Name: Balancing The Ledger: BitGo Now Accepting Dash, Stellar Coming Very Soon
Uploaded: 2018-10-04
Duration: 9 min 51 s
Description: BitGo Co-founder and CEO Mike Belshe stopped by Balancing The Ledger to share the news.

[ MUSIC ] Welcome to Balancing the Ledger, where tech and finance intersect. I'm Jen Wieczner, and today I'm here with Mike Belshe, the CEO and founder of BitGo. Thank you so much for being here, Mike. Thanks for having me. So tell me a little bit about what BitGo actually does. So BitGo is a security and scalability platform for digital assets. So we gotta start with bitcoin back in 2013. Simply put user sometimes called wallets? Sure, we build wallets, that's right, yeah, security platform for digital assets. We started with bitcoin Back in 2013, we now support, I think it's somewhere around 85. Yeah, that's what we do. And what's the difference between a company like Bitgo and some of these exchanges like a coin base? We don't trade. We are a security platform, started out as pure technology. These days in addition to the technology we also do Custodianship, so custody of course, has been much talked about lately. In our view, it's actually been the missing piece of kind of infrastructure for digital currency technology. When exchanges started, they didn't have for instance, the banks or trusts or custodians to go to. They had to build that themselves so coin base and Gemini, Bittrex finance. They are exchanges, they do trading. We don't do trading or security and custodian platform. Okay, yeah cuz some of the exchanges actually are coin based and some of the other ones have actually said they do offer custody solutions. So what makes BitGo different from those custody solutions. Right, so We're building custodianship more for institutional investors and then in a very different way. So we're now a qualified custodian that's through the division making in South Dakota. We just were granted that a few weeks back actually. Actually and this allows us to help customers that need us to meet the Custody rule. So the Custody rule is part of the 1948 Advisor's Act. If you are a hedge fund, or an RIA, or somebody with fiduciary responsibility for someone else's money. When you hold their money, or their asset, you're required to use what's called a qualified custodian. The exchanges, they are sometimes offering custodianship, but they're not qualified custodians themselves. And in fact, what they're doing is they're trying to hold funds so that you'll use their exchange, right? So in other asset classes, you don't have The exchange hold the funds. You just never do it. In fact, if the NYC went to the SEC and said, hey, please let us be a custodian for the assets that we trade, the SEC would laugh them out of the room. It's just not allowed in any other asset class. And this is because we know that there's been a number of abuses that happen when you start to put these things together. You need a separation and a. Checks and balances between the different parties that are involved in in trading. I just, for example, if you look at how Bernie Madoff operated. He claimed to have a bunch of assets but he didn't have them. He's actually been public about it. He says to this day, if he had been required to use an independent qualified custodian, he would have never been able to get away with it. The ponzi scheme, the biggest ponzi scheme ever. The biggest ponzi scheme ever. [ LAUGH ] That's right. So Anyway, I'm not saying that the exchanges are operating in a malicious way today, however it does open up that potential for abuse. The exchanges are primarily focused on retail investors, right, they are interested in signing up 100, 000 new users a day. And a very hard challenging problem, they have a small team that works in security. The BitGo has the largest dedicated research development team solely purposed toward security of any company in the world. And that's because that's all we do. We're not focused on trading. We're not an exchange. And you also have some big news that you're annoucing this week. Can you share hat with us? This week, we're happy to announce we're now supporting Dash and Stellar's coming. It's in final test. Be out Very soon. And why those two did you decide to add them now? Both of these offer some advances, particularly around payments. So, in the case of DASH, they offer instant payments. That's one of their big focuses. They also have some privacy payments that they do. So that's unique. In the case of Stellar, they've done a lot in terms of tokenization. So they're targeting also kinda global payments. More for consumers, a little bit different then what Bitcoin itself does. So with some of the crypto currency exchanges there's been a lot of talk and controversy this year over which tokens to add because if you trade it, the FEC has jurisdiction over are you actually trading a security? And is that legal or not? Whether a token Is the security or not? Does that concern you, is that something that goes into your [ UNKNOWN ], no people are actually trading on BitGo. So we, I mean we do care, right? We don't want to promote any type of coin that isn't legitimate or you know, be a detriment to investors. At the same time, we're in a period where there's tremendous innovation, so things are changing rapidly. There's tokenization of all kinds of assets. There's features that are yet to be determined for different types of blockchain, so there's more work coming. We, however, don't have the same problem that exchanges have. So exchanges, you're right, if you're gonna trade something that's an equity, you need to be registered as an exchange that is authorized to trade equities. We're a custodian. So a custodian has different rules, right? You give me something to keep safe, and we give it back to you later. And whether it's an equity or commodity or something else, it's not differentiated in the same way. You actually started at Google. How did you get into crypto currency? Why did you start BitGo? Actually, it does come more or less from personal need. I think a lot of companies do emerge that way. Back, 2011, 2012, started helping some of my friends acquire Bitcoin, I acquired some Bitcoin. Being the technical person, I was the one that secured it. So at the time, I used some very secure technology, I had an air gapped Mac laptop, which I safely stored underneath my couch. [ LAUGH ] And that was okay for a while but you know, as the value of bitcoin continue to grow and eventually it was you know, many millions of dollars, I start to get worried. There's a lot of research at the time about the prevalence of malware, I was privy to that by way of my work at Google, I was one of the early guys on the Chrome team there. I was worried about my kids spilling coke on the machine, I was worried about getting malware. That led me to research. There must be a better way. I uncovered this little obscure area of BitCoin called [ UNKNOWN ] which is actually [ UNKNOWN ] and BitCoin was born. Yeah several [ UNKNOWN ] executives now actually travel now with their own physical security or bodyguards. You don't. Is that something you are concerned about? Terms of they've actually been targeted and kidnapped in some cases. Yeah, I mean, that's happening. I mean, it's a real need. Most of us, when we have large amounts of assets, we do look to more secure ways to store it. You could take your paycheck every month and convert it to cash and put that in your house. But, you probably use a bank. And, for large amounts of money, I think most people are gonna opt for that. For small amounts of money, I mean the great thing about BitCoin is that you have complete control, you can do whatever you want with it and that's one of the most liberating and exciting parts of these decentralized technologies. It's that you don't have to count on anybody else. But should you pass away, yeah how do you pass it on to your heirs, right? How do you protect yourself physically? Those are hard problems that we don't usually think about because we've taken care of that in the cash world with banks. So anyways, I think that's a critical element to fix. We need to make sure that people know that You can come and try to attack me but I can't give you my Bitcoin because frankly, I don't even have the ability to give it to you right now. With the addition of a dash and stella, you guys are actually up to supporting something like, 85 coins. We've also seen a big trend with stable coins either picked at the US dollar or at about a dollar. A coin just this weekend [ UNKNOWN ] invested in Maker Dai. I just heard PWC even the auditing firm is backing a stable coin. What do you make of that trend? Is that something you're thinking about supporting? Well first off I mean the industry has realized that creating a digital form of the dollar is better than a dollar right? I mean that's what it comes down. So tether was the first to do this in summer guard. But it doesn't have the backing that people need in order for surfer data. In spite of not having good backing and all kinds of doubts about it, people use it at tremendous volumes. That's because you can move money very quickly. There's actually -> And the mode on the US dollar now I think [ CROSSTALK ] [ INAUDIBLE ]. So the value's there. And a number of folks are in the market for that. So for me personally I think If you wanna have a stable coin, it's gonna be backed by dollar. There's some that are trying to do algorithmic- backed or asset- backed. Those will work for a while but sooner but sooner or later, whoever is managing that algorithm or who is ever managing that policy, they make mistakes. The great thing about bitcoin is that we kinda took the rules away from humans that make mistakes in terms of inflation and putting our more money and we said We're gonna set the rules to the ones that we know that work or we're gonna give it to computers to run. So anyway, I'm on a tangent there. But the principles are the same like if you wanna have a good stable coin, it needs to be actually like by a dollar. So Circles got a new coin out pack. So there's a new coin out. Gemini has a new coin out. Look forward to seeing traction on those. All three of those are supported through Bitgo wallets. We are happy to do that. They are? But not Teller. We don't support Teller. So Teller's based on a different protocol, the master coin / Omni protocol. Also the backing of it frankly, I think it's got some problems. There's been just this last week A decline in the price of Tether on certain exchanges got down- To below a dollar. To below a dollar, yeah. I don't think anybody knows the full story behind Tether, but my own opinion is that if I owned Tethers, and I knew that there was a dollar in the bank for every coin, If somebody wanted to sell me $ 1 for $ 0. 95, I would be buying them, right? So the that they're not out there on crack and buying those tells me that there's something wrong with it. Well, Mike, thank so much for being here. I'm really glad you could join us. Thank you for having me. I'm Jen Wieczner and for more about Balancing the Ledger come to fortune. com. See you next time. [ MUSIC ]

Balancing The Ledger: BitGo Now Accepting Dash, Stellar Coming Very Soon

Tech

BitGo Co-founder and CEO Mike Belshe stopped by Balancing The Ledger to share the news.