Paul Vigna, a renowned reporter for the Wall Street Journal who is considered an authority on cryptocurrencies, appeared on TechCrunch’s podcast, TechnoTopia, to talk about his new book, The Truth Machine, and what he thinks about the current dynamics of the cryptocurrency industry.
Vigna spoke candidly and openly about the cryptocurrency industry, its current and possible impacts on our everyday lives, and how it has the potential to define the future of humanity.
It was refreshing to see the tone that Vigna took during the discussion, since he was not vehemently critical of cryptocurrencies, but actually seemed to be at the other side of the fence, supporting them and their underlying technologies.
Technology is neutral – understand how bitcoin and cryptocurrencies work
Vigna mentioned that the technology behind Bitcoin and other cryptocurrencies holds immense potential for a technological shift, and ignoring it would be a big mistake.
He stated that while people could have mixed reactions towards the functionalities of cryptocurrencies, the technology that powers them deserves to be understood due to the innovation that it brings to the table.
He also explained that as with other inventions, the technology behind Bitcoin and other cryptocurrencies is supposed to work how its user would want it to function. If anyone good has their hands on it, then it will work for the betterment of the world, whereas, if someone with intentions of greed gets to be the expert of the technology, then it would not the technology’s fault.
“Technology is neutral, technology is just… technology, it can be used for something good and it can be used for something bad,” he said. “What we really want to see is people who want to take this technology and leverage it for the better of society to be the ones getting take control of this, rather than someone who will take control of the technology and use it for their own profit.”
“We are imploring people to get involved.” Vigna stated, mentioning that only with the involvement of the right kind of people could the underlying technology meet its true potential for the good of the world that we live in.
Potential dangers of crypto – the risks of bitcoin and other cryptocurrencies
Responding to a question about the risks that the asset class proposes, Vigna mentioned that the dangers go in two different directions.
“One is anarchy and the other is extreme centralization.” He said, elaborating on how permissioned and unpermissioned systems work in the cryptocurrency industry.
He mentioned that the prime example of an unpermissioned system would be the Bitcoin blockchain, which provides you with complete transparency with the ability to join available to anyone who wants to do so.
He stated that this use case defines the kind of transparency that is very effective and required in today’s day and age, but one that also poses informational risks.
On the other hand, he gave an example of a permissioned blockchain as being one where a bank has created a blockchain platform and only key individuals would be able to have control over it.
He stated that while this would control the private information, it would also mean that one single entity has control over that particular asset and its private information, and that, in his opinion, effectively negates the freedom that the technology of cryptocurrency proposes and leads back to how people could leverage the technology to their own profit.
Bitcoin and the internet’s dot com bubble – the comparison that never ends
Vigna mentioned that the scenario about the bank’s blockchain relates to the internet and how it has been shaped today.
He stated that the internet is now controlled by a select few companies, and that monopoly of sorts has caused immense problems for the end users – who now have nowhere to go.
Recalling how people say that Bitcoin and blockchain at the moment are where the internet was in 1995, Vigna stated: “I say that it is even earlier than that.”
He said that it would actually take people farther back than 1995 to be with the internet where we are with cryptocurrencies and blockchain at the moment, since as per him, the industry will take way more than a decade to shape into something that can be reviewed effectively.
“In the very long run, within 15-20 years, this technology would be a net positive on the societal level.” He mentioned.
Take part – how to understand bitcoin and cryptocurrencis, as well as the blockchain technology
“You don’t have to quit your job or move to Silicon Valley to take part in the discussion or be involved.” Vigna stated while talking about how people need to be more involved with blockchain technology.
“This technology is starting to touch every industry.” He said, explaining how he has various reporters from the Journal come over to him and ask him about blockchain, stating that they have to write an article about their industry’s involvement within the technology.
“Whether you are in the law industry, or the account industry, in the healthcare industry, even in a barber shop or a startup…” he said. “Figure out where it can plug into whatever it is you are doing, and how it can help.” He requested.
“You don’t have to become a bitcoin evangelist,” Vigna continued, stating that one should just see if they can incorporate the technology within the life that they are leading.
Speaking about ICOs – the benefits of icos, and the risks that they propose
Vigna also spoke about the pros and cons of the crowdfunding method of initial coin offerings (ICOs), which has taken the world by storm.
“The ICO phenomenon itself is really fascinating,” he mentioned, elaborating on the pros and cons of the same.
As per Vigna, the pros are simple.
“You are giving startups access to more capital than they can raise in the private markets. You are giving average investors the opportunity to get in early on a startup which they would never have otherwise.” He pointed out, before he started mentioning how the concept of ICOs poses a big flaw.
“You are completely flipping on its head the entire idea of the capital markets,” he mentioned, explaining that the way ICOs work for fundraising is actually opposite to how the currently functional method for it works.
“You officially allocate capital to companies that can use and produce some sort of societal benefit to it.” He explained the conventional fundraising system. “That’s the idea of the stock market, the bond market, the whole capital market is supposed to move money efficiently to companies that can make the best use of it.” He clarified.
“How do you make the best use of it?” He said before defining the process. “You come up with a product, you sell somebody on it, they give you a little bit of money, you build it up, you show that it works, they give you more money, you scale it up.” He outlined a few basic steps.
Explaining the end game and how it works in the conventional markets, Vigna stated that startups and companies have to go through this whole staircase system to their “ultimate exit”, where they hopefully go public and then seek the capital they desire, after having proved their mettle.
As compared to that, Vigna mentioned, the ICO actually raises that whopping capital first, and leaves the funds for the people who have not even started working on building the product in most cases.
Providing an example, Vigna pointed out that if you are a 25 year old who has a whitepaper and raised 300 million from the ICO you started, would the incentive not compromise your desire to actually go ahead and build the product that you proposed?
This, among many other issues, should be considered closely, Vigna stated.
Centralized and decentralized systems – the distinction
“It gives you an opportunity to go back in time and think about things where you had to trust a single entity.” Vigna mentioned about the difference of centralized and decentralized systems.
He stated that a lot of market segments could be rethought now that decentralization is a possibility.
However, he mentioned that some of these market segments are there for a reason.
“You have government issued money, because it’s just a better system, and it’s worked and it’s not that it’s a terrible system,” he said. “You can complain about the dollar all you want, but the fact of the matter is that it works.”
“Is bitcoin a better system?” He posed the question before he answered it himself. “Possibly.” He said. However, he stated that before Bitcoin or any other cryptocurrency could be selected for that distinction, people’s minds need to be changed on it.
He stressed that before that happens, people actually need to understand how it all works, and that can only happen when you let everyday people get access to it, making it easier to reach by the masses rather than just key individuals.
If you introduce something which is “really alien” to them then they would not really understand it or trust it the way that it deserves, Vigna stated.
“I think the potential is interesting,” he said. “The idea that you can have a decentralized network, where that’s where you are putting your trust in rather than a centralized player, I think that’s fascinating.”
“But you are going to have to change people’s minds about that, and that is going to be the hardest thing to do on a large scale over a long time.” He concluded.