Education, Investing

Crypto Bites: Chat with Tim Draper and Adam Draper

Abra founder and CEO Bill Barhydt recently sat down with Tim Draper and Adam Draper to record an episode of Crypto Bites. The conversation covers venture capital and bitcoin investing, as well as some thoughts about the future of the crypto space.

The following transcript of their conversation has been lightly edited.

Welcome

Bill Barhydt 00:07

Hey, everybody, welcome to a special edition of Abra’s Crypto Bites. We are at Draper University’s Hero City in San Mateo, just south of beautiful San Francisco.

I’m super excited to be … I call you guys, the first family of venture capital. Is that okay?

Tim Draper: 00:24

Sure. I mean we’ve been called worse.

Barhydt: 00:27

Yeah, I mean it’s —

Adam Draper: 00:29

That’s on the positive side.

Barhydt: 00:31

It’s early morning, so I don’t know if you mean today or if you’re —

Tim Draper: 00:34

That’s certainly better than the second.

Barhydt: 00:35

Okay, there you go. Tim Draper, Adam Draper, super excited to have the opportunity to talk to you guys.

I’m going to forgo introductions as to who you are. Everybody out there, I promise you, knows who you guys are. I just want to get right into it.

Adam Draper: 00:50

Great.

Philosophy on venture capital and investing

Barhydt: 00:52

I want to talk about three things with you guys, today. I want to talk about your philosophy on venture capital and investing, where you agree, where you differ. Hopefully, we’ll mix it up a little bit.

I want to get into crypto, bitcoin. You guys have a lot of investments in that space, both in bitcoin itself as well as companies. Who you’ve invested in and why?

And then lastly, where we think it’s going? Where is the space going? What’s missing for getting broad-based adoption? Is it a function of time? Or are there specific things missing? And would love to get your perspective on that.

Let’s get into it. Let’s talk about investing. You’ve been at it for … how many decades?

Tim Draper: 01:26

33 years.

Adam Draper: 01:28

Oh, I’ve been rounding up when I talk to people. I say 35 for you.

Tim Draper: 01:31

Oh, okay.

Adam Draper: 01:32

Is that okay?

Tim Draper: 01:33

Well, it probably is because I started before I started.

Adam Draper: 01:36

Okay, good. So 35.

Barhydt: 01:37

Okay, and your father is a famous, infamous venture capitalist as well, right?

Tim Draper: 01:43

Yeah, and when I started my firm, I went to get an SBIC loan. I was 26 years old and they said, “Well, you need 10 years investment experience.” I said, “Well, I’ve been investing since I was 10.” And the guy looks at me and goes, “Check.”

Barhydt: 02:04

All right. There you go.

Adam Draper: 02:04

That has changed.

The SBIC loan…now they have a 100 documents that you have to fill out.

Barhydt: 02:09

I see. So it’s not: check, check, check.

Tim Draper: 02:11

It’s not the best now. But it sure was then.

Getting started in venture capital

Barhydt: 02:12

And how long have you been at this?

Adam Draper: 02:14 

So I’ve been investing for about eight years as a venture capital or angel investor. I mean, technically, since I was about six.

Barhydt: 02:24

I was going to ask you —

Adam Draper: 02:25

He started me on buying the penny stocks on a … we would go through the newspaper and it’d be like, “What do you want to buy today?”

Barhydt: 02:32

Now did you get-

Tim Draper: 02:32

They were the most volatile. Of course, they lost all their money on it.

Barhydt: 02:35

Right. Did you get exposure to venture deals as a kid?

Adam Draper: 02:39

Around the dinner table, my dad would bring home stories of … I don’t know what other families brought home stories of, but we got stories about Skype growing, Skype’s network effect, and Hotmail’s network effect. Both network effects on communication for the internet.

So yeah, I think it was just osmosis. It wasn’t like … It was just such a big part of his life that we learned through him.

Barhydt: 03:09

I had a conversation with one of my teenagers two nights ago where he’s a little interested in bitcoin, not really there yet, but is super interested in the lore of Silicon Valley for some reason.

He started asking me a million questions about when I was working on Plaxo with Sean Parker, and he thought that was amazing. He was going to go brag to his friends-

Tim Draper: 03:29

Plaxo should have done much better. I don’t know why that didn’t.

Tim Draper: 03:34

I mean, how many times I’ve gotten the wrong email address because Plaxo doesn’t exist. It just kills me.

Barhydt: 03:41

Amen. Well, let’s do another podcast on why Plaxo failed.

Tim Draper: 03:45

Actually, I have four children and three of them have become venture capitalists.

Barhydt: 03:47

That’s awesome.

Tim Draper: 03:49

I must’ve gotten them excited at the dinner table.

Barhydt: 03:52

Do you feel that you have overlapping philosophies on venture capital? Or when you look at … I’ll ask you first, and then I’ll look at you … you chime in.

When you look at your kids who are also in venture capital, or if I was to ask your father the same question about you, do you feel that you have any overlapping philosophies on venture? Or do you feel that you’re just totally different?

Tim Draper: 04:11

Oh, there is a lot of overlapping, but it’s really fun to see how each of them has decided to go.

Tim Draper: 04:18

Adam, he can speak for himself, but generally, going after science fiction. My daughter, Jessie, she does Halogen Ventures, she only backs women.

Bill Barhydt: 04:30

Wow.

Tim Draper: 04:31

And my son, Billy, does Pace Ventures and that’s only brand.

He’s going after consumer and brand. Technology, too, but consumer and brand.

So it’s interesting, they’ve kind of … the branches have grown.

Barhydt: 04:49

Now, and when they’re raising … I mean, you have to raise all the time. We talk about it. I’m guessing you used to, but you probably do less of that now.

But when the kids are kind of raising for the first time, do they come to you and say, “What do I do?” Do they intuitively know what to do?

Tim Draper: 05:03

Weirdly, none of them have come to me for advice.

Barhydt: 05:07

Wow.

Tim Draper: 05:09

None of them. I say, “Hey, I can help. Here.” You know, I sent out, I said, “Here’s a bunch of my wealthy friends, you want to go to go talk to them.” They go, “You know dad I got my own network.”

Barhydt: 05:20

That is amazing.

Tim Draper: 05:22

Yeah.

Adam Draper: 05:22

I think originally it started as this try it our own before … I do come back, and I work in the same building as my dad. I go up sometimes when I have a hard to decision to make and say, “What’s the right direction?”

He gives me one answer, and then I go to my grandfather, and then he gives me the other answer. Then I have to figure it out.

Investing in big ideas

Barhydt: 05:42

How often do you get the same or overlapping answers?

Adam Draper: 05:47

By the way, I’d say the thing on the venture take, at the base of everything is like we always focused on people who were building things.

My grandfather is incredible with humans, human beings. That sort of, I would say it’s transcended the generations where it’s just sort of we know that at the end of the day it’s the person that’s going to be able to build and change the world.

Yes, we have different takes on the direction the world is going, I’d say that’s why we back different things. I focus very much on hard technologies and movements that you read about in Ender’s Game or Harry Potter.

Barhydt: 06:34 Yeah.

Adam Draper: 06:36

My dad has a … I would say we both also, my dad and I, the similarities are the things where it’s like, we are good where there’s regulatory uncertainty. We see a lot of opportunity where that is.

Barhydt: 06:51

We don’t have any of that at crypto.

Adam Draper: 06:52

Yeah, none of it.

Tim Draper: 06:55

Yeah. Why interview us?

Adam Draper: 06:57

Yeah, why? But that’s where we find the largest opportunities. And so my dad is just good naturally at … I don’t know if we’ve ever called it regulatory uncertainty, but that’s where the most growth happens.

So financial markets. You wouldn’t have guessed that in 2008 that would have been the best time to start investing in FinTech.

Barhydt: 07:19

Sure, turned out to be.

Adam Draper: 07:20

My dad decided to just throw basically everything at fintech. You know he backed a bitcoin, but he also backed Carta and all those things.

Tim Draper: 07:31

Yeah, all those things.

Adam Draper: 07:33

Robin Hood, Carta —

Tim Draper: 07:34

Coinbase, he was in it first.

Adam Draper: 07:35

I did it and then he … but yeah, so —

Barhydt: 07:38

Interesting.

Tim Draper: 07:40

I would say it a little differently, but I like the way he said it. I would say what we all I think we all do is think, “What if it works?”

“How great is this if it works?” We’re not all concerned about what could go wrong, because plenty of things can go wrong along the way.

But what if it works? Is it really going to be transformational? Is it going to really change the whole nature of finance? Or the whole nature of healthcare? Or the whole nature of government? We look and say, “Well what if it works? This would be awesome.”

That’s where the entrepreneur does keep ahead of the regulations because they —

Adam Draper: 08:20

They help create it.

Tim Draper: 08:20

They helped-

Adam Draper: 08:20

Hugely. Abra helped create it.

Barhydt: 08:22

Trust me, I could give you a million stories of the battles that I fight, or choose not to fight. It’s half my day, for sure.

Tim Draper: 08:31

Our sympathy.

Barhydt: 08:34

I asked for the job. Okay, so I want one example of where you went to dad and grandad, and said, “What do you think about this deal?” Both said no, and you did the deal.

Adam Draper: 08:45

Okay. It wasn’t about a deal specifically. I’m going to give you what both my dad and grandfather said about bitcoin.

Okay. First my dad actually, I think timeline wise, you invested in the bitcoin company before I did.

Tim Draper: 09:02

Yeah, but the wrong one.

Adam Draper: 09:03

Yeah, and I backed one of the right ones.

Barhydt: 09:05

I’m guessing I know which one.

Adam Draper: 09:06

Yeah and then I … But then over … I went to my dad and my grandfather and I was saying, “Well you know this bitcoin thing, it’s really interesting. What if we could have digital money?”

My grandfather … so my dad was already in, but it was sort of, “Is this market going to grow? I’m experimenting.” My grandfather said, “No.” He just straight up, “Absolutely not, don’t get into this. You need a government for money.” That was the hands down.

My grandfather, I’d never heard him actually disagree-

Tim Draper: 09:51

He worked for the government.

Adam Draper: 09:51

And he worked for the government though. He worked for a long time.

But then the greatest part of that is that over the course of time, I decided to go at bitcoin full on. We were the first fund ever to say, we’re going to back bitcoin. That’s how we connected originally.

We’ve now backed about 100 crypto companies. But the greatest thing, he sent me an article about five years later that bitcoin was at the top of the headline. It was about how Goldman Sachs was doing something with bitcoin. He said, “Hey, you were right.”

Barhydt: 10:25

That’s it. So you get the same one line — from your grandfather that we do from the venture capitalists. That I love.

Adam Draper: 10:33

Yes.

Barhydt: 10:34

That’s the best tidbit so far.

Tim Draper: 10:35

As long as they say, “You were right.”

Adam Draper: 10:39

Both my grandfather and my dad both just quick little emails. Yes.

Biggest lesson learned as a venture capitalist

Barhydt: 10:44

All right. Quick before we get into bitcoin. Biggest learning so far as a venture capitalist, angel incubator? Anything you want.

Adam Draper: 10:55

Okay. Biggest learning? The crazy stuff works. And the obvious things don’t, would be probably my biggest learning.

Barhydt: 11:05

Wow, okay.

Adam Draper: 11:07

Not necessarily like … So first off, rules are definitely broken all the time. My new thesis is irrational people doing rational things works. And rational people doing irrational things works.

So anyone in the bitcoin community that’s been relatively —

Tim Draper: 11:24

How about irrational people doing irrational things?

Adam Draper: 11:27

I don’t know.

Tim Draper: 11:28

That’s where you get into big trouble.

Adam Draper: 11:29

That’s the trouble, but maybe there is a crazy outlier. But it’s sort of like one of these things where the rational markets, they need someone to come in and be a little irrational to be able to actually break things.

Where the rational people going after irrational things, it’s almost like a good background, like someone who worked in remittance at Boom Financial. Then is literally leaving their company to join this cryptocurrency thing that is anathema to the entire financial market.

Barhydt: 12:02

Sure, it’s more of a movement than anything else.

Adam Draper: 12:05

To join a movement, that’s a seemingly rational, seemingly rational person doing an irrational thing. So that’s sort of my new thesis.

I would say at the end of the day, optimists win. You need to be able to say what if? You have to be able to say … It’s really you want to be pursuing your own mission.

Everyone thinks they’re competing with other people and the entrepreneur’s really competing against themselves in their own market. It’s a full self-discovery thing. It’s not a-

Barhydt: 12:44

As a longtime entrepreneur, I would say any CEO not in therapy is missing —

Adam Draper: 12:50

They’re not doing it right.

Barhydt: 12:51

I will tell you, I have no problem with admitting that. Certainly coaching-

Tim Draper: 12:55

You know there’s a guy who specializes —

Yosi Amram specializes as … He went through it, he was an entrepreneur. He went through this big thing. He took it public and then he got pushed out by other political CEO.

Tim Draper: 13:12

Then he said, “Oh, my god, this is tragic to me emotionally.” He decided that what he would do was he would be the shrink to the stars.

Barhydt: 13:24

When you’re dealing with the fourth thing that didn’t work on the way to the ninth thing that might work, the self-doubt..it just percolates. As a 50-year-old CEO, I’m old enough now where I know that okay, I’m past that. But as a 30-year-old CEO, it was horrible.

Adam Draper: 13:44

I’d say there’s a great quote from a movie. It was, “In my 20s, I knew everything. In my 30s, I realized I didn’t know anything.”

Tim Draper: 13:56

In your 40s, you’re right.

Adam Draper: 13:58

About both.

How investing has changed through the decades

Barhydt: 13:59

All right. I’m going to ask the question a little bit differently. So you lived through the dot com era, some fantastic exits. You’ve seen social networking and now bitcoin/blockchain.

How are things different in your world of venture now? Versus in the 90s? And then through the Google, Facebook years?

Tim Draper: 14:18

Well, I think that the consolidation around the best tokens. Bitcoin, Ethereum, there’s a big consolidation around those. And the innovative tokens. That same thing happened during the dot com period.

Because there were some amazing people going, “Hey, pets.com or whatever.” It was a big, lots of these that kind of came up, raised a bunch of money, and then disappeared.

So similar thing happened in the token world. But then there was the rise of the real. The rise of the great technologies. The rise of the really interesting things.

So with bitcoin, you’re seeing the rise of the people around bitcoin doing interesting things. The OpenNode and the Lightning Network. Realizing, “Hey, we found something. We found an interesting opportunity, let’s run with it.”

Around Ethereum, there are also a lot of those interesting things happening. The payment for better or more honest journalism, that kind of thing. Interesting things happening around those.

Then there are a bunch of these that didn’t really happen. But then there’s some surprises. Like wow, look, the data wallet. Or whatever. That are coming up and people are going, “Wow, look at that. That was interesting.” It’s a new application.

A lot of it has to do with who are the people behind that? How driven are they? It’s just like entrepreneurship all the way through. People who are working really hard and doing really great things and they stick with it and they go for the long haul, those are going to be the ones that win.

First investments in bitcoin space

Barhydt: 16:17

Yeah. So on that note, what was your … beyond bitcoin itself, which I know you’re both holders of. So am I. But what was your first corporate investment in the bitcoin space? Which company did you invest in first? Do you remember?

Adam Draper: 16:32

I bought, I invested before I bought bitcoin.

Barhydt: 16:36

Oh, interesting. Okay.

Adam Draper: 16:37

It was from Brian Armstrong, the CEO of Coinbase, pitched me at a coffee shop. I ended up investing because of people like you, where I met every single person I met was the most dynamic person I had ever met. I was like, whether or not, this is a crazy idea. This is a rational person doing an irrational thing.

Adam Draper: 17:03

So I ended up investing in Brian, in a seed round. Then about … actually it wasn’t for another four months, did I actually buy any bitcoin.

I remember when I actually had finally signed the docs with Brian and I invested money. You’re holding the piece of paper and he said, “Oh, do you want to buy bitcoin on our platform?” I was like, “I just gave you a bunch of money, man. Hey, man, I know that you’re trying to do what’s right for you, but seriously?”

 That is the time I look back on as I should’ve just done it. Because the price around eight bucks or something.

Tim Draper: 17:49

Mine was CoinLab, which was well before that. But it was an investment where it was still totally the wild west and it would seem to be kind of interesting. They were in the catbird seed, but they hadn’t picked a good direction yet.

Then with him, I said, “Well, I also want some bitcoin.” So different situation.

“Here’s some money. Get me some bitcoin.” He said, “Okay, we’ll take that money, get a chip, and mine the bitcoin. And you’ll get it at an even cheaper price.”

Okay. Well, then the chip never arrived for months.

Barhydt: 18:33

That’s a problem.

Tim Draper: 18:33

And months and months.

Barhydt: 18:35

And the price is going up and up and up.

Tim Draper: 18:36

And the chip … well, the people who were making the chip were doing some mining of their own. So we got front run.

Then finally he got it, the bitcoin had gone from four to 36 by the time he finally got it. So then he mines a bunch of bitcoin and I’m saying, good, I got some bitcoin.

He stores it in Mt. Gox and it was gone. So I had a very different experience. The reason I bought all the bitcoin in the big auction was first I didn’t think I was going to get it all, but I did.

I think I’m the only one who bid above market for all the [soco 00:19:14].

Barhydt: 19:14

Gotcha.

Tim Draper: 19:17

My reasoning there was, after Mt. Gox, the price didn’t drop very far for bitcoin. I thought, whoa, people really need this. I was ready to totally give up and say, oh, that was a total disaster and I don’t know what those guys were thinking. But why would we ever get involved?

But it only dropped a little, so I did a lot of research and said, oh, wow, all of these interesting applications. This is going to replace all the fiat money. I didn’t even know the word fiat, except for the car.

Barhydt: 19:47

Right.

Tim Draper: 19:48

So the political money, the money that’s tied to politics, this is going to replace all of it. I got very excited about it.

So when the auction came, I thought, well, the upside’s super high. If I bid a little bit lower, I get a slightly better deal, who cares.

So I think I may have been the only one who bid above market and I got all the lots. Like okay. It was more than I wanted.

Barhydt: 20:17

Careful what you ask for, right?

Tim Draper: 20:19

But now I’m good.

Barhydt: 20:20

That’s awesome. that’s awesome. Wow, okay.

Tim Draper: 20:23

I’m good.

Barhydt: 20:25

All right. So since then, obviously Coinbase has turned out-

Draper: 20:29

So we both invested in companies before we bought bitcoin.

Barhydt: 20:31

Yeah, I would never have guessed that.

Adam Draper: 20:33

Yeah, so that’s wild. Because if someone-

Barhydt: 20:35

You didn’t know that? You both didn’t know that —

Adam Draper: 20:37

No, we didn’t realize that.

Tim Draper: 20:38

We didn’t think about that.

Barhydt: 20:38

You guys are learning a lot about each other.

Tim Draper: 20:39

You bring it all out.

Investing in the emerging cryptocurrency industry

Barhydt: 20:40

All right. So companies first, bitcoin soon after. Since then, you’ve done a tremendous amount of investing in this space, both of you, right? I mean you have a fund dedicated to that and I believe you’ve done many corporate investments, venture investments since then.

So beyond Coinbase, which congratulations, what is the investment that you’ve made in the last 18 months that you’re most excited about in the crypto space?

Adam Draper: 21:05

You mean Abra?

Barhydt: 21:07

Besides Abra. We’ll give you that one.

Adam Draper: 21:10

Let’s see here. You know the things that have worked up til now, so it’s gateways. It’s the onboarding experience, Abra, Coinbase, all these things that allow the people who are not in the digital world, to get into the digital world with digital money.

I think that the next sequence is going to be … well, first, in that digital world, we need data.

And understanding that data is going to be really important, indexing that data’s going to be very important. We backed Etherscan. I would say that that’s one that I’m really excited about because it’s sort of a below the radar.

Barhydt: 21:48

Explain Etherscan.

Adam Draper: 21:50

So Etherscan is you can check and validate a transaction when an Ethereum moves from one wallet to another. You can see when smart contracts settle.

Almost every product uses their API to be able to alert. Every product uses them. And no one really realizes that they’re sort of beneath the surface of everything.

Maybe I shouldn’t even be saying that, maybe that’s their goal.

So Etherscan, once you’re in, it’s important to index all that information. So it’s sort of like the internet. With the internet, it was important to get onboarded to the TCP/IP, which was through like Netscape.

But then once you’re in, indexing all the information, like Yahoo and Google did, ended up being one of the most important pieces of the internet.

So I still think that that’s really important. Then it’s just about use cases and getting people to use it. So the other thing I’m very excited about are user interfaces, which seems very obvious … not obvious, seems a little lighter way. Because we’ve talked about protocols and daps, which are peer to peer networks, so long in this stack of the decentralized world that I’m really excited about the thing that the consumer interacts with.

So there’s this new stack of … there’s a user interface and there can be millions of user interfaces that are built on top of a peer to peer network. The stack that I see the most of is … right now it’s Augur is live and Ethereum’s live. So people are building user interfaces on top of both of those.

We invested in a company called Guesser that is doing that.

Barhydt: 23:28

Explain Guesser.

Adam Draper: 23:29

Guesser is a … it’s gambling. So Augur is a prediction market

Barhydt: 23:34

Which in of itself sounds like gambling.

Adam Draper: 23:37

It is gambling.

So they’re creating an interface that just makes it easier to globally gamble. So you could have a … you could be managing the book of everyone in the world, which is sort of a fascinating concept. Again, regulatory uncertainty.

I think that right now it’s about figuring out the true use cases and why? Why is decentralized better?

 Because a lot of the times that we’re talking about decentralized products, the why is why do you need a slower database? Why do you need permanent file storage? Why are those things important? A lot of the times, it’s not.

 I think that’s the thing that I want people to get, is it’s good for some things and not good for others. Let’s play to the things that it works for.

Barhydt: 24:26

Decentralization is one of my favorite topics. So I promise you we’re going to talk about.

Adam Draper: 24:30

And assets. I would say assets are … that’s going to be a really big deal.

Barhydt: 24:35 What do you mean by assets?

Adam Draper: 24:36

I don’t know. Everyone talks about STOs, so the security token offerings. So auctioning off pieces of this building would be really, really cool.

But the killer app of the entire decentralized world is global. That’s it. If you’re not doing it globally, you’re doing it wrong.

So the reason that I think Guesser’s interesting is you could be peer to peer betting with someone in a different country.

So I would say me being able to buy … actually, this is sort of what Abra’s moving towards. But being able to buy shares of Apple, or being able to buy shares of … where it hasn’t been enabled in a lot of different countries, that’s the exciting stuff.

Barhydt: 25:18

That’s right, I agree. The way I look at it is decentralization comes at a tremendous cost in transaction inefficiency, energy, user experience, because you got to know what a private key is. If you don’t need that, you’re really wasting a lot of time.

Adam Draper: 25:31 Yeah.

Barhydt: 25:32

There are very few applications that really need that. Turns out finance definitely needs it. We’ll see, as it relates to other applications.

Barhydt: 25:39

But as a segue, so entrepreneur or a company that you’ve invested in in the crypto space that you remain super excited about?

Tim Draper: 25:47

Oh, we’ve recently invested in OpenNode. I think that they are going to make it a lot easier for retailers to just take bitcoin. Once that starts to happen, then it starts spreading.

Barhydt: 25:59

So explain OpenNode.

Tim Draper: 26:01

Well, they use … okay, here’s bitcoin, the blockchain, and it’s kind of slow. Here’s the Lightning Network and it is off chain making a bunch of transactions and then pulling them back into the slow node. Right?

Well, OpenNode is the interface to that Lightning Network to bitcoin.

Barhydt: 26:26

Super interesting. So they’re basically trying to be the POS for crypto with instant payments that bitcoin itself can’t manage?

Tim Draper: 26:33

They’re going to make it very easy for anybody to move money anyway through bitcoin. I think it’s going to really have an impact on bitcoin.

But the thing I was thinking, I got to tell you, which was I was in Argentina and I met with the Argentinian president and I made him a bet. Because bitcoin was at 10,000 when I saw him last. That was two years ago.

Barhydt: 26:59 Okay.

Tim Draper: 27:00

It had just hit 10,000, so I was kind of riding high because I’d predicted that.

The peso was at seven and a half cents. So I came back and I said, “Well since we saw each other, bitcoin’s fallen to 4000. But the peso’s fallen to two and a half cents.”

 I said, “So I’ll make you a bet. If the peso does better than bitcoin over the next year, then I owe you a bitcoin. And I will double my investment in Argentina.” I’ve made some investments in Argentina.

He said, “Okay, okay.” I said, “But if bitcoin’s more valuable than the peso, then you owe me the equivalent in pesos and you have to make bitcoin a national currency.”

Barhydt: 27:48 Oh, so what’d he say?

Tim Draper: 27:51 He looks at me and he goes, “God, these crazy guys that come into my office.” Then I said, “Like Japan did.” And he went, “What?”

I said, “Yeah, call the Japanese president, figure out what he did and do that.” He turns and he goes to his minister, “We got to do this, set that up.”

So that was exciting.

Then I thought one other thing, which was interesting. This is going to get into this competitive governance thing that I like. I said, “And forget about fixing the roads, the real estate guys are going to do that when all of the economy starts moving to you.”

And he said, “Just because of bitcoin?” I said, “No. Take your infrastructure money and put in 5G because your internet sucks.” I didn’t say sucks. “Internet is poor here. I’m in this great hotel and you have horrible wifi.”

“So please do this.” Then think of all the entrepreneurs that are going to go, “I’m going to Argentina. I can operate in bitcoin. I get 5G wifi or 5G straight in.” And they’re trying to make a move. So let’s hope he does it.

Barhydt: 29:07

Yeah, we have developers at Abra in Argentina and they are the most passionate, most incentivized to see this work. Versus anyone I’ve spoken to. Except maybe some folks in China. But other than that, they get it.

Tim Draper: 29:18

Well, the Chinese are getting a little depressed because their government has clamped down and makes everything illegal.

Japan responded to that by making bitcoin a national currency and showing how an ICO would work in Japan. They just laid it out.

Barhydt: 29:35

Yeah. So I think we are going to see in the next 10 years, some country really push bitcoin as either a primary or backup reserve currency. It’s going to happen.

Tim Draper: 29:50

I think in 10 years, a lot of these borders are going to dissolve and the governments are going to compete for us in a virtual way.

There’d still be some physical government that’s sort of tied to police or whatever. But then there’s going to be this virtual governing and that can be coming from anywhere.

Barhydt: 30:10

That’s right.

Tim Draper: 30:10

So I’m pretty optimistic that the world’s get … becomes one big, flying —

Tim Draper: 30:16

What did you call it? A golf ball? A golf ball flying through the —

Adam Draper: 30:20

I said we’re a rock.

Tim Draper: 30:22

We’re on a rock.

Adam Draper: 30:24

Hurtling through space, yeah...

Adam Draper: 30:26

And we’ve divided up our countries by these arbitrary —

Tim Draper: 30:29

It’s actually very it’s more like a pool ball.

Adam Draper: 30:29

Yeah.

Tim Draper: 30:31

It’s very smooth.

Barhydt: 30:32

Yeah. All right. Well, either way, I hope it happens.

A bitcoin standard

Adam Draper: 30:36

I like the reserve currency. I like the idea of … because countries have been backed by gold in the past, but then they go off the gold standard, doesn’t make sense anymore. Bitcoin —

Tim Draper: 30:45

Oh, go on the bitcoin standard.

Adam Draper: 30:47

Bitcoin standard.

Barhydt: 30:48

Well, that’s the book, right? Saifedean’s book, if you haven’t read it, and I would say this to everybody listening and watching, the best book by far on this topic is called “The Bitcoin Standard” by Saifedean Ammous. I always screw up his name. But brilliant guy, love the book.

The first third of the book talks about why we screwed up vis-à-vis coming off the gold standard, in terms of basically eroding everybody’s personal net worth. Why bitcoin is the best opportunity that we’ve ever seen to get back to that. And what happens to fiat currencies over time.

 If you look at the graph of the hyperinflation of the Argentinian peso, or the Venezuelan bolívares over time, it looks like QE1, two, and three. Right? Probably the only difference is the dollar status as a reserve currency is saving us right now. That’s not very encouraging.

But at the same time, bitcoin didn’t exist 10 years ago, but we can actually measure its relative weighting versus global GDP. That’s insane. For a concept that didn’t exist 10 years ago. So maybe we’re on our way.

Tim Draper: 31:53

That would be really interesting.

People have asked me, “Well, so, is bitcoin the gold standard for crypto?” And I said, “Why would you compare bitcoin, this forward-thinking, incredibly exciting, dynamic new thing, to gold? Something we use to transact business in the 1200s?”

Adam Draper: 32:16

Like pirates. I always think of pirates. Like yeah.

Tim Draper: 32:20 Arr.

Barhydt: 32:20

Yeah, exactly.

Tim Draper: 32:23

I’m thinking, gold standard? Where do you get off thinking that that’s gold? Gold is like so far weird commodity.

Barhydt: 32:31

So we’ve painted this picture of where we think this could be, back to your question of hey, what if this works? As investors, I think that’s awesome.

What will it take to achieve crypto mass adoption?

Barhydt: 32:38

What is it going to take? Let’s talk about part three now, what is it going to take to get us there? What’s missing? Why isn’t everybody using this? Is it something that everybody should just adopt?

Tim Draper: 32:46

That’s why OpenNode sounds exciting.

It’s the same kind of thing. Why does … I think it’ll also take Coinbase becoming the standard bank. Where you don’t have all the … All these banks are doing a lot of making a lot of noise as they slowly disappear into the sunset. While these cryptocurrencies are rising.

 As they rise, and more and more of us have Coinbase accounts, and maybe we’re working with OpenNode with a retailer, maybe we’re … It’s going to be spreading and we’re going to hardly notice that it happened. It’ll just happen.

Barhydt: 33:30

So do you think-

Tim Draper: 33:31

Suddenly we’ll be at Starbucks and they’ll be going, “Oh, yeah, you can pay in bitcoin.” Then two years later, you’ll try to pay in Starbucks with dollars and they’re going to laugh at you.

Adam Draper: 33:43

Well, what I love is Sweet Greens you can’t take cash anymore.

Barhydt: 33:46

Okay.

Adam Draper: 33:47

There are more and more no cash places.

Barhydt: 33:50

Yup.

Adam Draper: 33:51

Although in New York there are tons of cash places. I don’t know what their deal is. But I don’t have cash, so it’s very difficult for me to operate in New York, it turns out.

Tim Draper: 34:01

New York is a time machine.

Adam Draper: 34:02

Yeah.

Tim Draper: 34:02

You go back in time-

Adam Draper: 34:03

But there are a couple of these little places, so I have to go to branded places that exist outside of New York to …

Barhydt: 34:09

But in the same vein, what do you think the path is? What do you think is missing for broad base adoption of crypto? Either —

Tim Draper: 34:16

If I’m Lucas Film right now, I’ll tell you, I would save a fortune by just paying those 15,000 people at the credits, all the credits that run down after Star Wars?

I would just say, “Everybody gets a wallet. Here’s your bitcoin wallet number, blah, blah, blah.” Then you’re … they send … Adam gets checks for 25 cents every month or so because … or every quarter.

Adam Draper: 34:44

We were both on Nickelodeon.

Barhydt: 34:46

Oh, yeah.

Tim Draper: 34:46

We were on a Nickelodeon show.

Barhydt: 34:47

So you’re getting residuals.

Tim Draper: 34:48 Yeah.

Somebody spends seven dollars and 50 cents —

Barhydt: 34:52

To send you the check.

Adam Draper: 34:52

It’s like 10 bucks I think.

Tim Draper: 34:53

To send us a check.

Barhydt: 34:54

Right, right. So now there’s a company, I don’t know if you’re familiar with Payoneer, they basically ship debit cards I think out of the Caribbean or Central America somewhere, to workers in Russia who basically are doing offshore work, but need to get paid. So they’ll basically do a deposit on the prepaid debit card.

But my understanding is when you look at the foreign exchange fees, the ATM fees, the network fees, they’re paying upwards of 10 to 15 percent just to get their income.

Tim Draper: 35:17

Right.

Barhydt: 35:17

This isn’t a migrant worker we’re talking about, this isn’t Mexican farmers getting raped on fees, this is somebody who knows computer programming. Who’s developing websites maybe in the US or in Europe, who are paying 15% of his income to do this.

Tim Draper: 35:30

We have a company called BitPesa that actually takes your Nigerian naira, turns it into bitcoin, shoots it over to the Tanzanian shillings, and then drops it … are they shillings? I think so. Then drops it down there.

Then they’re in something like 10 to 15 countries, or on their way to 10 or 15 different countries. So that all that goes away.

Barhydt: 35:57

If I understand what you’re saying though, the beauty of that is the users don’t even know how it’s working.

Tim Draper: 36:02

Right.

Eliminating the friction from finance

Barhydt: 36:02

Right? To me, I wonder if that’s the approach that’s ultimately going to lead to adoption. So it may be OpenNode, but are people going to be transacting in dollars using bitcoin in the background?

Tim Draper: 36:15

At first, at first. Used as on the rails or whatever.

Barhydt: 36:18

Right.

Tim Draper: 36:19

That’s already happened and that’s fine. But I actually think that bitcoin’s much easier to send. It was crazy, I gave bitcoin to …

Adam Draper: 36:28

Well, it can be to —

Tim Draper: 36:29

To the people at Christmas.

Adam Draper: 36:30

Fiat denominated bitcoin.

Tim Draper: 36:31

To family. I just went here, here. One of my nephews actually had his QR code open and I just went click and we had made the payment. It was the fastest payment I’ve ever made.

So that’s going to save retailers tons of time.

Barhydt: 36:53

Yup.

Adam Draper: 36:54

On the societal level of what’s it going to take? I think it does have to … we need to not talk about blockchain and bitcoin. I don’t talk about TCP/IP.

Barhydt: 37:06

Absolutely.

Adam Draper: 37:08

It has to fade, where it’s just I’m exchanging goods.

Barhydt: 37:11

Yeah, in 1991, you had to install a TCP/IP stack on a Windows 3.1 PC to use the internet.

That’s where we are right now in terms of having to understand how this stuff works.

Adam Draper: 37:21

So I think that there needs to be a couple toys that people don’t know that they’re using bitcoin or the blockchain for. Or crypto in general for, that exist in order to … it’s actually in this regulatory uncertainty market.

 I think NFTs, non-fungible tokens, which are like CryptoKitties, where it’s like you have one of something on the internet and it’s a toy. It’s like a beanie baby online.

 I think that those are going to escape a lot of regulatory uncertainty because it’s like are you going to regulate beanie babies? All the sudden we’re going to have this interface where you’re not noticing that you’re using a crypto network. But all the sudden you understand how it all works.

I understand how email works, I don’t really understand how email works. I just care that my message gets to you. So I’m more … I’d say one of the themes are user interfaces where I don’t need to deal with Ethereum or bitcoin, awesome, love it. Or a bank would also be awesome.

Until being able to buy things with cash and not have something that’s a cumbersome wallet, would be fantastic. We have a company called Nifty Gateway that’s sort of opening it up to NFTs. There’s still uncertainty, but are you going to regulate beanie babies? I don’t think so. I don’t think you should.

I think that’ll give us a good societal framework for how to think about crypto network.

Barhydt: 38:45

I think that’s why PayPal got away with a lot in the early days, right?

Adam Draper: 38:47

It was a toy.

Barhydt: 38:48

They were enabling people to buy Pez dispensers and beanie babies online… on eBay.

Right. As opposed to saying, hey, I’m sending… I’m sending to Russian oligarchs. If they were promoting sending money to Russian oligarchs … they are [crosstalk 00:39:02] now, but they probably would’ve happened sooner. Is my guess. I mean I wasn’t there, but I’m assuming that that’s what happened.

So okay, by the way, Nifty is a great name for an NFT company. That’s pretty cool, I didn’t know that.

Adam Draper: 39:13

It’s been a theme of names actually. I’ve seen a lot of them, but Nifty Gateway’s ours. 

Barhydt: 39:21

I have this bias philosophy that you know very well because you know what Abra’s doing, you see the updates. But I think the collateralization of real-world assets using crypto is by far the best way to get adoption. Besides just digital gold. I mean that’s a foregone that people are doing that.

So have you seen other companies trying to figure that out? Or is it just too hard?

Regulatory uncertainty

Adam Draper: 39:41

The United States, not to bash regulation, but is sucking the wind out of everyone’s sails to try anything in the US. So you have to think I need to go somewhere else, I have to reside in a different place in order to even experiment with the idea.

I think that means that we are going to be leapfrogged.

Barhydt: 40:05

I just want to be clear to my lawyers who are watching this that Adam said that.

Adam Draper: 40:08

I said that.

Barhydt: 40:08

Not me.

Adam Draper: 40:09

I said that. No, I truly believe this. I think that this is an opportunity for places. I think a common conversation is that in Africa, they completely leapfrogged the desktop and they went straight to mobile.

I think that this is a leapfrogging moment for financial institutions in a country that basically needs to fill in a stable currency.

Barhydt: 40:36

I think the US is —

Tim Draper: 40:37

I’ll give you an example of that.

Barhydt: 40:37

Please, go ahead.

Tim Draper: 40:38

Where the US did suck the air out of the game. It’s too bad because … and it comes into the technology of an airdrop.

Tim Draper: 40:50

Because US gives away aid to all these countries. I don’t know some very large percentage of that aid, I would argue probably half, goes to the dictator.

Barhydt: 41:02

Like a commission because they’re the funnel.

Tim Draper: 41:05

So that the country gets very little of that. Well, an airdrop-

Adam Draper: 41:10

It’s really great for the dictator.

Tim Draper: 41:14

Right.

Barhydt: 41:14

It is.

Tim Draper: 41:15

Correct. An airdrop would be a fabulous way for the US to give away aid. It would also be a fabulous way for anyone who wants to donate money and do an airdrop.

Well, somehow now they say you can’t-

Adam Draper: 41:29

You’re not allowed to airdrop.

Tim Draper: 41:30 Airdrop because that is promoting your token. So somehow we’re letting the SEC, in that case, dictate what the country can do and what kind of-

Barhydt: 41:44

In the meantime, we legally give money to dictators.

Adam Draper: 41:46

The airdrop is sort of like viral marketing with money.

Tim Draper: 41:49

Yeah.

Adam Draper: 41:50

Yeah. It’s like we created viral marketing.

Tim Draper: 41:54

That’s their argument.

That it would be marketing a token.

Adam Draper: 41:57

No, I’m just saying that —

Barhydt: 41:59

Yeah, I mean-

Adam Draper: 41:59

It’s analogous to it.

Barhydt: 42:00

That gets into securities marketing issues, for sure.

Tim Draper: 42:02

But think of all the incredible applications of an airdrop.

And we just lost it because the legal framework has somehow told us that’s not fair.

Adam Draper: 42:13

Again, like global. You can’t … the US is not going to be the … I think that there are a lot of great things about the United States. I think that …

Tim Draper: 42:23

Basic freedoms are-

Adam Draper: 42:24

Basic freedoms are fantastic. I do. But I do feel that we, on this financial revolution, where we’re all moving to this new infrastructure, we’re going to get left behind if we don’t open it up.

Barhydt: 42:36

I think what you just said is why I’m optimistic about bitcoin in the US. There is enough supreme court backed case law to state that computer programs are protected free speech. I don’t talk about this publicly because this is not an academic exercise for me, I’m trying to run a business.

But really, when you think about it, bitcoin is not a commodity. It’s a computer program that actually generates other computer programs. That’s how you move bitcoin, you actually create small bitcoin scripts they’re called. That’s a computer program. Why are we calling that a commodity? That’s insane.

The supreme court is already established that computer programs are protected free speech.

Tim Draper: 43:09

Oh, have we … do we have the EFF or whatever working on a lawsuit yet?

Barhydt: 43:13

I was just going to say when the EFF, not a lawsuit, but I read a fascinating, somebody sent it to me yesterday, it came out about a month ago. I don’t know how I missed it. The SEC shut down and fined one of these decentralized exchange relays.

The EFF wrote a pretty scathing letter to the SEC that you basically are effectively trampling on first amendment free speech rights by shutting down what effectively are autonomous computer programs.

Now I am overly simplifying what was a beautifully written multi-page letter. But I think this is a real problem for the government but in a good way. Because I think that ultimately they’re going to have to acquiesce to the fact that this is free speech.

To your point, as the freedoms we enjoy, why is this any different?

Adam Draper: 44:01

You think George Washington and the group creating the constitution was thinking hand machines?

Barhydt: 44:10

I don’t know. But probably not. But so far-

Adam Draper: 44:16

I’m kidding.

Tim Draper: 44:16

That’s good.

Barhydt: 44:16

The Supreme Court has-

Tim Draper: 44:20

That’s actually a pretty good argument. Free speech, everybody’s behind that.

Adam Draper: 44:23

Free speech, no, that’s our thing. That’s the United States thing.

Barhydt: 44:27

I’m tingling a little because I’ve never said this publicly, but I spent so much time thinking about this and why is nobody standing up in arms about this and just protesting the fact that we’re getting this wrong? We’re starting to build precedent after precedent going down the wrong path.

Adam Draper: 44:42

We forked wrong.

Barhydt: 44:43

Yeah.

Adam Draper: 44:44

We’re on the wrong side of the fork that just happened.

Barhydt: 44:46

Now as a venture capitalist, part of the problem is I can assure my investors, I am not going to spend their money to go fight the regulators on whether this is free speech or a commodity. It’s not going to happen.

Barhydt: 44:56

But somebody, whether it’s EFF to your point, is going to have to make that argument at some point. Because it’s just too fundamental to our future if we start getting into autonomous companies, autonomous regulations.

Looking toward the future

Adam Draper: 45:06

Oh, these are going to be consistent conversations that everyone’s having. It’s going to be about …

I just saw a billboard, Prudential, it was a very complacent billboard. Which is if you’re retired, the machine can’t take your job. The robots can’t take your job. I was like, wow, you really just hey, give up.

Tim Draper: 45:29

Give up.

Adam Draper: 45:29

Hey, give up.

Tim Draper: 45:32

That’s hilarious.

Adam Draper: 45:32

Give up. And that’s on the 101. That’s a huge billboard.

Tim Draper: 45:33

Adam came up with this great idea, which is to just have AI take all our jobs and then what? What you start thinking is well, good, I’m freed up to do all these other things.

So you get to abstract your job. It’s like when the hoe was invented, you’re not down on your hands and knees anymore. I mean it’s a big breakthrough.

Barhydt: 45:57

I would love for my job to be automated.

Adam Draper: 45:59

Yeah.

Bill Barhydt: 45:59

Then I could go-

Tim Draper: 46:00

Yeah, me too.

Adam Draper: 46:01

Everyone’s worried about job automation. Everyone worried about this with the computer also. They were like, how many jobs are going to be replaced?

Barhydt: 46:06

Sure.

Adam Draper: 46:06

What it did, create new jobs.

Barhydt: 46:09

Look, we’ve had this conversation for 100s of years. Whether it’s the hoe-

Tim Draper: 46:15

The horse and carriage.

Barhydt: 46:15

Factory automation.

Adam Draper: 46:17

Yeah, the horse.

Barhydt: 46:17

Information technology. It’s never going to end.

Adam Draper: 46:19

Who’s going to drive people around? Uber actually.

Barhydt: 46:21

I think it may end when we reach —

Adam Draper: 46:22

And Lyft.

Barhydt: 46:23

When we do finally reach the singularity, it may end. But hopefully, we’ll all be on a beach by then enjoying ourselves.

Tim Draper: 46:29

Yeah. Except I started to think about that singularity. Getting a machine to predict the unpredictable future. The predictable future I get. They can extrapolate, it can be statistically.

But there’s an unpredictable future. That only a few entrepreneurs in the world are coming up with. Now we’ll have seven billion of these entrepreneurs-

Barhydt: 46:59

So in other words, why would a machine make irrational bets that you’d be willing to bet on personally?

Tim Draper: 47:02

That I’d be willing to make?

Barhydt: 47:04

Interesting. I hadn’t thought about that.

Tim Draper: 47:06

Maybe the machine learns to do an irrational bet for this singularity. But I believe the machines are still going to be working for us. I don’t think it’s going to go the other way.

Barhydt: 47:18

Yeah. Interesting. Wow. All right. I want to keep going but I’m being given the “we got to get back to work” sign. This has been amazing.

Adam Draper: 47:28

This was fantastic.

Barhydt: 47:28

Thank you so much.

Adam Draper: 47:29

Hey, thank you.

Barhydt: 47:29

On behalf of 100s of 1000s of Crypto Bites fans. So it’s going to be good.

Adam Draper: 47:34

Good.

Tim Draper: 47:35

Good.

Barhydt: 47:35

Thanks.


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