest in bitcoin, the history of money and the global fiat currency standard as a necessary introduction to a longer discussion of the future of money.  

Ten years ago, resilient cryptocurrencies did not exist, yet today the infrastructure to create them is now available to anyone. The blockchain is often described as having the potential to be more disruptive than the Internet itself and the rules of finance are being rewritten every day. This fireside chat looked at the good, bad, and the ugly of cryptocurrency and blockchain and highlighted issues that will drive the next five years of blockchain.

Are we in a period of Creative Destruction and what will emerge in the future?

Bitcoin Origin Stories

“…it was just the beginning of a stream of thinking about the possibilities of this technology, which is really blockchain distributed consensus networks, and what it meant.”

Matt Devost:  The thing for me about this panel – and thanks for joining us, I’ll let you give an introduction about how you discovered Bitcoin, in particular, and cryptocurrency – is that I first wrote the panel description in 2019 in anticipation of a 2020 event. And the world went crazy in the interim as it relates to blockchain, cryptocurrency, web3, NFTs, et cetera. So I would love to get your perspective on how did you get introduced to these concepts and what was the appeal?

Raymond Roberts:  Sure. So I began the first part of a 10-year sabbatical back in 2012. And I had an interest in trading commodities – Forex, that kind of stuff. I just wanted to kind of dabble in that area. And came across a of couple people that were working with Bitcoin  – and had an opportunity very early on to read the original white paper and I stared at it in absolute bewilderment.  I was like a hog looking at a watch. I was trying to figure out what did this meant. How did it work?  What was it about? And it was, there was a golden moment where I kind of figured out exactly what the value of Bitcoin was and what it meant and how it worked. And I remembered I just couldn’t stop thinking about it.

And I started working on a number of projects that incorporated digital assets in a social network.  This is back in 2013 and 2014. And, and it was just the beginning of a stream of thinking about the possibilities of this technology, which is really blockchain distributed consensus networks, and what it meant. And back then you could see the rise of Bitcoin pricing, by the way. It was one of the only – there were only a few assets that were like it. I remember at one point there was only like less than a hundred of these token coins projects that had been started. And you could see the rise of Bitcoin just moving from like nothing, right? Micro pennies. And then eventually, by the time I started really paying attention, it was like in the hundreds of dollars, it was a couple hundred dollars. So there was a lot of excitement back then about what that could be. And then you can see over just a 10-year period where it has gone.

The History of Money

“So when someone…started smelting copper or iron…the nature of money started to move towards those things that were difficult to do  – and could only be produced by technology.”

Devost:  But I think we kind of jumped ahead on Bitcoin.  There is a broader conversation to have here  – and that is around the concept of money.

Roberts:  Yes.

Devost:  So what is money and why do we feel like it is going to be disrupted by these technologies?

Roberts:  That is a great question. So, the history of money, you have to look back and think about what money is, right? So money is a unit of account. It is something that we agree on. And I know the previous speaker did nail it.  It is a social construct, and it is something that we agree on that has an exchangeable value between us. It is a unit of accounts, tiny, small.

Think back to the entire history of money. It is a human construct that started a long, long time ago, probably five, 10,000 years ago.  Somebody said, or somebody thought to themselves, I’ve got food, you have grain. How do we exchange food for grain? And that began the system of barter that probably always existed between human beings. But then at some point somebody realized that a deer is not that divisible, right?  I can’t get a handful of grain for a deer or whatever the units were.

And clearly somebody came along with a sort of an intermediate object, something like a stone or a seashell. And for the longest time, stones, little rocks, pebbles. And in some cases, seashells were the mode of exchange between people. So it was an intermediary system of barter where you could fractionalize an object or the value of an object, right down to like a handful of seashells. The problem with seashells is they are everywhere.   So there is this concept of “stock to flow”, which I could talk about if you wanted to, but [seashells] are easy to get. And so over time, and this is technology, this is where technology kicks in overtime as technology improved, you can see money follow technology. So when someone invented smelting and started smelting copper or iron, you could see that the nature of money started to move towards those things that were difficult to do  – and could only be produced by technology.  So for a couple thousand years, coins were sort of that medium of exchange, the form of money that people used, different types of coins.  A lot of problems with coins, because you never knew where they were minted or who had them.

“…we have been operating in a fiat standard – not a metal-based standard, not a hard currency standard. And so this is a very new era of money…”

And as smelting technology became cheaper and cheaper, you could see that people were sort of fabricating their own coins. And then, we think about one of the greatest inventions, which is the Gutenberg press, right? That invention led to the printing of notes.  The creation of actual paper notes, which are much easier to move around than coins. But in between, there was this movement towards very valuable objects like silver, gold, precious metal systems. It was Isaac Newton that became the keeper of how much gold was worth – what it was worth to the bank, and then how much silver could be traded in for how much gold. It was Isaac Newton that did that. And then at some point people realized carrying gold around is not particularly useful.

So they started using printed notes as a substitute for gold. Now, the biggest thing that has happened, a lot of folks think that it happened in 1971 when we came off of the gold standard, but it actually happened in 1915 when the Bank of England came off of the gold standard to finance the first World War. And that was the first origination, in modern society, of fiat currency. So for a very short period of time, there was quantitative easing back in England in 1915 to pay for the war that was happening in Europe by the British.

Now they went back to the system of the gold standard, and it wasn’t until 1971 that the United States came off of the gold standard. But there has been a period of time now where we have been operating in a fiat standard – not a metal-based standard, not a hard currency standard. And so this is a very new era of money right now and we have been at it since 1971. The entire world has been in this process,  right now, where the US dollar is the backing reserve currency. Now. It is not gold anymore. It is the US dollar.  And all other currencies in the world are really based off of the US dollar, between the US dollar and the Euro. You’re looking at about 70 to 80% of the world’s trades and currency.

The Future of Money

“…the rest of the world just has to operate either using the US dollar or some other object that is dependent on the US dollar.”

Devost:  What percentage do you think the US dollar will be of the global reserve currency in ten years?

Roberts:  we are going to continue to be the dominant form of currency in the world. I think that the United States’ ability to influence other countries and to maintain the system that it has right now is rather profound. And I think that as we move towards a US digital dollar, it’s going to become more and more entrenched throughout the world. There is this tendency to trust in the US economy.  The US economy – no matter how bad the world is doing, no matter how dark our economy gets – we are always the cleanest dirty shirt on the planet, right? So our economy always seems to fare well. We have a momentum of productivity and ability to produce and to move financial products throughout the world.

We have this ability plus it helps if you control them if you control the International Monetary Fund(IMF).  It helps if you control the World Bank. But we have this ability to continuously have this momentum, and then the rest of the world just kind of wants to feed off of that. There are 185 different currencies in the world, of which most you have never heard.  Like you’ve really only heard of maybe ten or fifteen of them. And the rest of the world just has to operate either using the US dollar or some other object that is dependent on the US dollar.

There is a great story about Kenya. Kenya had a period of inflation that wasn’t working for the average citizens. So what they did is they started using the local telephone network. They started using the point system on the local telephone network as a form of currency that had more value than the Kenyan denomination. And then somebody wrote an app so that they could trade cell phone points. And so this is really like the first Bitcoin. It is kind of an interesting concept, but again, they are really relying on that U.S. dollar.

“And so the idea today is we would like to have more transparency about where money comes from…nobody can calculate the size of the monetary systems that exist today with fiat.”

Devost:  So one of the interesting things, if you talk about moving to a U.S. digital currency is the transparency built into those systems. Yet we have a lot of economic value that is stored in kind of non-transparent systems, right, that we have seen revealed through the Panama papers, et cetera. What happens to that element of the global economy, the kind of the shadow economy? Do we have cryptocurrencies that marry up to it, that are tradable? Does it become more transparent?

Roberts: So, do governments want transparency?

Devost: Good question.

Roberts:  Right? So there is going to be this natural tension between the folks that live in a country and then the folks that they agree should be their government. But the government really doesn’t want transparency. And with the advent of fiat currency, we’ve gone back to a time – you have to roll back to the Bank of England, 1695, you have to roll back to why they created the Bank of England. It was to finance the king’s wars in France. Before that there was no transparency. The king could just go out, wage war, run up huge debts, and figure it out, right? And the people had to pay for it. And so the bank, the bankers got together and said, no more of this. We want transparency. But what has happened with fiat currencies is that there is no transparency.

This is a really big issue. And I think a lot of folks, maybe some folks in this room, are a little bit frustrated by the amount of debt that we accumulate through the fiat system. And we don’t know how money is created.  How is the current monetary system – how is it funded? How does a dollar come into existence in the current system? And it would be great to be able to see that. Now, when it comes to gold, something like gold, for the longest time we knew exactly where gold, how gold was produced. Somebody went and prospected gold, expended labor, time, energy, time, food, you know, all of these things – and came back with a handful of gold dust.  And so we knew where this dust came from.

You could not know this before there was alchemy.  People were trying to create gold. They could notdo it, right? Gold is a very unique substance. And so the idea today is we would like to have more transparency about where money comes from. When you look at something like Bitcoin, you know exactly where that money comes from. It is an algorithm. You know exactly how much Bitcoin is out there. Twenty-one million coins – you know exactly the last date of the mining of those twenty-one million coins.  It will be – I don’t know the exact date, it will depend on the clock – but it’s somewhere in the year 2139 or 2140, right? We know exactly what the unit of production is for that and where it comes from and how it is in the market. We know exactly how many Bitcoins exists; how many Satoshi’s have been burned. We don’t know this for the U.S. Dollar, we don’t know this for the Euro. We don’t know. Nobody knows how much. Nobody can calculate the size of the monetary systems that exist today with fiat.