| More Articles | Free Reports | Premium Services Charles Sizemore: I recommended Bitcoin to subscribers of our flagship Freeport Investor advisory when we launched it a year ago. Bitcoin fulfills the libertarian ideal of a currency that’s untethered from governments and their interventionist central banks. It’s a return to a free market form of money. And that’s philosophically appealing to us. More practically, Bitcoin is an inflation hedge. If you don’t like how the Fed and commercial banks can create dollars out of thin air, and inflate the money supply, you can buy bitcoin. It’s limited in supply and takes real world inputs to produce. That makes it a much more stable store of value. So far, that’s worked out well. At writing we were up 134% in the model portfolio on our Bitcoin position. And I expect more gains to come. But there’s more to crypto than just bitcoin. Marco, you run the crypto investment fund, Second Renaissance Investments. You believe that cryptocurrencies – and the blockchain technology that powers them – will transform our world by freeing us from middlemen and coercive authorities. Let’s start there… Marco Wutzer: We know that technological change brings changes to society. The invention of the printing press in the 15th century, for instance, transformed education and brought literacy and knowledge to the common man. The spread of the printing press also gave birth to new ideas, threatening outdated power structures and beliefs. We had another paradigm shift with the invention of the steam engine. It revolutionized manufacturing and led us into the Industrial Age. The cost of manufactured goods plummeted. Mass production increased the availability and accessibility of products. This made the average person wealthier than aristocrats and kings of the previous age. In the more recent past, the microchip changed our world again, leading us into the Digital Age – and all the changes that brought with it. Now, blockchain technology and cryptocurrencies are changing the underlying infrastructure of the entire internet. We’re looking at a fundamental shift in how society works. Crypto is a trustless technology. It removes the middlemen from so many aspects of life. Whether that’s a social media middleman like Facebook… an e-commerce middleman like Amazon… or a financial middleman like Schwab. Middlemen have always existed because they’ve been necessary. This is the first time we’ve been able to run our society – and our economy – without them. Charles: One of the things crypto bears like to say is that people aren’t using this technology enough… or that it doesn’t scale to the point where enough people can use it. Is that a fair criticism? Marco: Look at the last cyclical peak in the blockchain ecosystem, in 2021. Most crypto transactions typically took a few minutes to confirm. Bitcoin transactions took even longer. That’s way too long for buying something in a store. It also cost a few dollars per transaction. So, crypto wasn’t something you could use to buy a coffee. It was too expensive. And the capacity wasn’t there to accommodate a lot of users at once. Today, this looks very different. We now have high-speed blockchains. They can confirm transactions in less than two seconds, which is what you need for a point-of-sale transaction. They typically cost a couple cents, or even a fraction of a cent, per transaction. And the capacity is there to sustain hundreds of millions of users. So, we’re looking at vastly improved usability. A good analogy is the growth of the internet. If we go back to the late 1990s, the internet had hundreds of millions of users and was growing. But it was super slow. Then came DSL connections, and it got faster. Then came cable broadband. Today, connections are so fast we can stream high-definition video to our smartphones. This is the scale of change we’re going through in the crypto industry right now. Charles: Where do you see use of crypto networks take off? Marco: One area I’m particularly excited about is the financial system. Most people don’t know it, but we’re getting rid of the financial system as we know it. It will slowly disappear, as capital markets shift to a blockchain ecosystem, and everything happens peer-to-peer – without a middleman, in other words. This won’t happen overnight. This transition will take a decade or two. But that’s the future we're heading towards. Charles: That’s how it’s always been. When I was a kid in the 1980s, it was still common to write a check for your groceries. Visa and MasterCard were launched in the mid-1960s. But they didn’t become truly widespread until the 1990s. And it’s still possible to pay with stuff by check. Some landlords still prefer or accept rent payments by check. And some utilities and local government offices also allow check payments for permits, fines, and taxes. Of course, adoption of new technologies happens at much faster speed today. So, the transition from the existing financial system to a crypto based one will happen a lot faster. Marco: That’s right. Also, you have shifting demographics at play. The Silent Generation – folks born between 1928 and 1945 – are fading away. And over the next 20 years, the Baby Boomers will no longer be the force they are today. Then you have us Generation X folks who crossed the digital divide. We grew up before the internet and now use it all the time. But behind us, you have the Millennials and Gen Z generations who are digital natives. They do everything on their phones. For them to use something other than their phone… let alone a paper bill… is a total anachronism. Charles: We’re talking about the plumbing of the financial system here. When I swipe my Visa card, I don’t know what happens behind the scenes. I just swipe and, like magic, I pay for stuff. There’s no reason you couldn't have something that looks like a Visa card that uses blockchain technology. You won’t even see this new financial plumbing. So, less tech-savvy folks could end up using this new financial plumbing and not even know it. Marco: Oh, absolutely. Just look at email. Do you know how the SMTP or IMAP protocol works? They govern how emails are sent and received. But you just send an email and never have to think about them. It’s the same thing. Charles: At The Freeport Society we believe in free minds, free speech, and free markets. The ultimate free market is one in which vested interests and middlemen don’t have control. And blockchains don’t just cut out middlemen. They also offer more transparency than the current financial system. Anyone can look at a public blockchain and see the history of transactions. What you see is what you get. Marco: This is the core premise of crypto going back to the “Cypherpunk” days. The Cypherpunks, for folks who don’t know, were a group of activists and technologists in the late 1980s and early 1990s. They believed in the power of cryptography to protect individual privacy and freedom from government surveillance and corporate control. Ultimately, this meant bringing power back to the individual. If you look at the government power, and all the problems that stem from it, what is the root of it? It’s the fiat currency system that funds it all. Governments create dollars, euro, pounds, and yen, at will. This is the ultimate source of their power. If we cut that out, it goes a long way toward freeing humanity from the shackles of central banking, so to speak. Tune in tomorrow for the second installment of this conversation. | 
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