Editor’s Note: Blockchain technology will be revolutionary. It will allow people to move money and data without having to rely on a trusted middleman. That will make future transactions faster and cheaper.
With Wall Street entering the picture, though, many people fear greed will undermine the decentralized nature of blockchain technology. That’s why I contacted world-renowned cryptocurrency expert and PBRG guru Teeka Tiwari.
Today, Teeka tells me how he balances the promise of blockchain technology and the promise of blockchain riches…
Editor: Okay, on a more serious note… There’s a big debate going on in the crypto space. You call it idealism versus realism.
Basically, some people fear that Wall Street greed will undermine the decentralized nature of blockchain technology. Just recently, Fidelity Investments announced it plans to offer crypto products to large investors like hedge funds this March.
Here’s how one of our readers put the situation: “If Wall Street holds all these tokens, I think it might eventually lead to the death of digital assets. They’ll just become useless cryptographic numbers.”
Now, we all know that when big companies like Fidelity, Citigroup, and Goldman Sachs enter the crypto space, they’ll push prices up—which is great for investors…
But as the reader points out, won’t Wall Street greed also defeat the purpose of bitcoin by centralizing its ownership and control?
Teeka: That’s an excellent question.
First things first… Owing physical bitcoin is not the same as controlling bitcoin. Bitcoin is a software that can only be changed or amended by miners and people operating full bitcoin nodes.
Nodes help maintain the network. And there are thousands of bitcoin nodes. To make changes to the bitcoin blockchain, a majority of those nodes have to agree. I think it’s doubtful that Wall Street will spin up tens of thousands of bitcoin nodes. It’s just not part of its business model.
So Wall Street can’t exert its will over the bitcoin code. However, if firms own most of the bitcoin out there, they can certainly act as gatekeepers… and impose fees and restrictions on how you use and custody the bitcoin you purchase from them.
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Editor: Is that good or bad for decentralization?
Teeka: I’m of two minds here… There’s the dogmatic idealist, and then there’s the realist who’s been in finance for the past 30 years. And I have to find a balance between the two.
From an idealist standpoint, I hate seeing big banks co-opt decentralized technology like bitcoin. The point of bitcoin is to decentralize the financial space by removing the middleman—not to build a whole new series of gatekeepers.
But the realist in me says that if you want to see a multitrillion-dollar asset class—which is what I believe we’ll see with crypto—you cannot see that value creation without the help of the traditional financial system. It has to be a part of it, because it’s the guardian of the world’s capital. Most of the world’s money is under its care.
Call them the high priests of finance or whatever you want… But without their blessing—and without getting their piece—money isn’t going to flow easily into crypto assets.
Editor: So how do you reconcile these two positions?
Teeka: Problems like these have different stages. Think of it like the alphabet.
You start with “A” problems—your early stage problems. And you go all the way to your “Z” problems, which are your end-stage problems.
Now, a lot of people—in life, in investments, and in general—worry about Z when we’re still on A, B, and C.
So this idea that crypto will get so popular with the traditional financial system that it’ll lose its primary value proposition—which is, it allows self-custody of assets, can’t be duplicated, and has a fixed number of units that can be issued—is an end-of-the-alphabet problem.
We’re still in the A, B, and C stages of crypto. By the time we get halfway through the alphabet, the value creation that we’ll have seen in this space will be gigantic… and we’ll have already taken massive profits along the way.
Like with all new technology, solutions will arise. But what I’ve learned from creating wealth myself is that it’s a mistake to try to find an answer for every problem—especially end-of-the-alphabet problems—because they may never ever see the light of day.
That’s why I focus on the front-of-the-alphabet problems.
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Editor: So what do you consider as early stage problems in the crypto asset class?
Teeka: Well, crypto needs more buyers, for one. The number of people who are actually involved in the crypto market is still very small. It’s only around 35 million. So we need to see more adoption. And crypto also needs to be easier to buy, sell, hold, and trade.
Those are front-of-the-alphabet problems.
The good news is, Wall Street is fixing all of that…
Traditional financial firms will make crypto available to more than a half-billion new investors—that’s 15 times the current number of users. And they’ll make bitcoin and cryptos much easier to buy, sell, hold, and trade.
Editor: That sounds great. But what about decentralization? Isn’t that a major reason why people wanted an alternative currency like bitcoin?
Teeka: The beauty about bitcoin and cryptos is that you can self-custody them.
Now, a brokerage firm could say, “We’re not going to allow you to custody your own bitcoin.” And theoretically, it could do that…
But it would put it at an enormous disadvantage to crypto exchanges like Coinbase, Kraken, and Binance that allow self-custody—meaning you can hold your own bitcoin in your personal wallet.
So the actual users of this new financial system—us—always have the ability to get their coins back. We always have the ability to self-custody easily.
This is why I think that bitcoin will continue to thrive.
Again, I want to stress that fretting over Wall Street dominating bitcoin is an end-of-the-alphabet problem that you don’t have to deal with right now.
Now’s the time to focus on creating the life-changing gains that come when an ocean of new money comes into an asset—especially an asset as small as crypto is.
Trillions upon trillions of dollars are set to come flooding into crypto. My job is to find those names that will benefit from this impending tidal wave of cash.
That’s what you want to focus on. It’s too early to worry about anything else.
Editor: Thanks for clearing that up for us, Teeka.
Teeka: You’re welcome.