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Forecast Panel - Left to Right: Peter Csathy, Babak Razi, Heather Wilburn, Richard Wolpert, Brock Pierce
As a former child star, you’d expect Brock Pierce to be doing other things. It was not however surprising to anyone at TechZulu’s 2014 Startup Forecast event that Pierce spoke with authority on the future of tech. A serial entrepreneur and tech investor, Pierce is bullish on many innovations, but none as much as Bitcoin.
“Bitcoin is the biggest technology innovation since the Internet,” said Pierce. The only question: “is that future right now, or is it 10 years from now?” To profit from Bitcoin “market timing is critical.”
And Pierce knows the pain of poor timing from firsthand experience. After a few small acting roles in the “Mighty Ducks” franchise and a star role in the movie “First Kid,” he went on to work for the Digital Entertainment Network (DEN), a company that produced and hosted short TV-style clips on the web in the late 1990s. Despite raising around $50 million, DEN ultimately went bankrupt because as Pierce said they “were trying to deliver video over broadband in the 90s,” and the infrastructure to carry video did not exist yet.
A few years later, YouTube launched on the back of a more robust Internet, soared and was quickly bought by Google for $1.65 billion.
“The second mouse gets the cheese,” said Pierce. Or rather “more often than not, it’s actually the third.” At best, early failures are a good lesson, but “typically being too early is worse than being too late.”
So the question for Bitcoin is: is the market ready to bring its investors profits?
Born on the Internet, and created by mysterious developer by the alias of Satoshi Nakamoto, Bitcoin has only been trading since 2009. And because it’s popularly known as a digital currency that traffics the web’s most nefarious activities Bitcoin has a reputation issue.
It has particularly gained infamy in recent months as the digital currency of choice for Silk Road buyers and sellers. Silk Road was an online black market site for the sale and purchase of illicit drugs that was shut down by the FBI last October. Since then, the illicit drug trading website has left a black mark on Bitcoin and the digital currency’s most active advocates, including Bitcoin exchange BitInstant CEO Charlie Shrem who was arrested for supposedly facilitating the usage of Bitcoin on Silk Road.
Pierce knows Shrem. In fact, they were supposed to meet the Monday following his arrest and they’ve been in touch since the incident. Pierce said Shrem was apologetic and polite about the incident via email.
Pierce explained the incident as naivety and said “entrepreneurs are not used to industries with rules,” said Pierce. “Regulated industries have rules and they have repercussions. Know the rules.”
Many may find these recent developments as damaging to the Bitcoin market, but Pierce sees them as cleansing and informative. “We’ve gotten past that point with the closure of Silk Road,” said Pierce. “The price of Bitcoin went up after that, not down.”
Despite the hysteria around using Bitcoin as a method for laundering money, Pierce said there actually is “less anonymity with a Bitcoin purchase then there is with buying drugs with a suitcase of cash money.” The arrest of Shrem for Bitcoin connections to Silk Road lends some credence to that view.
Most importantly, Pierce is not speculating on Bitcoin for its black market uses. He said he sees Bitcoin as an important tool for lowering transaction costs and facilitating commerce in countries where trust is low.
“In the US it’s not going to change our lives very much” because we have efficient banking systems, trust and rule of law but in emerging markets it is useful," said Pierce.
In places like Africa, Latin America and Asia Bitcoin may help people transfer small amounts of money that were before too costly for money carriers like Western Union to transmit. What’s more, Pierce said given the monetary instability of countries like Argentina, Bitcoin may provide people with a stable and liquid currency for preserving their wealth. Beyond, “I think Bitcoin has the potential to become a banking system,” said Pierce.
Yet, Bitcoin is not just a nuanced hedge against depreciating currency and unstable banks, Pierce said it can act as programmable money. “Imagine taking a dollar bill, encoding rules in the money itself,” said Pierce. For example, if you sell something on Amazon using Bitcoin, the payment, ”is going to disappear into the block chain (Bitcoin's electronic ownership record)” and “doesn’t go to you until FedEx confirms delivery.” In markets where people distrust each other this sort of feature could go a long way to facilitate commerce.
Ultimately, these sort of practical applications should overshadow Bitcoin’s recent snags with the law. Pierce likes to point out that despite mainstream critics, some rather formal institutions are investing in Bitcoin. There was “100 million of VC backed [investments in Bitcoin] last year,” said Pierce, “I predict next year it will be $500 million.”
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