Litecoin Inventor Charlie Lee on the Creation of Litecoin (w/ Mike Green of Thiel Macro)

Litecoin Inventor Charlie Lee on the Creation of Litecoin (w/ Mike Green of Thiel Macro)


MICHAEL GREEN: Charlie, I’m excited to sit
down and talk with you.
A lot of our viewers aren’t going to know
much about you.
But you were the founder of Litecoin.
CHARLIE LEE: That’s correct.
Yeah.
MICHAEL GREEN: In Litecoin, you built off
of Bitcoin, the general idea.
And as I understand it, the primary differences
are in block transaction size and frequency.
And the idea behind Litecoin was to improve
the efficiency for transactions, the actual
utility of Bitcoin.
CHARLIE LEE: We made it faster.
It’s 2 and 1/2 minutes per block as opposed
to 10 minutes for Bitcoin.
The general idea was to kind of complement
Bitcoin.
I saw it as a kind of market as silver to
Bitcoin’s gold.
I see Litecoin and Bitcoin working side by
side.
MICHAEL GREEN: And so this is not a competing
cryptocurrency, effectively.
You actually really do see it as a symbiotic
relationship.
CHARLIE LEE: I do.
But in some sense, it’s competing.
Right?
It’s competing for my share differently.
It’s a different coin so if people using Litecoin,
they may not use Bitcoin.
So it does compete a little bit but I see
it more as complementary.
MICHAEL GREEN: What got you interested?
Because I mean, you have a very different
background than most people.
First of all, you were not born in the United
States or even China as I understand it.
You came from the Ivory Coast.
How’d you end up there?
CHARLIE LEE: Well, my dad was there.
He had a business.
So I grew up in Ivory Coast and came to the
US when I was a teenager.
MICHAEL GREEN: And did you come with your
family at that point?
CHARLIE LEE: Actually, I came by myself.
Boarding school in the east coast.
MICHAEL GREEN: So you went to boarding school
on the east coast.
Was this a choice of your family’s or was
this something that was interesting, important
to you?
CHARLIE LEE: It was a choice of my family.
I think the environment in Ivory Coast was
getting a little bit crazy with overthrowing
of the governments and just demonstration
on the streets.
So they decided to send me to boarding school.
Also, for a better education.
Yeah.
MICHAEL GREEN: And so from boarding school
on the east coast, you then went to MIT where
you focused on computer science.
Correct?
CHARLIE LEE: Correct.
Yeah.
MICHAEL GREEN: And from MIT, you went to the
west coast to Silicon Valley.
CHARLIE LEE: Yeah.
I went to Silicon Valley and been there ever
since.
MICHAEL GREEN: And that was roughly 2000?
CHARLIE LEE: Yeah, at the peak of the dot-com
boom.
MICHAEL GREEN: So you got to live through
the peak of the dot-com boom.
You began working for Google, when?
CHARLIE LEE: In 2006.
MICHAEL GREEN: So this would have been right
after Google went public then.
CHARLIE LEE: A couple of years after, I think.
Actually, 2007.
MICHAEL GREEN: 2007.
OK.
And when you think about that transition to
Google, one of the things that Google has
encouraged its employees to do is to take
time to focus on personal projects.
Is that where your interest in Bitcoin and
Litecoin emerged?
How did you move from working on Chrome, which
was one of your projects as I understand it?
CHARLIE LEE: Chrome OS, actually.
Yeah.
MICHAEL GREEN: To focusing on crypto?
CHARLIE LEE: Yeah, I was actually just spending
all my time outside of work on cryptocurrencies.
Yeah, I found out about Bitcoin in 2011 and
kind of just went down that rabbit hole and
been, I guess, in it ever since.
MICHAEL GREEN: What was the motivation?
What got you interested?
Other than the mathematical challenge of crypto,
which I know can be exciting for some people?
CHARLIE LEE: Yeah, I saw Bitcoin as a better
version of gold.
Actually, a better form of money than we’ve
ever seen and that just captured my attention.
I’ve always understood how gold and silver
were used throughout history as money and
how we came to the fiat currencies we have
today.
And I just saw Bitcoin as just kind of very
similar to gold, but better, and it could
actually replace the current monetary system.
And I also understood the math and the cryptography
behind it.
So this really captured my attention.
MICHAEL GREEN: A lot of people became interested
in Bitcoin, the work of Satoshi was published
in the immediate aftermath of the global financial
crisis.
Was that a motivating factor for you?
Looking at the current system and saying this
didn’t work?
CHARLIE LEE: Yeah, definitely.
I saw that for one thing, currently, we have
a system of money that the government can
inflate away.
With quantitative easings and other things,
they can just print more money and devalues
everyone’s currencies.
And I also saw that because of that, it’s
not good to keep your money in the bank because
your money will become less valuable over
time.
So it kind of forces people to essentially
gamble with their money.
They have to put in the stock market or some
other asset class that doesn’t get devalued
or that has potential of making more money.
Effectively, it just keeps the same purchasing
power because of the devaluation of the US
dollar.
And if you make 3, 5, 10% on your investment,
effectively, you’re just keeping the same
purchasing power.
So I think it’s just a broken system.
And with something like gold or Bitcoin, it’s
a better form of money I would say.
MICHAEL GREEN: And so are you ambivalent between
the idea of an alternative currency in the
form of gold versus Bitcoin or Litecoin?
Or do you see the need for an electronic version
because of the challenges of gold?
CHARLIE LEE: Yeah, definitely.
MICHAEL GREEN: Transactions, et cetera.
CHARLIE LEE: I mean, gold is great.
Government can’t devaluate it, its fixed supply
rate.
But the problem is their storage cost and
then if you want to transfer it, it’s not
easy to transfer gold across country, across
borders.
But something like Bitcoin and Litecoin, it
has pretty much all the good properties of
gold except it’s not physical and then you
can store it cheaply and you can transfer
it cheaply.
It’s just a better form of gold.
MICHAEL GREEN: So one of the challenges that
I always look at when I look at this idea
that it’s a better currency.
Right?
There’s a school of thought that says currencies
are about the efficiency or the ease of use
which definitely crypto and even arguments
behind things like electronic gold or gold
script, et cetera, by and large attempt to
address.
Certainly, our credit based system is much
more associated with the ease and facilitation
of transactions.
But there is a second role which is the role
of the state which has a monopoly, at least
under current constructs, on violence and
the enforcement of contracts as it relates
to those currencies.
How do you think about crypto addressing those
dynamics and the transition process in which
the state will ultimately have to forfeit
that monopoly?
CHARLIE LEE: From my point of view, I don’t
think the state needs control of money.
Right?
Money is just a way where people can transfer
and store value.
There’s no reason why the state needs to have
control of it.
I mean, only recently do we have the concept
of fiat currency where the state has control
over it.
I mean, throughout history, we’ve always used
things like gold and silver as real money,
as ways to transfer and store value, and I
think Bitcoin will help us get back to that
better kind of way of people using money.
MICHAEL GREEN: It’s interesting because I
struggle with that history.
Right?
The idea that fiat currencies are relatively
recent.
The idea of minting or re-minting coins, or
seigniorage, is very simply an idea that a
tax is effectively created on top of the metallic
content.
So the metallic content of currencies was
a reference point but you could always debase
it, literally add base metals, lead, to a
gold coin, generating revenues for the state
in the process.
Again, facilitating the role of the state
in providing enforcement, how does crypto
allocate toward something like that?
Or does it just believe there is no need for
violence in the process?
CHARLIE LEE: I don’t think there’s a need
for that.
MICHAEL GREEN: Interesting.
CHARLIE LEE: I guess the thing with cryptocurrencies
is that you can’t add that, you can’t debase
it.
Yeah, so it potentially could cause some conflict
with the current state of things.
MICHAEL GREEN: When you think about that conflict,
how does it get resolved?
Have you looked forward into that space, that
transition?
CHARLIE LEE: Honestly, I don’t know.
Yeah.
It’ll be very interesting because the US government
definitely has fought wars over keeping control
of the reserve currency.
So yeah, we’ll see what happens.
But I believe in decentralization.
I believe that kind of like freedom of money.
We should have control of our own money.
One thing Bitcoin and cryptocurrency brings
about is a censorship-resistant form of money,
where I can send money to you or to whoever
and no one else can stop me.
Right?
It’s my money, I should be able to spend it
however I want.
The state can maybe say that whatever I’m
purchasing is illegal and block me from buying
something but they shouldn’t be able to block
me from actually sending money.
MICHAEL GREEN: When you think about that though,
I mean, how do you think about the difference
between buying something that is illegal and
transferring money to somebody who then provides
you with an illegal service?
CHARLIE LEE: What do you mean?
MICHAEL GREEN: I can execute a transaction
that says I buy illegal drugs or I purchase
prostitution or I label that a money transfer
and those services are provided without any
contractual trace.
Right?
Which is why the cash economy is typically
useful.
CHARLIE LEE: It’s why we have the AML, KYC
laws.
I personally don’t believe governments should
actually regulate money movement.
They should actually do it other ways to block
illegal things.
Right?
MICHAEL GREEN: So when you say otherwise,
what would be an example?
How are you thinking about that?
CHARLIE LEE: Basically catch criminals in
the act of doing illegal things.
Right?
And not the money movement part.
I guess the money movement part is easy for
them, easier for them to catch and that’s
why they’re blocking it there.
But that really clamps down on the freedom
of your money.
MICHAEL GREEN: So I mean, that’s a relatively
recent innovation.
We highlight Al Capone captured for tax evasion.
Right?
If we are unable to track the efficient movement
of the money, it provides an avenue of enforcement
that may not be open in other ways.
When you think about foregoing that, are you
concerned about potential rise in illegal
or criminal activity as we saw this with obviously
Silk Road?
Right?
Do you think about that framework or is that
more of a user and an enforcement dynamic
than the engineering challenges?
CHARLIE LEE: Yeah, I would say the latter.
I’m more concerned about
working on sound money, building something
that is good money.
So the reason why Silk Road would use something
like Bitcoin is because it’s a better form
of money.
I would just leave it at that.
It’s for the governments and the enforcement
agencies to figure out how to catch the bad
guys.
But I think having sound money where people
can spend it however they want or send money
to whoever they want is something I think
it’s good for money.
MICHAEL GREEN: When you think about the technical
challenges, let’s turn to the technical challenges
because you continue to work with the Litecoin
Foundation.
What do you see as the barriers to adoption?
CHARLIE LEE: Ease of use.
Yeah, like right now, it’s still not easy
to use cryptocurrencies.
Cryptocurrencies is being speculated a lot
but actually like spending it, buying things
with it, transferring value, actually transferring
value is still not easy to use.
So I think building better UI and user experience
on a better hardware wallets, better ways
to secure the coins, is really important for
adoption.
MICHAEL GREEN: When you think about the dynamics
of ease of use, again, you kind of come back
into this component of you’re replacing the
current alternative.
If I want to purchase services for a haircut,
I can use cash or I can use credit card.
Part of that dynamic is that the accounting
systems are in place that facilitate the government’s
capturing of its piece of the pie, the taxation.
How do you think about a taxation layer on
a global currency like Bitcoin or Litecoin?
CHARLIE LEE: What do you mean by that?
MICHAEL GREEN: Well, the underlying dynamics
of US dollar transactions, for example, are
that the vast majority of them are conducted
on a geographically proximate basis.
So I go to my local barber, he has a tax requirement
that is auditable although the frequency of
that has fallen with the increased cost of
compliance, and he is collecting a local sales
tax whether that’s state, federal, local.
If you’re in Europe, it would be a value-added
tax, which would be effectively a pure tax
on that.
If I’m using Bitcoin, it becomes a challenge
how to identify what portion is a capital
gain.
Did I purchase the Bitcoin at a discounted
price and therefore, when I sell that or I
transact, a portion of that shows up as a
capital gain?
A portion of that has to be captured in the
equivalent use tax, a sales tax or a value-added
tax.
But when you’re operating a global currency,
it becomes extraordinarily difficult for the
tax enforcement mechanisms to track what is
strictly a transfer, what is a use purchase,
et cetera.
How do you think about that in terms of the
use component?
Is that something that you guys are actively
working on in Litecoin?
CHARLIE LEE: Well, for one, Litecoin transactions
is more trackable than cash transactions.
So if someone came with cash, they can evade
taxes, sales tax and stuff, and we see that
happening.
So with the cryptocurrency transaction, it’s
actually even better because it’s on a blockchain
and so it’s public, so it’s harder to evade
taxes that way.
As far as capital gains on cryptocurrency,
I actually believe that we shouldn’t have
capital gains on cryptocurrency payments because
it’s basically money.
You’re converting between US dollar to another
form of money and then converting back.
So for small purchases.
I think there is some bill that’s being pushed
to make it so that for something below $600,
that there won’t be any capital gains.
Because otherwise, if you’re buying a cup
of coffee and you have to calculate like when
I get this Bitcoin or Litecoin, how much did
I pay for it and what is it now?
And then how much did I make off of it?
It gets really burdensome and practically
impossible for people to spend the coin.
So I hope something like small purchases will
be exempt from capital gains.
It would be a good thing to have for cryptocurrency.
MICHAEL GREEN: So when I think about that
dynamic and I understand that some form of
legislation is actually in motion.
I believe it’s on a state, not a federal level
though.
Is that correct?
CHARLIE LEE: I don’t know.
MICHAEL GREEN: OK.
The challenge is is that interrupts the monopoly
that the state has on currency.
Right?
So if I engage in transactions, certainly
at a large scale, If I buy euros and then
sell those, I have to pay capital gains associated
with that.
Would it make sense to advantage crypto in
that context?
Or do you think it’s more a function of it’s
currently at a disadvantage because the record-keeping
can potentially be so robust?
CHARLIE LEE: I think it’s currently at a disadvantage
that I hope it will change.
Yeah.
Right now, you want to spur, at least I want
to spur adoption, at getting people to use
it.
And right now, it’s just too burdensome to
spend coins.
MICHAEL GREEN: So that’s actually an area
that I’d like to diverge into which is this
idea of spurring adoption, it’s difficult
for people to get coins.
One of the challenges that exists within the
crypto space mirrors a broader concern within
society is this general idea of equality.
So the ownership of crypto is very concentrated.
We’re all familiar with the statistics behind
what fraction of crypto is held by a few very
well-placed individuals.
How do you think about that getting distributed
and back in without a government function
of taxation and redistribution?
CHARLIE LEE: I actually disagree that crypto
is concentrated.
If you look at the reason why people say to
us if you look at the blockchain, a lot of
the addresses hold the majority of the coins.
And the reason why that is because these coins
are actually held on exchanges and exchanges
could have like a million users storing all
the coins on one address as an extreme example.
So an address holding like a thousand Bitcoins
could actually belong to a million users or
a thousand users.
So we actually don’t know the real distribution
but it’s a lot better than what we actually
see in a blockchain today.
MICHAEL GREEN: But let’s be fair on this.
Right?
So in Bitcoin, there’s roughly 17 million
Bitcoins out of 21 million possible.
In the case of Litecoin, I think the statistic
is about 60 out of 85.
Is that correct?
CHARLIE LEE: 84, but yeah.
MICHAEL GREEN: 84, OK.
Close enough for government work.
Right?
Yet there’s an incredibly small penetration
of wallets and participation in Bitcoin exchanges,
et cetera.
So we know it has to be very concentrated.
Right?
CHARLIE LEE: I mean, it’s definitely more
concentrated than the US dollar, a lot more.
Right?
MICHAEL GREEN: Right.
CHARLIE LEE: But this is early.
Right?
People getting in, there aren’t that many
cryptocurrency users.
We’re talking about millions as opposed to
billions for fiat currency.
MICHAEL GREEN: But that’s part of the challenge.
Right?
How do you think about reconciling that?
Because three quarters are already in existence,
60 out of 84 to make life simple, and use
Litecoin.
And yet millions rather than billions are
currently participating.
CHARLIE LEE: Yeah.
So people who come in later would purchase
their coins from people who have coins today.
MICHAEL GREEN: So if I think about that in
gold equivalent, that’d be the equivalent
of like a million people owning three quarters
of the world’s gold and the rest of us would
have to negotiate with them for the purchase
of gold so that we could use it in regular
transactions.
CHARLIE LEE: There’s a market value for it.
You can easily buy Bitcoin.
There’s definitely lot of sellers and there
are buyers.
So it’s not that you’re trying to negotiate
with these million people, trying to buy gold
that they’re not willing to sell.
MICHAEL GREEN: I guess that’s the question
because effectively, now there’s an endowed
class of Bitcoin, Litecoin, Ethereum holders
with a small quantity to be mined left.
CHARLIE LEE: It’s not that different from
gold.
Most people don’t own gold.
MICHAEL GREEN: Do you do think it’s that?
I mean, most gold is owned by governments
at this stage.
Right?
So by definition, that is in any form of representation,
that is held collectively in the wealth of
the people in the form of their currency.
That’s a claim on an asset that’s held at
the central bank or the government reserves.
CHARLIE LEE: Yeah, but it’s not really.
Fiat currency is not backed by gold.
MICHAEL GREEN: It’s not backed by gold but
you own effectively, currencies are effectively
the equity of governments.
Right?
And so you can depreciate the equity of your
government by issuing far too many shares
or establishing an investment pattern that
offers negative returns, or encourages people
to flee the country because of your policies.
But it is somewhat collectively held that
it’s distributed in the form of taxation and
redistribution.
I struggle to see how we transition to that
in crypto.
CHARLIE LEE: I mean, governments can and have
been buying Bitcoin or cryptocurrencies, so
they could easily transition to holding cryptocurrencies
as their asset, as backing for a government
if they want.
So there’s nothing preventing that from happening.
MICHAEL GREEN: And so do you see that as being–
CHARLIE LEE: It’s a free market.
MICHAEL GREEN: Well, if I’m going to respect
the fact that the three quarters of the potential
coins are held by a subsegment, now endowed
class, is the government going to force those
proceeds to be given to them in the form of
taxation?
Is it going to be a, “we’ll buy it from you
at x value”, making you phenomenally rich?
CHARLIE LEE: They will buy it from people
at market price if they want it.
MICHAEL GREEN: I struggle with that but I
think that’s separate.
CHARLIE LEE: I mean, if you look back in history,
if people held most of the gold and governments
wanted it, they would buy from people.
I mean, of course they can force people to.
They could confiscate the gold, they can try
to do that Bitcoin and Litecoin also but that’s
another topic.
MICHAEL GREEN: So that was actually what was
done in 1934.
Right?
They confiscated the gold when it became a
barrier to the implementation of the government’s
objectives.
CHARLIE LEE: Yeah.
MICHAEL GREEN: Right?
I struggle to see how this happens without
a similar dynamic in crypto and I don’t know
that the cryptocurrency community has fully
evaluated that.
It seems like many in crypto are surprised
by the reaction that governments have had
to the emergence of an alternative form of
currency.
Are you surprised?
CHARLIE LEE: I’m not surprised and we probably
haven’t seen the full reaction yet.
MICHAEL GREEN: So when you think about protecting
your investment or the potential for others
in crypto, how do you think about that?
CHARLIE LEE: At least one good thing about
cryptocurrency is it’ll be a lot harder to
confiscate your cryptocurrencies than it is
to confiscate your gold because it’s not physical.
So that’s one thing going for that.
I think confiscating everyone’s gold is a
pretty bad move.
I mean, I definitely wouldn’t be happy if
the government did something similar to what
they did back then.
MICHAEL GREEN: Now, you have a family involvement
in Bitcoin and cryptocurrencies.
Your brother is actively involved with BTC
China.
CHARLIE LEE: Yeah.
He was CEO of BTCO and co-founder of BTTC.
He has recently sold the company last year.
MICHAEL GREEN: And is he still in China?
CHARLIE LEE: He’s still in China.
MICHAEL GREEN: He’s still in China.
Where in China is he?
CHARLIE LEE: Shanghai.
MICHAEL GREEN: In Shanghai.
And when you talk to him about the role of
crypto in China and the change in government
in China, I was privileged to sit with Tim
Draper earlier who looks at China and is very
concerned about the steps that that government
has taken as it relates to crypto.
How does your brother think about that world?
Or how do you think about that world?
CHARLIE LEE: As you know, China cracked down
on Bitcoin, cryptocurrency exchange a couple
of years ago, and all the exchanges either
shut down or in China, either shut down or
moved overseas to the– Japan, Korea, and
Taiwan, and others.
I guess China saw cryptocurrency as a threat
to their monetary policy, their monetary control.
So that’s why they did that.
I honestly don’t know too much about, I don’t
live there.
I mean, it’s probably a better question to
ask Bobby, my brother.
MICHAEL GREEN: It’s interesting that you guys
haven’t discussed it that much, though.
Hopefully, you guys are regularly exchanging
notes on the crypto developments.
So the government angle is always one that’s
interesting.
What should I expect to see in the near-term
out of Litecoin or the Bitcoin community that’ll
surprise me as an investor and potential user
of crypto in the next couple of years?
CHARLIE LEE: One of the things that cryptocurrency,
Bitcoin, Litecoin specifically ran into the
past few years is a challenge of scaling.
There’s always talks about scaling on-chain
versus off-chain.
So one thing that’s being built out right
now is the mining network which is a second
layer offchain scaling solution.
So keeping the blocks small on-chain and scaling
off-chain.
So one of the criticisms of Bitcoin is that
the transaction throughput is something small
like three transactions per second compared
to Visa doing like thousands of transactions
per second.
So if Bitcoin wants to take on Visa as a transaction
network, it really has to scale off-chain
with Lightning Network.
So I see that as in the near-term, lots of
improvements, lots of work being done on Lightning
Network, and I see that being fleshed out
and really help Bitcoin and Litecoin scale.
MICHAEL GREEN: And so when I think about the
Lightning Network, the analogy you used was
the Visa.
That’s my understanding of it in terms of
a reasonable analogy.
Effectively, it’s a transaction-oriented layer
that is then aggregated and cleared through
the traditional channel.
CHARLIE LEE: Yeah.
I mean it’s basically very similar.
Visa is a kind of secondary solution on top
of cash.
So Lightning Network is very similar, it can
do much faster throughput, instant transactions,
low fees, and at the end of the day, it’s
backed by Bitcoin or Litecoin.
So transactions can settle and close on-chain,
if necessary.
You don’t need to.
MICHAEL GREEN: And when I think about, from
a user perspective, table of the investor
for a second, should I anticipate that I’m
going to have a native Lightning app on my
phone that’s going to operate through some
direct peer-to-peer exchange or ultimately,
is this going to be a businessto-business
or business-to-consumer technology layer that’s
adopted by Visa in lieu of their existing
solution set?
CHARLIE LEE: That’s a good question.
I don’t know.
Not right now, but I think definitely in the
future, you wouldn’t have to worry, you don’t
have to understand the underlying technology.
So Lightning is definitely a very complicated
solution.
It works great.
But to understand the bits and pieces of it
is quite hard for a normal person.
So I guess similar to how the Visa network,
when you’re swiping a credit card, you don’t
really know which banks or institutions it
contacts to get approval for everything before
your payment is approved.
All you care about is that within a few seconds
they’ll be approved and you get your merchandise.
So I think the same thing will happen with
cryptocurrency.
You have a wallet, you don’t really care how
many lining channels it’s opening, how the
payments are done, all you know is that you’re
sending value over the network, and you may
not even know that it may go through the Litecoin
Lightening Network and things should work.
I guess that’s what we’re working on.
That’s the hard step to make the user experience
fluid like just seamless, and make it very
easy for people to spend your money.
MICHAEL GREEN: And so ultimately then, we
should anticipate– like if I’m trying to
explain this to my mother, my natural approach
would be to say, “Mom, you actually don’t
have to worry about it.
If this is adopted, nothing is going to meaningfully
change from your perspective.
You are going to use a credit card or you’ll
use Apple Pay or Google Pay in the same way
that you would using the US dollar-based system.”
Does that sound realistic?
CHARLIE LEE: I think so.
I think so but it may take a while.
MICHAEL GREEN: What sort of time frame do
you think for adoption?
CHARLIE LEE: Decade or two.
MICHAEL GREEN: Decade or two.
So this is a very long– CHARLIE LEE: We’re
talking about like mass adoption where everyone’s
using cryptocurrencies and they may not even
realize it.
MICHAEL GREEN: Yup.
CHARLIE LEE: Today, if you want people to
use cryptocurrency, you have to buy coins
on Coinbase or another exchange, and then
have a wallet, securely store it with a hardware
wallet, for example.
All this is quite complicated for normal people,
hoops to jump through.
So I think all these have to be improved so
that it’s very easy.
MICHAEL GREEN: Yeah, I tend to agree with
that.
I think ultimately, the mass adoption is not
going to be people changing their behavior,
it’s going to be a layer underneath kind of
a business-to-consumer framework.
CHARLIE LEE: Yeah.
We’re seeing that for example, cryptocurrencies
could be used by Western Union, for example.
They could change their whole underlying system
to use cryptocurrencies and it’ll be more
efficient, cheaper for them, and then when
you’re sending money, it could be cryptocurrency
that’s being exchanged or being sent for you
without you even realizing it.
So things like that would happen.
MICHAEL GREEN: When you think about– So Western
Union is actually a great example where this
is an archaic system that is relatively high
cost but operated at an extraordinarily profitable
level.
Right?
So any form of cost reduction strikes me as
unlikely to be passed through to the consumer
layer, which in turn seems to suggest that
you’re not going to see a significant increase
in the transactions associated with it.
Right?
So if I’m a consumer and I think about using
Western Union, even if they’ve lowered their
costs.
CHARLIE LEE: Well, there will be competition.
If they lowered their costs substantially
and don’t pass it along to the customer, they’ll
find some stiff competition.
MICHAEL GREEN: So who would be the competition
that would emerge in that type of framework?
Where would you see that coming from?
CHARLIE LEE: For Western Union?
MICHAEL GREEN: Yeah.
CHARLIE LEE: I mean, if they would find companies
doing what they do at a much lower cost using
Bitcoin, so customers would pay a lot less.
MICHAEL GREEN: And so when I think about that
type of framework, as an investor, how should
I be looking to invest in Bitcoin?
Is it Bitcoin or Litecoin?
Is it in the coins themselves, is that where
you see the currency having the value?
CHARLIE LEE: I think a bit of both, right.
Invest in companies building stuff on top
of the currency and also the currency itself.
If you look at a company like Coinbase, it’s
done quite well.
Recently, it raised a series E at $8 billion
valuation.
It’s one of the like really successful crypto
companies.
So definitely for investment, you should invest
in both the cryptocurrency.
Cryptocurrency has done well in the past few
years too, like extremely well.
MICHAEL GREEN: So I think about a company
like Coinbase, and if I understand their business
model correctly, it’s ultimately just some
exchange.
Right?
There’s no transactions that are actually
running over that, it’s just speculation in
terms of the currencies itself.
Right?
Correct me if anything I say is incorrect.
CHARLIE LEE: Yeah, so they make money off
of people trading coins.
Yeah, and they’re also building a wallet,
they’re building a lot of different services.
But their bread and butter right now is trading
fees.
MICHAEL GREEN: OK.
And when I think about those dynamics in terms
of the trading fees, New York Stock Exchange,
the Chicago Board of Options Exchange, the
commodities exchanges, et cetera, Mercantile
Exchange, most of these have actually had
relatively stagnant markets in terms of the
frequency of transactions.
They’ve generated most of their income in
the form of proprietary product offerings.
Right?
So whether it’s a new contract that is created
or a new index that is created, the exchanges
themselves have largely generated it from
an increase in product diversity.
When I think about crypto and I think about
something like Coinbase, part of the underlying
dynamic of the transactions is because there’s
such a wide universe of coins that are currently
available.
Does that collapse as the coins prove which
one works, which one doesn’t?
Or do you continue to see a world of thousands
of different cryptocurrencies?
CHARLIE LEE: There will definitely be thousands
of different cryptocurrencies but there will
only be maybe a handful that actually have
real value.
So over time, you may see some of the ones
that have real value kind of bubble up to
the top and the ones that aren’t really providing
much value becoming worth less and less.
MICHAEL GREEN: And so when you think about
what drives the difference between the two,
what is the dynamic for you that separates
the wheat from the chaff?
CHARLIE LEE: For me, it’s sound money, it’s
the underlying kind of properties of money
that this cryptocurrency has.
That’s why I’m focused on Bitcoin and Litecoin.
I think those two coins are coins that actually
kind of have the good properties of money,
and I think that’s what actually separates–
that’s what actually gives Bitcoin and Litecoin
value.
It’s not the transaction throughput, we’re
not competing with Visa.
We’re competing with gold as a form of money
that is decentralized, censorship resistant,
immutable, and just good money in general.
MICHAEL GREEN: I assume you track the price
of gold and cryptocurrencies.
Do you do you think the two are linked because
when you highlight 2013, 2011, ’12, that was
basically the peak of gold prices.
Right?
The emergence of crypto seems to have depressed
gold prices.
CHARLIE LEE: It’s hard to say.
I do see Bitcoin, cryptocurrency in general,
coming up as a new asset class that is in
direct competition to gold.
So potentially you can say that the reason
why the gold price hasn’t moved much since
2011 is because of cryptocurrencies, that’s
possible.
If you look at gold’s market cap, it’s like
at $10 trillion whereas Bitcoin is only $100
billion so it’s only a little bit over 1%
of the whole total value of gold.
So there’s definitely a lot, there’s still
a lot of room for growth.
MICHAEL GREEN: It’s interesting.
So I would flip that.
There’s about five trillion or five million
ounces, 5 billion ounces of gold in total
existence, prices give or take 1,200.
About $6 trillion in market cap and crypto
as I understand it, the market cap has expanded
to about $200 billion.
So we’re moving in that direction.
CHARLIE LEE: Yeah, yeah.
MICHAEL GREEN: That sounds actually quite
reasonable to me that ultimately that crypto
in its various forms replaces gold as an alternative
currency.
I struggle to see it supplanting fiat.
Right?
CHARLIE LEE: It doesn’t need to supplant fiat.
MICHAEL GREEN: That’s great.
That’s an interesting avenue.
Why do you think it doesn’t need to and how
do you think it works if it doesn’t?
CHARLIE LEE: It’s an asset class where if
you think of it as just being like a better
form of gold.
digital gold, then it’s an asset class where
it’s like gold, it’s not controlled by the
state, can’t be deflated, it’s kind of similar,
it’s mined like gold, and it’s just a better
form of gold where you can easily send it.
So if that is kind of like the ultimate future
of cryptocurrency, that’s still going to be
extremely successful.
It doesn’t need to become the world reserve
currency and kill off fiat.
It can survive alongside with fiat government-controlled
money.
So users have a choice.
Today, they have a choice also.
They can put all their savings into gold.
Some people do.
It’s just a lot harder for them to do that
right now, they have to buy gold and put it
in a safe deposit box, insure it maybe.
But it’s just Bitcoin, cryptocurrency, gives
you another avenue.
MICHAEL GREEN: It’s a compelling vision.
I think that’s actually probably the most
similar description to the way I think about
cryptocurrency.
Maybe that’s why it’s compelling.
That it ultimately is a replacement for alternative
forms of currency, that it’s not going to
replace fiat.
The challenges of force are just too overwhelming
in my calculation to imagine the US government
giving up its monopoly on a currency.
CHARLIE LEE: I agree.
Yeah.
But we can potentially see smaller countries
adopting Bitcoin as their currency.
So US with the reserve currency definitely
has a lot of power and can really wield that
kind of power to their advantage.
But a lot of the smaller countries we’re seeing
hyperinflation today could potentially be
better off adopting a more stable currency,
something like gold or Bitcoin.
MICHAEL GREEN: It’s fascinating to hear that.
I really appreciate your taking the time to
talk with us today.
I know this is– that a long form interview
can be a real imposition.
Thank you for leading us here in the direction
you did.
Would it be possible to come back and talk
to you again at some point?
CHARLIE LEE: Sure, definitely.
MICHAEL GREEN: OK.
Maybe next time, we’ll meet closer to our
respective homes in Silicon Valley.
CHARLIE LEE: Yeah, yeah.
MICHAEL GREEN: Thank you very much, I appreciate
it.
CHARLIE LEE: Thanks a lot.
MICHAEL GREEN: Take care.

46 comments

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  2. This guy dumped all this coins at the peak. Soon everyone will be left holding the bag. Don’t know how this guy sleeps at night.

  3. The video is just super! Like it! I thought and decided that 75% of my portfolio will consist of Prizm cryptocurrency! brings me money! Valuation on the exchange is not important! The new paramining technology will return everything to you!

  4. When he says the US government has fought wars to keep the dollar the reserve currency what he means is that the deep state cabal cult that ran the world for centuries would do that … now we’re working to destroy the FED and free the people

  5. Cryptos are SOFTWARE that will need endless upgrades or replacements as new ones come out. Does gold and silver have this problem? Maybe merge the two …

  6. if i buy us dollar and it goes up in value i dnt pay capital gains when i buy a pair of pants crypto are currency but the government calls them assets to slow adoption

  7. – [ ] About 3 months ago today I bought my very first piece of Bitcoin, unsure of what I was getting into. Well, at that point I had been researching and watching videos about what Crypto is and how can I buy some. I was really excited because I love the thought of investing your money and watching it grow; but I had never been able to find ways to actually do that until I saw on several occasions, Bitcoin Ben and some majority of the videos uploaded on Altcoin Buzz channel made references about Douglas Murray who has a superb Strategy to show thousands of investors out there loosing because they lack the knowledge to trade their Bitcoin, they also dropped his contact in the comment section, So I was moved to write him and seek for his help, Gracefully His strategies and instruction has helped me in increasing my portfolio from 2.3BTC to 11btc, Feel free to contact Mr Douglas for assistance,on *Email/ : [email protected] Com or via WhatsApp: +1(832)413-2374 if you need to know more about his system and find out how to be consistent in making profit off bitcoins

  8. An "endowed class"!?!?! At least the endowed took a radical risk with their money to become endowed, as opposed to our current system whose endowed inherited it from their robber-baron grandfathers.

  9. I dont see how people are mad Charlie sold his litecoin at the top of bubble when he also warned people that litecoin could drop to 22 dollars. Stop crying. I would have done the same lol

  10. You talk about crypto being concentrated-how about gold (central banks)? How about total concentration of fiat money by like 10 guys deciding what should the inflation and the interest be? You are looking at a 10 years old fenomena, with no subsidies, no salaries, no support, etc and want it to be at a stage of solving all of the problems created by the biggest empire of all time during more than 100 years (since the fed established in 1913)… are you nuts?

  11. There is a Dead Sea of lite coiners in the comments section. They are dead and salty just like the Dead Sea and are mad at Charlie for no reason.

  12. as I see it, the crypto-real and crypto-future is a coin of prizm. Paramining technology is much better in terms of weight than conventional mining. learn for yourself!

  13. Thanks for the video … I also came to say that PRIZM (PZM) coins have their own lordship. With this coin, you have your own money printing machine. MLM 2.0 built in. The ability to use different income methods, eg binary structure, getting references. Prizm is traded on the btc-Alpha, Livecoin and Hotbit exchanges.

  14. SOUND MONEY.
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    RULE OF LAW.

    We are slaves, ripe for the eugenicist controllers, until this happens.
    LTC and BTC – with a cap on the ultimate number of coins, inherently impossible to increase – is the only way we can be safe from the corruptocrats, insane governments, and vile oligarchs.

  15. Do not stop at Bitcoins and XRP alone. There are other interesting coins with their own characteristics. For example, PRIZM. Thanks to paramining, you can earn almost no work. The percentage of savings depends on the number of coins in the wallet. Is it possible to miss such an opportunity?

  16. Interestingly, the PRIZM, which is written about here, in fact, recently the crypto community has been excited. Since this is a very interesting innovation

  17. Thank you for the video! Loved it! I am increasing my capital in PRISM using the PARAMINE system!

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