Jeffrey Wernick: Wall Street is a slave to debt, and Bitcoin is free

Source: Cointelegraph Chinese

On March 11, the Cointelegraph Chinese online talk show series Focus debuted. The moderator of this sharing is Cointelegraph Chinese CEO & Co-Founder Vadim Krekotin. The guest is Jeffrey Wernick, an early investor in Bitcoin, Uber, Airbnb, and a master of economics and finance from the University of Chicago. The theme of this event is "Cryptocurrency Economy under Free Capitalism", sharing topics around the birth background of cryptocurrencies, the development of Bitcoin in the past 10 years, the impact of the new crown virus on the Bitcoin and cryptocurrency industries, and the blockchain in 2020 And the future of cryptocurrencies, and understanding and evaluation of various stages of Ethereum development. This online sharing consists of two parts, the first part is the online interview session, and the second part is the free communication session.

The following is a wonderful record of the sharing process:

1. Vadim: Hayek is a great economist and political philosopher. He believes in free capitalism. We know that you mentioned earlier that you were heavily influenced by Hayek.

As an early investor in Bitcoin, do you see the existence of cryptocurrencies as a form of liberal capitalism? Or how do you define the cryptocurrency economy?

Hayek said in his book, "The Road to Slavery," "As we go to great lengths to consciously build our future based on some lofty ideals, we actually create The results of the struggle for the opposite result, do people still imagine a tragedy greater than this? "(China Social Science Press, 1997)

Jeffrey: Throughout history, currencies have almost been denationalized. "Denationalization" is the term Hayek used in his "Denationalization of Money." Hayek himself supports the denationalization of currency. I believe he will enthusiastically support Bitcoin and abolish the law of legal tendering and let the market judge the currency.

I want to separate the discussion about Bitcoin from the blockchain. Bitcoin is money, and blockchain is the ledger. There are differences and differences in the attributes of the ledger. So when I think of money, I think of Hayek, and when I think of blockchain, I think of Kos. Coase raised questions about why the company exists and the nature of the company. In other words, why do we organize economic activities in this way. Think about all the bitcoin-related activities. Initially it had no pits, no companies, no organizations, no businesses, and no recruitment. There are only people who mine by computer, some out of curiosity, some for technology, some for philosophy, and some people because they believe in its value and are willing to contribute to it.

I hope we can transform the gig economy into an economy of ownership outside the enterprise system. It is hoped that the distributed ledger can provide individuals with self-organization capabilities as soon as possible, and determine the value distribution through the consensus and governance embedded in the agreement, while pricing the inputs in the production function. As bargaining power gets more evenly distributed, POW will become more valuable, and POS will become less important.

2. Vadim: Bitcoin has been developed for more than 10 years. Do you think that the entire economic system or blockchain ecosystem will develop like Hayek said? What do you think about the development of cryptocurrencies in these 10 years?

Jeffrey: Bitcoin is currently a means of storing value. Due to its volatility, different quantitative trading strategies, momentum traders, and volatility traders have emerged for crypto funds. Since Bitcoin has been the best value storage method since its birth, in my opinion, it has been well developed to a large extent. But I do want a bit more bitcoin holders and a bit less bitcoin traders. I hope that everyone can get a small portion of about 2% to 10% from each salary or each fund invested, and each time they invest in Bitcoin.

3. Vadim: A recent article in the New York Times entitled "The central bank vows to take action against the new crown virus and the stock market has soared" states that the US stock market has risen sharply since the 2008 financial crisis. The government promises that if the new crown virus outbreak hits the global economy suddenly and violently, they will intervene and help, and investors seize this opportunity. "

This is the biggest one-day gain since late December 2018, and the S & P 500 has plummeted 4.6%. As New Coronavirus continues to spread globally, the economies of all regions are inevitably affected more and more. In this case, although Bitcoin is considered by many to be a "safe haven" for funds, its performance is far below expectations, falling below $ 7,900, which is disappointing.

The cryptocurrency and blockchain communities have also been discussing the impact of the new crown virus on Bitcoin and other assets in the industry. Facing the beginning of such a new year, how do you predict the future of blockchain and cryptocurrencies in 2020? Looking at the bigger picture, what are your expectations and estimates of the impact the virus will have on the global economy and financial markets?

Jeffrey: The world economy is inherently fragile, and it is not a day or two. I think the spread of the virus just exposes the huge vulnerability of the global economy. Sadly we live on this planet together. The virus does not require visas or passports, it has no borders, and its effects are ubiquitous: people lose their lives or are isolated, various activities are cancelled, and the market has plummeted.

The virus provides yet another example of the erosion of trust. A few years ago, I often said in interviews that they were not researching to trust technology, but they did not trust or totally trust all technology.

4. Vadim: You are a firm believer in Bitcoin, and you bought it very early. I remember you said that you never even sold a bitcoin, so why do you keep holding it? Hasn't it been sold till now?

If you have never sold a bitcoin, does this also mean that you have never used it? Have you ever used it to buy anything?

Jeffrey: (That's about to be said) Grayshine's rule is-bad money drives out good money. Bitcoin's best use is as a means of storing value, which is the best property of money. Rather than spend money, accumulate wealth. Bad money is used to spend, and Bitcoin, the best way to store value, is used to save money.

5. Vadim: Some people believe that Bitcoin is blockchain 1.0 and Ethereum is blockchain 2.0. It seems to you that you have never supported Ethereum, and you think 1CO destroyed a large part of the value of Ethereum. Can you explain why you have this view of Ethereum?

I thought you were just a believer in Bitcoin and would not support any other cryptocurrencies, but in fact you are not because we noticed that you also acted as a consultant to QTUM. This makes me curious, what points of Qtum attract you? Do you have any investment logic when choosing different cryptocurrencies?

Jeffrey: I think those who say that Bitcoin is blockchain 1.0, Ethereum is 2.0, and EOS is 3.0 are "idiots". No other stored value method can monetize as quickly as Bitcoin. Its settlement is much faster than any other value savings-you sell art, stocks, bonds, houses, cars, or anything else as quickly as Bitcoin. However, ETH and EOS are bad value savings and payment methods.

ETH became the reserve currency of the junk coin economy because of 1CO. I have insisted time and time again that the junk coin bubble will burst and ETH will collapse with it. But with the emergence of a new junk coin economy, namely Decentralized Finance (DeFi), ETH has gained new life.

As for EOS, they paid a fine and almost admitted they were a liar. As I expected, Larimer is also working on another project, which confirms the failure of the EOS governance structure. I remember that in 2018, several people wrote to me about their EOS and it was blown up. My response was to make it worthless and advise them to sell it immediately.

Returning to Hayek's topic, prosperity leads to depression (business cycle theory). 1CO is cheap money, it first creates prosperity, and then it is depressed-so many bad investments are causing damage to the crypto economy.

About QTUM, I met him the year before Patrick became 1CO. I found him to be a serious and thoughtful man. I've always insisted that most projects fail, and I bet on those who are aggressive. Patrick and I are still friends. He is determined to keep studying, which is a very important quality. Few of the people I met really wanted to study. My views on tokenization are very different from others.

Soon I will give a talk on the vision of tokenization in New York and plan my vision. And smart contracts will play a role in this kind of token economy, but at present the role of smart contracts is not great. The common mistake is to confuse the utility of the project and link it to the price of the token. Its value should be linked to the token, not its utility. This may be a confusing statement. I hope readers can think about this issue.

6. Vadim: In addition to Bitcoin, your early investors in Uber and Airbnb are also well-known, and there is no doubt that you are a very successful investor. I think many investors agree that you have unique insights into the world, and you have seized the needs of the times.

Now more and more technologies such as artificial intelligence, blockchain, big data, and deep learning have been developed rapidly. Digital and machines are driving the future of many industries and financial markets. What do you think will happen after the Internet age? Is there anything (technology) that will change the way people live? Do you think it will belong to the blockchain in the future?

Jeffrey: I have mentioned many times that there is a huge conflict between centralization and decentralization. Many blockchains are more aimed at achieving greater centralization. But what I advocate is decentralization, immutable currency, immutable ledger, encrypted communication, data sovereignty, and no longer need untrustworthy third parties or internal economic activities of companies-this is the real thing in a peer society Revolution of trust.

7. Vadim: In September last year, Google announced that they had achieved "quantum hegemony", at which time the news became hot. They have reached an important milestone in the development of quantum computing-solving a problem that traditional computers cannot solve at all.

Do you think quantum computers will hit Bitcoin?

Jeffrey: Google has stated that its goal is "do no evil". I think the reason they no longer say this is that if they say so, they could be prosecuted for fraud. I think this sentence is more accurate to say that they "just do evil".

Eric Schmidt once said in an interview that they would stop before stepping on that weird bottom line. Oh, they've all crossed this line and entered the weird realm. They directly wiped the bottom line. Everything they do is weird.

Google won't beat Bitcoin! Bitcoin represents the most powerful supercomputer in the world. It is also becoming more powerful and more secure. So as technology evolves for evil, Bitcoin is also evolving for those who are committed to decentralization and away from the evil Google. My money stays in Bitcoin.

8. Vadim: I have another question. You once expressed this view: Do you think that the valuation model of Wall Street has shifted from discounted cash flow (DCF) to playing around with concepts to get high valuations. Tesla is a typical example of. Wall Street doesn't like Bitcoin just because they don't know how to use it for marketing.

But we can see that many institutions and companies have started their cryptocurrency business, such as Bakket, JP Morgan Chase, Facebook and so on. What do you think is causing more and more institutions to enter the blockchain industry? How did this change happen?

Jeffrey: Wall Street doesn't like Bitcoin because Bitcoin is the opposite of Wall Street. The two are philosophically opposed. Wall Street controls funds and controls so-called "trustworthy third parties". Their disclosures and books are fraudulent. They want to devalue money and make it a tool for concentrating wealth and power. They have raised countless industries barrier. But Bitcoin is free. Wall Street is a slave to debt, and they engage in dishonest money transactions. Bitcoin, like gold, is real money.

9. Vadim: Thank you very much for your touching speech. Today ’s last question, if you meet Satoshi Nakamoto, what would you say to him?

Jeffrey: I'm glad I know Bitcoin, but I don't need to know Satoshi Nakamoto. To me, the philosophy of Bitcoin is that Satoshi Nakamoto doesn't matter. Bitcoin is self-explanatory. This reminds us that the identity of the creator is seriously overestimated, but its attributes are underestimated. Attributes are the most important, and identity should be irrelevant.

Wonderful review of interactive Q & A session:

Q1 from Kevin Ren: I have a question. Bitcoin has developed for ten years. Do you think it has been decentralized enough? Is it the market or the dealer that determines the price of the currency?

Jeffrey: I am satisfied with the decentralization of Bitcoin, because the motivation for double consumption and counterfeiting Bitcoin is very low, and there is a lot of value and distribution to stop this problem

Because Bitcoin's governance structure is anarchic-there is no better word to describe this attribute, Bitcoin is still immutable. And I am satisfied that it is unlikely that either party will devalue or forge it. I hope the number of wallets will grow and privacy features will be improved.

I think the market determines the price.

Q2 from Lu Chao LV: "Destroy you, nothing to do with you". In this era of Internet robbery, you are not necessarily an opponent but a passerby who defeats you. For example, Master Kong is for takeaway, and chewing gum is for the glory of the king. May I ask, who will replace Bitcoin in the future?

Jeffrey: I like the characteristics of Bitcoin and monetary policy. Evolution happens naturally.

The challenge for everyone is that they need to think like Satoshi Nakamoto about how to expand without entering the capital market. At the beginning, as a prerequisite for the initial design, it is necessary to truly achieve no permission for the government and eliminate fragility.

But once you start raising money from the public, you need permission. So fragility has followed. Many people don't pay attention to this. Technology may not be licensed, but operating technology requires licensing.

Almost everyone suffers from this design attribute, and I think it is a serious flaw.

Q3 from Jay Liang: Have you invested in other cryptocurrencies? What do you think of the future of other altcoins?

Jeffrey: Altcoins are fragile junk coins.

The design of practical tokens is to raise funds, but practicality should not be tokenized or monetized. It should be a technology, just do it yourself.