Financial services – whether mainstream or alternative – depend entirely on Trust – trust that the pieces of paper and coins in your pocket will be taken in exchange for goods (no longer 100% true), trust that a piece of plastic in your wallet will “tap and pay”, trust that you do “own” those securities a website says you do etc etc. However Trust is at a real premium right now and indeed ever since 2008. Who can you trust with your wealth? The State? Central Banks? Banks? The dollar? Sterling? The Euro? Stockmarkets? Your pensions? Crypto? “Stablecoins”?
So we dive into the nature of Trust per se – how that has worked, or not, how it is underwritten in the FS system, how it works in crypto and how the existing system and crypto might coalesce/crash together with CBDCs.
Unless you have precious metals in your hand the shocking truth is that all of your wealth is dependent on “the system” and trust in that so this is a core topic.
Topics discussed include:
booking holidays back in the day as well as now and what this tells us about the false promise of a digital world as well as choice theory
the origin of Omid and his name
Omid’s introduction from having less than zero interest in crypto to now being a published author
the seminal impact of doing his first crypto transaction and seeing that he directly owned bitcoin as opposed to traditional financial assets where there are always armies of intermediaries between and your assets
the theft of bitcoin as dropping the penny that there is some kind of unique reality to the crypto that there isn’t to other digital assets eg music
writing and lecturing about something as a real acid test of how well you understand and can explain something
how Omid’s second book mutated into being about the core concept of trust and how that works in the Crypto world
the paradox that the more trust based a system the greater the incentive to hack it
the asymmetry of trust – hard to gain easy to lose
did the State restore Trust in FS in 2008 or did it not? Eg rise of Bernie Sanders and Trump as rooted in this “the system is broken” moment along with a little after taxpayer-subsidised banks paying record bonuses and doing record levels of foreclosures
can we trust Central Banks given their record?
mainstream is “trusted” as the Central Banks cover up its errors via money printing etc – cf crypto less trusted as no central State institution buries its errors
CBDCs as a potential merger of the two worlds above
the architecture and naming of FS institutions as relating to the need to create a feeling of trust as “trust is the product”
money bubbles and crypto bubbles
neither money or crypto is “really real” – both just bits in a bank computer
OTOH eg Bitcoin has an engineered-in limit to how much the supply of it will grow cf conventional money where politicians and central banks print it without limit
Bitcoin also has its own built-in payment system compared to conventional money which needs external institutions – hence way harder to stop transactions
CBDCs as a State-driven desire to head off independent ~money
how much control is possible – the ultimate uncontrolability of mankind
“bitcoin cannot be regulated at the core architecture layer” and hence what regulation there is is at the surface/margin – eg where you go to trade into or out of it
the moving of bitcoin mining as an example of distributed systems resilience
Omid’s overall view of crypto
the future – utopia? dystopia? or something in the middle
can crypto be anti-totalitarian, anti-dystopian as opposed to many cases where it is just a different type of dystopia (theft/ponzi cryptos etc)
In this episode Omid, a decade-long veteran of the crypto world who as well as lecturing on said same at the Columbia Business School is the author of “The Story of the Blockchain: A Beginner’s Guide” which gets an impressive 4.5* from 82 reviews on Amazon. He is also the author of his upcoming “Re-Architecting Trust: The Curse of History and the Crypto Cure for Money, Markets, and Platforms”.
