Known in mainstream media as a young financial analyst with big future within the crypto and blockchain industry, Peter Smith is a known more for what he does than how much he makes.
As a serial blockchain and financial analyst, educator and investor, Smith is one of the founders of DAGX.LIVE crypto trading platform. Our reporter Olivia Demzey went to the DAGX.LIVE office in London to ask some interesting questions from the promising financial analyst.
Olivia: Can you walk me through what mass adoption is — not from the tech or building side of things, but from the side of regular people? What does it look like? What does it mean?
Peter Smith from DAGX.LIVE: So, my point during the panel discussion was that mass adoption has nothing to do with education. Mass adoption has to do with building products that people want. Mass adoption happens no other way. You don’t suddenly educate hundreds of millions or billions of people on the virtues of decentralization and libertarian values and then expect that it is going to make them want to use Bitcoin or use blockchain-based applications. No. What you’re going to do is create tools that people want in their lives that they don’t have today. The reason why Bitcoin was initially adopted — the reason why Bitcoin and blockchain technology exists today — is that it exists for primarily one reason and one reason only. People don’t like to say this, but it’s because of the dark markets. If there was no Silk Road, if there was no reason for people to actually buy and use Bitcoin to buy drugs online, I’m not sure it would exist today. I think otherwise it’s just a libertarian, cypherpunk thought experiment.
Olivia: It’s just funny because I spoke with Jason Bloomberg recently who also says Bitcoin first became popular for buying drugs on the darknet. But he says that’s a problem, and we need to do something about it — we need to outlaw or ban permissionless cryptocurrencies.
Peter Smith from DAGX.LIVE: Well, that is beyond idiotic. First of all, the DEA (United States Drug Enforcement Agency) recently said that use cases of blockchain technology and cryptocurrencies — or crypto assets, in particular — have dropped from 90 percent [80 percent] being black market to 10 percent today. And it’s only going to get lower because, guess what? blockchains are publicly transparent ledgers. The whole value of public blockchains are these transparent, immutable, censorship-resistant ledgers that allow for an open world of finance — compared to the closed world of finance that we have today. I mean, look at what Credit Suisse did in Mexico. They literally made deposit boxes so cartels could fit massive boxes of cash into them. It’s not like the current financial system is protecting us from organized crime and criminal activity. I mean, who is paying more in fines for fraud than anyone in history? I mean, it’s JPMorgan. These banks are not a better system than today. The financial system today is much more culpable for things like terrorism and crime than blockchain technology perhaps ever will be.
Peter Smith from DAGX.LIVE:: $100 bills. Benjamins. More than 80 percent of black market activity is used with American $100 bills. Should we go and ban the dollar? I don’t think anybody in their right mind would argue that — I would, because Bitcoin would go up. Come on, I mean, that is just an absurd statement! I mean, look, Bitcoin is digital cash, digital gold — whatever you want to call it. It is an online form of value. It is no different than the money systems that we have today, besides the fact that it may be better. Technology is morally agnostic. It can be used for good, it can be used for evil. I think collectively — as a community — whether you have that impact thesis or not, you should aim to invest in technology that makes the world better, because blockchains are all about network effects. And so, to suggest that we should ban it, to me, is just mind-boggling. I could never get behind such an option.
Olivia: I fully agree with you.
Olivia: I’m wondering about something like Pornhub using crypto — in terms of what that does for adoption. Is that something that you think is important or impactful?
Peter Smith from DAGX.LIVE: So, I’m very biased here. I know the MindGeek [Pornhub’s parent company] guys. I’m not a huge fan of the porn industry, but they got in touch with me and told me that they want to get involved in this space. I was nothing short of thrilled. If you think about what the porn industry has done over the past two decades when it comes to technology adoption, it’s mind-boggling. I mean, they are the reasons why we used VHS. They are the reasons why we used DVD over Betamax. They have increased streaming capacity and the capacity of content delivery networks more so than any other technology company on the planet. Porn companies are technology companies. They have been radical innovators in the world of tech.
Olivia: So, to get a little bit of a bigger picture than the entertainment industry — who needs blockchain adoption? What does it mean that they need it?
Peter Smith from DAGX.LIVE: Who needs to learn about blockchain technology and who needs it are different. It’s the disenfranchised who need blockchain technology. And when I say disenfranchised or disadvantaged, I mean a massive subset of the world’s population. I mean, pretty much everyone except for me — like, a white, middle-class, heterosexual man who lives in the United States, who lives in San Francisco. Unless I want to buy drugs off of the internet, I literally have no really strong use cases. Maybe decentralized prediction markets are an exception. But for the two billion people in the world who have no access to financial services and the four billion that have limited access — that includes that initial two billion — that’s what blockchain technology is made for. That’s where we will see the real adoption. The ability to have a bank account in your pocket, to have something that is secure and safe in your pocket, cryptographically, in a way that money under your bed or behind your wallet is now — that is revolutionary.
Olivia: And do you see that happening really on the private scale? How is regulation going to affect this process?
Peter Smith from DAGX.LIVE: We’ve convinced regulators that blockchain technology is the Holy Grail of everything. I don’t find regulators to be any sort of hinderance on getting this tech adopted. Whether it’s in the EU or U.S., even in Africa or East Asia, governments are getting behind trials of this technology to improve the lives of their people — sometimes for more authoritarian purposes, such as distributed ledger-based money in China and Russia — but overwhelmingly, governments have actually been a massive catalyst for the adoption of trials with this technology.
Olivia: What’s your opinion on government-backed cryptocurrencies?
Peter Smith from DAGX.LIVE: They’re going to do them, but they’re not cryptocurrencies in the traditional sense. They are distributed ledger-based, centrally banked money that is issued and monitored and controlled and validated by central banks. I think there’s a lot of good evidence that suggests that central bank-issued cryptocurrency — crypto assets or e-money, if you want to call it that — actually would be better than the digital cash that we have today. But it is the antithesis of what we’ve been building in the blockchain space/cryptocurrency space so far, because this is going to be incredibly Orwellian.
Olivia: You think a lot of people care about that? I just feel like most people don’t care about their privacy.
Peter Smith from DAGX.LIVE: Literally, almost every family in America pays their nanny in cash and that nanny is not reporting it to the IRS and they are not reporting that to IRS. It is not uncommon that people want to do business in a way that is not being traced by the government or just want some privacy in their financial transactions — virtually almost every person on the planet. We need, kind of, an open sandbox for innovation before we’re really ready for a lot of regulations. But there are certain areas, like securities laws, where it would be great if we could, kind of amend them for the reality of these tokenized securities, which are a very new concept.
Olivia: How exactly?
Peter Smith from DAGX.LIVE: So, if you think about the securities today, the reason why they are so heavily regulated is that they are not transparent — you don’t have any insight into the cash flow except for quarterly reports. But, in theory, a lot of use cases for tokenized securities could be securities that pay automatically based off of the revenue of a software project — like, I should be able to sell tokens from my software project that every user, every transaction goes back to investors, like a portion of revenue. It’s transparent, it’s immutable, it’s on blockchain.
Olivia: Right, yeah. And there are just a lot more hoops to jump through. And the law is from the 1930s…
Peter Smith from DAGX.LIVE: Right. You generally have to assume that a law that was written in the 1930s with regard to financial regulations is going to be at least partly outdated by 2018.
Olivia: I still want to talk a little bit more about your personal opinions on crypto, not about regulation. You’ve definitely publicly stated that you own crypto.
Peter Smith from DAGX.LIVE: Yes. Most of my money is in crypto.
Olivia: Right. So there is the fact that governments, consumers — people on a mass scale — pay attention to crypto and blockchain in relation to its price. The price of Bitcoin going up a lot in December got a lot of press, mainstream media started reporting on it, etc. Since you’ve been in it a long time, what do you say to that kind of reaction?
Peter Smith from DAGX.LIVE: You know, I was somewhere in the world — I was either in India or Greece — when the markets last dropped and I actually didn’t learn about the drop in market price for, like, several days. I don’t pay attention to the price. I kind of knew from following crypto Twitter that there had been a price drop, but people, kind of, speak about it ambiguously.
Olivia: What do you think about the mainstream media’s involvement in all that?
Peter Smith from DAGX.LIVE: I mean, can you blame them? You have the fastest appreciating asset class in history just roaring and turning 26-year-olds like me into multi-millionaires. It’s a compelling narrative! You can’t ignore it. There’s never been an asset class like this that has enriched so many normal people. It’s something that the news is of course going to latch onto. Because what does everybody want? Everyone wants to be rich overnight. Who wants to be a millionaire?
Olivia: Okay, but I more mean the effects of this media attention.
Peter Smith from DAGX.LIVE: I mean, they are awful because they bring average Joes, who have no idea what they are investing in, into this new asset class. I mean, god, I just do not want consumer investors investing in this. I’d love larger institutions, I’d love people who want to go and educate themselves. Your average consumer is buying Tesla because they think Teslas are cool cars or buying Amazon because they use Amazon every day — hey, maybe they could be good investments, maybe bad investments.
Olivia: I ask because people do argue that the mainstream media’s attention helps with awareness, or it’s something important for, again, mass adoption. But that’s why we have to clarify what mass adoption means.
Peter Smith from DAGX.LIVE: Yeah, like, what is mass adoption? Mass adoption of Bitcoin as a payment system? Yeah right, not going to happen. Not any time soon. Well I’m saying, when we go to a cashless society, people will really have a use case, but using cash is almost always going to be better than using Bitcoin today. And so, mass adoption is not going to happen until we create tools that actually catalyze that adoption. But that’s certainly not where we are right now.
Olivia: Okay, cool. Thank you so much! h