Video - Bitcoin Will Change The World

Tim discusses what inspired him to invest in the Bitcoin ecosystem and how the technology can transform the world. The video discussed about how they learn Bitcoin.


Matt Schlicht:            Hi guys.  I'm Matt Schlicht with ZapChain and I'm here with Tim Draper.  We're super happy to have him.  Founder of DFJ.  They've invested in more companies than I can count.  And Drapers Associates and he is headmaster at Draper University. Welcome to the Bitcoin Course.

Tim Draper:              Great.  Thanks for having me here.

Matt Schlicht:            Yeah.  We're super excited.  We think that you can enlighten the millions of people that are watching us right now.

Tim Draper:              Terrific.  All right, millions of people.

Matt Schlicht:            Hi guys.  So, you want to talk a little bit about DFJ or Draper University?

Tim Draper:              Sure.  DFJ is venture capital business and Draper Associates does more early stage investing.  And I've always been focused on that entrepreneur.  And what an entrepreneur can do for all of us.  And I'm always looking for new technologies and new ways for people to operate.  Because then we can get, we can progress as a society and very exciting.  And I started Draper University of Heroes to encourage people to become entrepreneurs and to see if entrepreneurship could be taught.  And it turns out it can.

Matt Schlicht:            Which is awesome.  And by the way guys if you have not checked out Draper University.  You should go do that because the campus is awesome and the people are awesome and you should just look into that because it's really cool.

Tim Draper:              Oh, it's fantastic.

Matt Schlicht:            So, back to Bitcoin that's what the world wants to hear.

Tim Draper:              Okay, good.

Matt Schlicht:            How, you know, Bitcoins' been on for five years now a little longer than five years.  How did you first learn about it?  And when you learned about it was it confusing?

Tim Draper:              It was a little confusing except that the first I heard of a virtual currency was from this billionaire from Korea who came to me and he said that his son wanted a sword for his birthday.  And this was five, this was seven years ago.


Matt Schlicht:            It's a good birthday present.

Tim Draper:              And it was a sword and I said well that's great.  And he said no a virtual sword so that he could play in this game.  And he said and I'm playing in this game.  And I have to work during the day so that I've hired somebody to be my avatar during the day and then I take over at night because you build more and more value over time.

Matt Schlicht:            Right.

Tim Draper:              So they were in Korea, they were living in this virtual world for a long time.  And it got to be a very important part of their society.  So, I was very familiar with virtual currencies.  So, Bitcoin to me at the beginning felt like just another virtual currency.  But then I saw that it was open.  And it was open to everyone.  And that we could all trade in this Bitcoin.  And it wasn't tied to one game or one way of operating or discounts at Starbucks.  It was a currency that really had the ability to be global and very interesting currency.  So, I got very excited about it.  And I backed a couple of the early Bitcoin companies and like all pioneers a fewer have arrows in their backs.  But we learned as we went and got more and more excited about Bitcoin.  And then I realized that it was possibly world-changing.  It was possibly the kind of thing that as the internet was to communications and information.  Bitcoin could be for commerce and business and commerce and finance.  And because now there is a very efficient, very fast way for me to pay you.  For me to send you money over a border.  For me to invest in you and get my electronic shares back.

Matt Schlicht:            All these things aren't really good, are they?

Tim Draper:              Yeah.  Okay.  You, you, any of you.

Matt Schlicht:            All of you.

Tim Draper:              So, this was a -- I looked at it and I said wow.  This is suddenly a major opportunity.  And so, we backed a couple of companies that were for exchanges.  We backed a couple of companies that were for banking.  A couple of companies that were ways of paying for goods and services online, ways of paying for goods and services offline.  We now have large portfolio of Bitcoin companies that we think are going to be as transformative to finance and commerce as the internet companies were to communications and information.

Matt Schlicht:            That's awesome.  I mean we probably wouldn't be as far along if you and other investors hadn't started putting capital into the Bitcoin industry.  I think that's actually a really big point because in order for Bitcoin to succeed we need more smart people who can focus on Bitcoin full time.  And so, I think it's really awesome that you kind of, it's a risk.  Right, and you're kind of, you did it.  Someone had to it wasn't going to work if someone didn't.  And even if all those companies you put money into didn't you know didn't do as well as everyone hoped that's still awesome in the industry was able to move forward.

Tim Draper:              Yeah.  What's great is that there's this whole infrastructure that's being built around Bitcoin many, many companies, there are hundreds now.  Maybe something like 500 Bitcoin companies out there.  And then many many more who are now accepting Bitcoin and but 500 different entrepreneurs are all trying to use Bitcoin to transform an industry or another.  And that really does start to build.  It builds usage.  It builds value.  It makes the Bitcoins themselves more valuable.  It makes our lives a little easier and I think it will move money faster.  And it turns out that that is one of the measures of the most advanced societies is how fast money moves through the economy.  And the dollar has moved very quickly because we now use a federal reserve note.

Matt Schlicht:            Right.

Tim Draper:              Before that it was tied to silver or to gold or to whatever.  And before that it was actually gold or silver.  Now, this is another way that we can move money around much faster.  And all the countries of the world are now looking at this and saying is it a huge opportunity or is it a threat to our society?  And my belief is that it is an enormous opportunity.  If the U.S. had started to put all sorts of constraints on the internet.  All of these U.S. companies would not have benefited in the U.S.  In general, it would not have benefited from this huge growth of the internet.  Well, the same thing is happening now with Bitcoin.  People are deciding whether do we let it run free?  Or do we put constraints on it?   And what constraints are those?  And is it light touch?  Or is it heavy touch government?  And I believe that the lightest touch governments will succeed hugely and get the benefit of all of these companies who are getting started in Bitcoin.  Now, it's interesting that in Korea this place where they started with these virtual currencies.  They are the most open to Bitcoin.  And now we've made two investments in Bitcoin companies in Korea, Coinplug and Korbit.

Matt Schlicht:            Nice.

Tim Draper:              And we're very happy about those.  And I believe that we will continue to make those investments in those countries that are the most accepting of Bitcoin whether it's the government or the people.  In the case of Argentina, we have a company called BitPagos in Argentina.  And that's because they have a national currency their peso that just keeps collapsing.

Matt Schlicht:            Right.

Tim Draper:              And if you have a currency that keeps collapsing because you're just printing more money, then no one trusts that currency and they create any kind of stored value in that currency.  They know that that currency is the one that you have to get rid of as quickly as possible.  Bitcoin is a great place to put some stored value.  And so BitPogos is making it so that people can make transactions through Bitcoin rather than through Argentinean pesos.

Matt Schlicht:            Right.  And I think that's a really good point because probably a lot of people that are watching, they may have heard of Bitcoin and they think oh, this is some virtual currency.  Like they're still back when you first heard about when the sword, right?

Tim Draper:              Right.

Matt Schlicht:            Like this really like a video game.

Tim Draper:              Right.

Matt Schlicht:            But no, like there's actual people in the world that don't have a stable local currency and Bitcoin can actually have a huge impact on their lives.  Like take away all the other you know amazing and awesome things that Bitcoin can do and can like move us forward like that alone is I think that's pretty huge and pretty important for people to realize.

Tim Draper:              I think there's another major major feature of Bitcoin.  And that is we pay two-and-a-half to five percent on credit cards every credit card transaction.  So, every time I buy something from you.  Or every time you buy something from me.  Anytime we go to the store we're paying the credit card companies and that creates more friction to commerce.  With Bitcoin, there are our ways of going and making those transactions without paying the credit card companies.

Matt Schlicht:            Right.

Tim Draper:              And not working through credit but working through Bitcoin debit.  And so, we are going to be able to make these purchases.  And right there the world economy grows by two or three percent right there with Bitcoin.

Matt Schlicht:            It's huge.

Tim Draper:              And two or three percent on a world economy is maybe a $1 trillion.

Matt Schlicht:            Yeah.

Tim Draper:              This is, it's really quite extraordinary what could possibly happen out there with this new wonderful Bitcoin currency.

Matt Schlicht:            Yeah.  And I think that one of the really exciting things as we don't know exactly what it could become?  Like we have a lot of ideas around it.  But I think that's why a lot of people are super excited about it.  It's like I don't fully understand it but we're trying to.

Tim Draper:              Well, no one fully understands the internet either, they understand that they can do with it.

Matt Schlicht:            Or electricity or anything.

Tim Draper:              Yeah, they can understand what they can do with it.

Matt Schlicht:            Yeah.

Tim Draper:              Same kind of thing with Bitcoin.  They're going to learn, hey, I can buy things and I don't have to pay the credit card company.  Or hey I can send money to my family in Mexico but I don't have to pay 8%  to Western Union.

Matt Schlicht:            Right.  So, people that are watching if they're going to go Google you.

Tim Draper:              Okay.

Matt Schlicht:            Search for Tim Draper.  One of the things that will probably come up is that you won the auction for the almost 30,000 bitcoins from the U.S. Marshals.

Tim Draper:              Yeah.

Matt Schlicht:            So, that's a lot of Bitcoins especially today.  We don't know exactly how much you won for but it'd be around $20 million.  So, what like why did you do that?  What kind of compelled you to get many Bitcoins?

Tim Draper:              Well, they're there two reasons.  One is Bitcoin is setup so that there -- it's now they're it's now that 13 million of them out there and eventually there will be 21 million and that's pretty much it.

Matt Schlicht:            Yep.

Tim Draper:              So, part of it, part of me says hey this is a great way to capture some value if Bitcoin becomes quite valuable.  And I am projecting a price of $10,000 in three years.  So, I think that Bitcoin will be worth $10,000 in three years.  And so, I looked at that and I thought great opportunity.  The other piece is that if you have a large block of Bitcoin you can do some interesting financial work.  And much the way a bank with a lot of capital can do a lot of work.  And we are working, I'm working with VAURUM.  And with VAURUM we are creating new financial vehicles.  And those new financial vehicles can be quite valuable to society and particularly in third world's -- third world countries.  They can make a big impact on society.  And so, I took the risk realizing that it was an auction and when you win at auction you know that you've paid more than the rest of the people bid.

Matt Schlicht:            Right.

Tim Draper:              But I knew that by capturing that I would do two things.  One is we would be the center of activity for Bitcoin.  People, all the entrepreneurs know that this is the place to come.  And go to Draper Associates or go to Boost they know that now.  And that that large amount of Bitcoin can be real stability for new kinds of financial vehicles and those are soon to be announced.

Matt Schlicht:            It's awesome.

Tim Draper:              Yeah.

Matt Schlicht:            I mean it's like investing in a couple companies is one thing.  But buying 30,000 Bitcoins in an auction with a lot of other people is another, I think.  So, when -- I always wondered when these -- when the U.S. Marshals sent you these 30,000 Bitcoins.

Tim Draper:              It's a great day.  That's hilarious.

Matt Schlicht:            That would like I would be so nervous.  Because with Bitcoin you know you have this really really long string of characters which is your address.

Tim Draper:              Right.

Matt Schlicht:            Did they, you know, typically with like a bank or someone they'll send you like a little, like a dollar or something to check.  Do they do that?

Tim Draper:              It turns out they weren't able to do that because of the way it was all setup.  And it was very interesting we had to -- we ran through all the authentication cycles.  And we weren't really comfortable until we've been through three or four.  And the first one took a long long time.  And I'm not quite sure why that was?  And we were looking and thinking we'll wait and you know every hacker in the world was trying to break-in to this system.

Matt Schlicht:            Yeah.

Tim Draper:              And intercept the Bitcoin.  And so we were very nervous about it.  But the U.S. Marshals offices was good to their word.  Very solid they did a beautiful job of transferring the Bitcoin.  It was done in such a way that we had, you know, all of the best people in the world in the room making sure that this transfer happened.  And it worked out fine.  One of the people in the world I had in there was was my partner's son Leif Jurvetson who has been a Bitcoin user forever and he -- or Bitcoin buyer forever and he came to the conclusion that Bitcoin price could never go down.  Well he -- he realized that there was a limited supply.

Matt Schlicht:            Right.

Tim Draper:               And he was -- he's was now 13-years-old, I think.  Anyway, we had him in there as one of our Bitcoin experts.  And we also had some good security Bitcoin security people.  But I was very happy to do this thing.  And I was -- it was in a very exciting day watching that happen.  But there was a good half-hour before the first authentication came in.  And normally that's five or ten minutes.

Matt Schlicht:            Right.

Tim Draper:              And we weren't quite sure what was going on in the meantime but --

Matt Schlicht:            You're like are we going to get the Bitcoins --

Tim Draper:              That's right.

Matt Schlicht:            Is there some kid in like Milwaukee that's like mom, it's got like a lot of money.

Tim Draper:              I could pay for college.

Matt Schlicht:            Yeah.  And like everything, right?  That would be an expensive gold.

Tim Draper:              That would be very expensive.

Matt Schlicht:            Yeah, that's crazy.

Tim Draper:              Yeah.

Matt Schlicht:            So, yeah that would have been a bad day for you but --

Tim Draper:              It was a good day.

Matt Schlicht:            It was a good day though.  So where do you think Bitcoin is going?  Like you know what are the innovations you're seeing now like you know there's smart contracts?  There's like crypto equity.  Like what do you believe in?  what do you look in?

Tim Draper:              Yeah, one of the great things about Bitcoin is that through that technology you can also have a ledger.  It's billed as a ledger.  And a ledger works in a lot of different ways.   You can actually -- you can have accounting without accounts.  You can have contracts without lawyers.  You can setup for an event so let me -- let's say we have a contract.  And I give you some money and you give me some equity back.  We set it up so that when the company let's say I get half your company for a $1 million or a $100 million, whatever, okay $100 million.  We set this up and you get the money and I get the equity.  And then when the company is sold or it goes public or whatever.  That's an event and at that event, the money is immediately divided --

Matt Schlicht:            Right.

Tim Draper:              -- between us.  It works even, it works very well for if you die.  And you want to spread yeah, it's all right.

Matt Schlicht:            It's getting really bad.

Tim Draper:              And you want to spread but you want to send the money to, you know.

Matt Schlicht:            Right.  Like you will.

Tim Draper:              Or your friends and your families and whoever it can operate as an immediate redistribution, that happens instantly.

Matt Schlicht:            Right.

Tim Draper:              So, events -- anything with an event at a later date can be quite valuable.  It can be quite, it can be done in such a way that it saves many many many dollars.  And is much more honest and straightforward than our current system.  So, I love these smart contracts because they can build what's called the waterfall which is really a money fall for when you've made contracts your business and you gone out and you made contracts with various people.  And then when your company is sold a certain amount goes out to the bank and another amount goes out to your employees and then it goes out to the preferred shareholders and then to the common shareholders.  They called that a waterfall.  That can all be built into a smart contract.  The other thing that can be built into a smart contract is accounting.  You can, I can sell you something.  I'll sell you a shirt.  You pay me money.  Normally, what has to happen is you have to get your accountant to say oh okay you sold a shirt.  So, your sales go up.  And you got some money or you haven't gotten your money yet.  And your accounts receivable go up and then your cash comes in.  And then your cash goes up and your accounts receivable goes down.  I similarly have to do the same thing on my end in accounting where I have -- my inventory has gone down and my -- so my shirts are down and my cash has gone up because you've sent me cash.  Those two accounting events can now be done automatically on both sides.  Because of a smart in effect a smart ledger.  This is transformative.  This is something that can make all of our lives much easier.  And all of the people who did all the accounting and legal work for that those kinds of contracts can live even more productive lives.  And some really amazing things could happen to our society, we'll end up with more scientists we'll end up with more engineers.

Matt Schlicht:            More people focused on creativity.

Tim Draper:              On creating new great things.  And we'll get-off the planet sooner.  And we'll cure cancer sooner and our economic growth will explode at a much faster rate.

Matt Schlicht:            So, basically for everyone watching.  Bitcoin will enable space travel.

Tim Draper:              Bitcoin will improve society.

Matt Schlicht:            Right.  And allow us to do all these awesome things that we've always dreamed of.

Tim Draper:               Right.

Matt Schlicht:            And we make movies about.  Awesome.  So, I think the last question is if someone, you know, someone out there may be working on a smart contract company.  Maybe they --

Tim Draper:              Come visit me Draper Associates.  I'm Tim Draper.  [email protected], come and visit.  And send me a plan.

Matt Schlicht:            Cool.  Yeah sent send him everything.  He wants all the awesome Bitcoin companies specifically smart contracts or if you have something crazy send it over to Tim.  Well, thank you for letting us all in on, you know, all this information about Bitcoin.  I think that you put it in such a way that a lot of people are trying to say this but you say in a really inspiring way that makes Bitcoin sound like you really understand that it can have a huge impact worldwide.  And that this could just bring society up a level.  And I think that's super exciting.

Tim Draper:              Yeah, I think it's going to make a big difference to all of us.  I think it's a major opportunity for all of us.  For all of the countries of the world, for all the businesses of the world to really have an accelerator behind us.

Matt Schlicht:            Absolutely.

Tim Draper:              Yeah.

Matt Schlicht:            Thank you for being here.

Tim Draper:              Great.

Matt Schlicht:            All right.

Tim Draper:              My pleasure.

Matt Schlicht:            Bye guys.

Tim Draper:              Bye guys.


Written by Tim Draper on October 21, 2014.