SPEAKER_00 0:01

Welcome to the future ventures podcast on scaling with clarity. On today's show, we have Hubertus Hofkirchner, the Austrian, founder of the BitCredit Protocol, a Bitcoin native trade finance protocol focused on rethinking trust, credit, and global commerce infrastructure. Hubertus is a serial fintech entrepreneur and the former CEO of Austrian telecom operator Telerink, which was acquired by T-Mobile for $1.5 billion. He's also an economist focused on the intersection of monetary systems and trade finance, leading monthly seminars at the Hayek Institute in Vienna. And today we're going to explore the future of money, decentralized finance, and what happens when financial infrastructure becomes program. Hubertus, welcome to the stage.

SPEAKER_02 0:51

Hello Maxime. Pleased meeting you.

SPEAKER_00 1:17

But why don't we start with a couple of things? What is the Bit Credit Protocol? Why did you decide to start it? And then kind of give us your origin story. I mean, you're a very accomplished entrepreneur, like not very many uh entrepreneurs can claim an exit of $1.5 billion. So turn it over to you.

SPEAKER_02 1:37

Yeah, um, how to start? Well, let's let's start uh sequentially. So I started out working uh at Citibank International, uh first job here in Vienna, uh, where I kind of put myself out of the job by essentially automating my job on one of the first PCs delivered in in the in the mid ear early mid-80s. Uh went on then to to uh plan, design, and actually implement the the uh security system for euro securities and euro equities for small city banks, which got then implemented all over uh Europe in this in the smaller city banks. Uh did my MBA afterwards uh at Yesse in Spain, uh, which is very nice, and then went on to be an investment banker, which is a small IT software uh investment bank boutique, which dealt only in this type of high-tech uh thing. Uh came back to Vienna, became a director of uh Kedietanstalt Investment Bank, which is uh it's a very old Central European investment bank. And uh I always wanted to be an entrepreneur, well, always uh for a long time. And then came the moment of the of the internet uh coming up, and I thought, okay, let's let's build uh an online brokerage for central and eastern Europe for the whole region, because until then all the online brokers were always for one country, and obviously that doesn't work in central and eastern Europe because all the countries are so small. Uh so I said, okay, let's build uh uh uh one which can do multi-countries. Anyway, long story short, in 2001, Erste Bank of Austria bought my my share, bought out the vehicle, bought the shares, integrated into operation. Uh then a former client of mine uh bought one of the Austrian telecom companies, uh quite on the cheap, let's say, and and uh was looking for a CEO uh for the vehicle, which was hemorrhaging money, like uh several hundred million every year uh to turn it around. So did that from 2001 and 2005. We sold it to T Mobile for 1.5 billion uh billion yeah uh Euros. So that would that was nice.

SPEAKER_00 3:57

And back in the day billion meant something. Uh Hubertus, back in the day a billion meant something. Now it's like we're talking trillion dollars valuations and billion dollars for uh seed routes. I mean, it's insanity, but I mean this is a massive accomplishment.

SPEAKER_02 4:13

No, no, no. Uh the the the the the the company was taken over as a loss making vehicle from from Vodafone, the the telecom company. Um, and so to say my job was a little bit troubleshooter, find out why it had such high losses, yeah, turn it around, make it profit. Yeah, so which we did. Uh otherwise the company would have been shut down. It was kind of 800 jobs on the line. We saved most of them, and then as soon as we as we rented back into uh profitable territory, company grew fantastically. Yeah, so uh and I guess then the old players got a bit scared and uh started to bid to take us out of the race. And then now there are three physical telecom networks in Australia. Anyway, I've been an entrepreneur ever since. Built, I think, what is the first digital options exchange uh ever, uh which which which was sold to a British bank in 2008, doubled in parallel in in prediction markets pretty much since 2004. Yeah, and anyway, long story short. So I've been on the intersection of let's say uh trade, finance for pretty much all my all my life and information uh technology. So that's me.

SPEAKER_00 5:28

And that that's amazing. Um what uh so I understand you would understand the the the legacy banking system really well and and kind of the the rails on which banking is done. What prompted you to actually um you know dedicate your time and attention to BitCredit?

SPEAKER_02 5:49

Um yeah, so so you said you dropped out of of uh you excuse me, you came in into 2018 to Bitcoin, right?

SPEAKER_00 5:57

I came into 2017 is when we started to look at it. We we our foray into uh blockchain was with a company that we started at the time called REM Loyalty. Our goal was to well, we issued the utility token on the stellar platform, and we wanted to use a utility token for loyalty rewards. Um, the whole premise behind it is the loyalty rewards are uh very much loaded and hated because uh because of all the limitations. So we wanted something that's easily transferable from a person to person. So at that point, when we started RAM loyalty, our goal was to to democratize loyalty rewards and make it transferable. So it's actually kind of build like a global platform for it. Um and so in 2018 is kind of like when we were working on the company, uh, we we were doing uh trading, and so like I mean there was this was the 207 end of 2017, early 2018 was kind of the ICO craze. Um, and we saw a lot of things that we we were not comfortable with in seeing, uh and so we slowly took the the the utility token off the trading platforms so that we don't have that volatility because if you want low lower three rewards, you want that stability, and so for a period of probably six to nine months, I was trading uh Bitcoin very actively. Um, and really besides Bitcoin and Ethereum, those were the the two primary cryptocurrencies that had any kind of like trade volumes, all the other um crypto was very volatile because there just wasn't trade volume, and so when when I was getting into it, like my my assumption was that Bitcoin will become the de facto alternative to fiat, and that it's gonna be a store of value, and so but if you look at Bitcoin pricing, it's very much in lockstep with the stock market, uh so I'm like they there isn't that separation that I was expecting.

SPEAKER_02 8:04

Yeah, no, no, this this this is probably something which we're gonna gonna touch on that, yeah. So so actually by the time you entered 20 uh 17, I was already dropped out of Bitcoin again. Okay, yeah, because uh so to say in in in uh in let's say 2015 during the the Greek crisis, I essentially realized that um something big was still missing in Bitcoin, which was a Bitcoin native, let's say, credit superstructure, a credit layer. So in 2015, I I kind of sped out the plan for BitCredit Protocol. Um, gave a presentation at Bitcoin Austria, everybody loved it. I was busy with other things, and so okay, put in a public domain, somebody will do that. You know? And so I essentially dropped out and said, okay, call me when this stuff works as a medium of exchange as proper money, then I'm back. So so then I was gone. I had let's say other other uh other projects to do. Yeah, so so uh yeah, that's that's that's uh the origin story, but nobody wanted to do it. Yeah, so so I came I came back for a reason in 2022. So there was you know, there was this uh Silicon Valley bank which went under, which needed a bailout. Yeah, and and I don't know, for some reason I remember remembered this this presentation which I'd given seven years ago um about how to make Bitcoin turn mini bitcoin into a money, and I thought, huh, strange, it's it's still volatile. What's happening? Has nobody done this? What happened to my presentation, which everybody liked? And and I saw, well, that nobody took care of building a credit superstructure on Bitcoin. There are loads of companies which treated Bitcoin as collateral and gave fiat loans against that collateral, but that was obviously not what I suggested proposed in 2015. Uh, because if you have a money, the money is not collateral, you just buy and sell with money. So that was the completely wrong solution. So, pretty much like you just said, yeah, it's it's uh it by 2022 it still hadn't monetized, as I call it. So I thought, okay, no, it's it's enough, let's do it. And I found my co-founder, because I I also teach a monthly uh Socratic seminar at the Hayek Institute, I think you mentioned that. So it's a it's a bunch of quite clever people meeting there to debate things deep in the night. And one evening in in late 2022, we debated uh so to say, why essentially that why why is the fiat money system so bad? Because that was the time when Christine Lagarde from the European Central Bank said, Oh, inflation came from nowhere. I mean, the lady printed six trillion dollars in the past two years, and then she's amazed as a governor of the one of the largest central banks in the world, why there's inflation. So we made that a topic one one night at the Hayek Institute.

SPEAKER_00 11:12

Yeah, yeah. I mean, what it I mean, the principles that they're attributed to to Bitcoin or crypto, like like they're they're really good. It like is the store of value as a is is a minimum of change. It's just I haven't seen some of these kind of big promises come to it. It I still see it as very speculative. Yes, there has been mass adoption for in 2018 when we're when we're building out the company, we couldn't go like we tried going to any and every bank in Canada, and every single bank told us nope, we don't do crypto, nope, we don't do crypto. And and and now you can walk into any retail bank and you you you can trade in crypto. But at the time this was really hard, and so we do a lot of trading with international customers, and I still have to well, in some cases we use different protocols, but for the most part, we use Swift. And I'm like, Swift was invented in what 1950, 1960. It takes three, four days for the money to get from Canada to like Europe, like, but this is ridiculous, yeah.

SPEAKER_02 12:17

And and it's actually worse now that you mention Swift, because as you know, Swift is almost uh uh Swift is part of the situation where we have a problem today with geopolitical money, yeah. Because because ever since let's say 1913, but even 71, the world is now totally run on nation-state money, so money which is subdued subdued to a nation state and its politicians, yes, and and before we had the gold standard, and gold was halfway international, well, pretty much in international. Um and uh I said essentially until 1971, when the last ship which France sent to pick up some gold, which they were owed from the United States, got blocked halfway through, and Nixon, as many people may know, cancelled the international gold standard. And from then on, money was completely dependent on the politicians. And and in the 50 years since then, we had a lot of bad developments in the whole world, uh in many aspects. Yeah, uh, generally, of course, uh, the inflation, including the latest bout, which is not over, that will continue. Yeah, we had asset price bubbles, which is nice if you are in good positions in the stocks or even in Bitcoin. Um, yeah, you had house price bubbles, which are not so good, not so good for young people who want to found a family, who want to marry and have a kind of normal life. Yeah, and and it causes a lot of social uh problems and and um inequalities. And then the real problems uh so to say, the in the real economy, they're even worse. Because if you have uh uh political money, the politicians make it their tool, so it ceases to be a tool of the economy. And so to say, the the politicians then okay, they implement sanctions here and there, once for that country, then for that country. You know, they change, they're also changing the geopolitics all the time. Uh we have we have companies which are being debanked, some of them huge companies, making $100 billion or more in world trade, and they're being simply debanked. There was such a case, for instance, in 2014, where a Swiss trading company, huge, 100 billion plus, as I mentioned, got a call in the morning by the banker, said, Oh, sorry guys, we we can't do business with you anymore. Yeah, and there's why or what's the matter with doing everything by the book? And they said, Well, you guys are doing uh sugar trades with with Cuba, you're buying sugar, export importing sugar from from Cuba. And said, Yeah, okay, we're Swiss, we are we're allowed to do that. There's no sanctions uh from from Switzerland to to Cuba. Uh and and you, you have you're a French bank, you don't have sanctions uh from Cuba, you're EU. And they said, No, no, no, no, no, no, no, no. You the invoice of the international sugar trade is in the global reserve currency, which is the fiat dollar. And once something is denominated in fiat dollars, it's the US law deems it to be under US jurisdiction, yeah. Which means that the bank had to pay billions of dollars in the United States because of a trade which had nothing to do with the United States. Yeah, so that's that's crazy. And and so to say that's that's one of the examples why international world trade is extremely vulnerable to the shenanigans of the politicians.

SPEAKER_00 15:44

I mean, I couldn't agree more, and and we've seen this with the um with the war between the United States and Iran. Um, one of the leverages that Iran is trying to pull is to change the the US dollars as the as the currency for trading oil and gas into Chinese UN, right? Like if if you decouple the US dollar from being the petrodollar, then the leverage that the US dollar has diminishes significantly. So we're seeing this, and um it's it's playing out at the world stage, and and it could be very would it ever happen? I don't think so, but it there's been at least it's it's replacing.

SPEAKER_02 16:26

I mean, Yuan, okay, it's replacing one thing which is problematic with another thing, another fiat currency which is as problematic, if not even more problematic. Yeah, I agree. So so I I try to be neutral. Yeah, I'm as as as I'm an economist, yeah. I kind of like like my views to be uh scientifically neutral. Yeah. So so so they are both fiat currencies. It's it's both terrible money, yeah. It's monopoly money ruled and abused by politicians for their purposes.

SPEAKER_00 17:00

Do you foresee ever a future where we have a currency that's not controlled by a government, or would would the government ever allow for this to happen?

SPEAKER_02 17:14

That that's a good question, yeah. I mean, obviously, there's good governments and bad uh governments, probably currently a little bit more to the bad side, pretty much everywhere. Yeah, but uh but there are also some good governments around, even today, in some countries. So there's always gonna be a good government somewhere. Um, and and yes, they I think once they come to their senses and realize that in in the benefits which a sound money, a return of a sound money after 50 years of feared experiments would have, yeah, in terms of growth, in terms of uh social uh peace, yeah, in terms of a better functioning system, yeah, I think they would realize very fast that this feared experiment must be ended.

SPEAKER_00 18:01

Question, a follow-up question on this. For people that are not familiar with trade finance, how broken is the system today? Kind of like what are the biggest challenges that exist with the existing system?

SPEAKER_02 18:13

Yeah, um it's getting worse by the year. Um, so this this this uh thing in trade finance, what happened over almost 100-150 years is that gradually intermediaries squeezed into uh trade where it actually is not really necessary. Yeah, there were some advantages to it, but also disadvantages, which I think are greater. But right now, all the trade which happens in the world has to go via the banking system, yeah, yeah, um, which is not strictly necessary for trade. Obviously, you need a banking system for for other things, uh, but it but banking is something very different to the currency system which keeps money running, uh trade, international trade running. We knew that with the Glass-Steagall Act, so to say, early uh in the last last century, uh, even though it was implemented wrong, that tried to separate the currency layer from the actual banking, the real banking, where the banks act as intermediaries of money. But the the the politicians botched that law, and and and we still have banks creating currency, which they shouldn't be. Yeah, that sounds weird, probably to practically anybody uh who is not, so to say, familiar with the Austrian School of Economics, but banks should not be creating money. That's a that's a rule. And today all the money is being created by by uh by by banks, uh money is created by the central banks, so to say, as the as the uh base money, uh and and and bank money is created by banks, by demand deposits, and and it causes all kinds of messes. And why is it so broken? It it's actually being admitted right now that there's a trade finance gap of $2.5 billion, uh, sorry, trillion dollars. Yeah, so so that's that's a sizable chunk of international trade which is not happening. And essentially, it is it it concerns the poorest countries in the world, like the emerging markets, and and the small to medium-sized companies in those countries, which are actually the the motor of innovation, of growth for any any country. So these countries and these companies are actually doomed to poverty because of fear money. How so?

SPEAKER_00 20:34

Can you unpack the idea, please?

SPEAKER_02 20:36

Yeah, yeah, because it's uh so see, since this is this artificial uh, let's say legal money, yeah, with a lot of laws to keep something which is extremely fragile and and dysfunctional, keep it alive. Um, there's lots of regulation, lots, lots of rules and and um things you have to do so it doesn't break down all the time. Yeah, we've seen 2007 just how fragile the fiat system is. As soon as the banks lose lose lose trust in each other, it's like a system of dominoes.

SPEAKER_00 21:08

Yeah.

SPEAKER_02 21:09

And so so all these the banks are leaving those countries, so the there's shrinking correspondent networks, and the bank correspondent networks are what keeps international trade alive. Those who stay, they have an attitude which is called risk off. That means if something looks just a slightly bit like there might be more than the normal risk is involved, they don't do it. Uh, the complexity and the the amount of work needed with these transactions has now gone so big because of increasing overregulation that it's practically not worthwhile to make trades. So banks sometimes don't even talk to companies who do less than five million dollars uh uh in in in in turnover, yeah, which which means a lot of the economy is shut down. So there's lots and lots of these things. Don't get me going on. And the other thing is obviously. That since you have political money, they also in some countries they also block the forex stream. And then let's say the president of the country puts 50% of the forex into a Swiss bank account. The country itself has has then a foreign currency squeeze. So it's all kinds of shenanigans going on, which which don't work. 2.5 trillion.

SPEAKER_00 22:25

I mean that that's a that's a really large number. So I'm originally from Bulgaria. Bulgaria just adopted the the euro in on January 1. Um the feedback that we that that I'm getting from from family that still lives there, it's it's been fairly negative from from well from an independence perspective. I'm sure that there's a ton of benefits and like to have a centralized currency for all of Europe. So this one component. And so the International Monetary Fund came in and stepped in, and and so we pegged at that at that time the Deutsche uh the the what was the the German currency? The the Deutsch, the the Deutsche Market was the so we we pegged the the left to the to the Deutsche Mark, and uh so so that provided some stability. So the inflation was good at the time, yes.

SPEAKER_02 23:22

The Bundesliga was a very solid institution at the time. That's when I started to work. They were still a good bank then.

SPEAKER_00 23:28

I a hundred percent agree. And so I look at this and and kind of see like the the like in I think as you pointed and rightfully pointed out, governments use currency as a political lever. Um, and so probably the the most notable example that comes to mind for this is Salvador that adopted I think they adopted a Bitcoin as a as a as a currency. Yes, it what is your perspective on uh smaller countries, maybe like developing countries adopting a cryptocurrency as a replacement for their currency? When will they realize an advantage by having a non-fiat currency? Is it when crypto becomes a widely accepted standard uh currency? Kind of like give me your perspective.

SPEAKER_02 24:11

Uh well, uh let's let's say I would like to focus this on Bitcoin because Bitcoin is not not crypto, and so to say, uh monetary systems are natural monopolies, you know. Uh over time, many millennia, the monetary possibilities gelled on gold, for instance, until 1913 or 71, depending on how you see it. Yeah, so we had salt, sheep, cow, corn, fish, whatever, as a money at some stage, upgraded to the metals, then to the precious metals, silver and gold, and in the end, silver and gold battled it out, and we were left with gold. I think I think it's it's my assumption is that there's a 98% chance that everything will gel down on Bitcoin. So I I couldn't, I I don't have time to deal with all the uh 20,000 other uh trials of of stable coins.

SPEAKER_00 25:08

Yeah, and and and you and you can see this from an exchange perspective if you're trading uh a currency, really the only one that that that that has volume is is Bitcoin. The other ones are so small in in comparison. Uh so I I I don't disagree with you, and I think there's gonna be an emergence of only one, yeah.

SPEAKER_02 25:28

And so to answer your question, yes, El Salvador did that, it's very understandable why they did that, yeah. Um, because they dollarized in 2001. They still have a central bank, even they still have the cologne in El Salvador. I've been there a couple of times. Uh so that's still there, although nobody uses it. So that shows you how how uh how long. So this is 20, 25 years ago, and they're still around. Uh, but they're dollarized. And of course, as a country, now El Salvador is very reliant on the politics of another country. So it's not a free free market money, which kind of evolves how the trade is, but they are dependent geopolitically. So it's it's it's a it's a it was a print in principle a good idea uh to give freedom in currency. Probably as a as an Austrian economist, I'm I'm not so much in favor of legislating one money in specific, even though of course I think that Bitcoin is it. Uh, but I I I value competition, so so there should have just been freedom in currency. Anyway, um, but it was too it was in as far as early, as obviously nobody had read my presentation from 2015, and there's still this credit layer missing on on uh Bitcoin, which could have established something like we used to have until 1913, which was essentially a peer-to-peer credit layer on gold on top of the gold standard, which was very stable because of the credit layer. Yeah, so so that it worked like you had the whole of world trade already working, yeah, without internet and all, believe it or not. And so when let's say a supplier, uh you're now in Canada, you said, right? Yes, I am in Canada. Yeah, so let's say if there was a supplier of Argentinian steak, yeah, they have good steak there, imports steak for uh Canadian restaurants, because uh supposedly Canadians like eating steak too. So what happens is that the Canadian importer would pay for the steak, the Argentinian supplier with a so-called bill of exchange, essentially a promise to pay that the the the seller, the exporter, in 30, 60 or 90 days, which which bridged the time gap while the goods were in the supply chain, processed, transported, whatever, cooked, till finally a customer pays for it in gold or gold substitute banknotes. So that period needs to be bridged. That's the real purpose of a currency. And Bitcoin doesn't have a currency right now, it is digital gold. Yeah, it has the gold, but the gold only comes into play at the end when the bill of exchange is paid. So it would have said, Oh, for those two tons of stake, you have to pay, I don't know, two gold coins. And when the bill of exchange became two, the Canadian importer had hopefully uh um you know prepared, sizzled, and sold the stakes in in this restaurant, gotten the gold gold in, and pays the bill of exchange. The bill of exchange gets drawn up, it poof disappears. That's that's the nature of currency. So that's how it worked, and the whole world worked like that. And the biggest center in the world at the time was was London, the the financial center of the world, really. It all ran on the British pound still then, not yet on the dollar. And and so this is when an Argentinian exporter needed to pay an let's say uh Australian export exporter of grain. What happened was two different British banks uh were involved, and one banker went essentially, if I play figuratively, with a sack of gold coins from one side of Lombard Street to the other side and brought the gold over uh to the other bank, figuratively speaking. Yeah, sometimes there was gold bars shifting in the Bank of England, but let's let's let's stay with that picture. So that that was commerce, so it was near instant. Yeah, so the money, the gold didn't have to flow from Australia to Argentina or to Europe. No, no, no. It was just walking over the street in London, and and obviously now with with uh Bitcoin technology, we can do all that perfectly secure, perfectly geo uh geopolitically neutral, um, protected by a huge amount of power uh just on Bitcoin in 10 minutes. Yeah, you can transfer pretty much any value in the world today on Bitcoin in 10 minutes. Yeah, it and Bitcoin, as you as you know, today has a market cap of 1.6 trillion. So the the store of value function, the initial one, is already there. Yeah, we can argue how that will evolve because there's still some changes coming. Um, but essentially you can already settle even the largest trades, tens of millions of of dollars in trade on Bitcoin main chain. What's what's missing, as I said, is to bring the bill of exchange equivalent onto modern cryptographic Bitcoin technologies, and that's essentially why we founded uh BitCredit in in uh 2023, and we are launching the system next week. So Bitcoin from then on has a chance to become man money.

SPEAKER_00 30:51

Understood. So can you explain the Bitcred Bitcredit protocol um in in simple terms, kind of like what is it does, how does it work, what would the new system uh do and enable?

SPEAKER_02 31:03

Yeah, see, see what happened is that not only in 2009 suddenly we had Bitcoin, a first digital man money, because the problem of digital scarcity was solved. Uh eight years later, here in Vienna, Austria, the United Nations passed um a model law for an electronic bill of exchange. So that was fantastic. Because now instead of having paper bills of exchange, which came out of fashion because of the increasing digitation of the banks, now we can have them again. So, what BitCredit is on the wholesale money part is essentially a free open source uh technology protocol uh for electronic bills of exchange. Yeah, there have been many companies trying to build proprietary systems, they all failed because this is infrastructure. This is this no company can own that. And so we built it open source with Bitcoin technologies, and now you can you can issue a bill of exchange on on your mobile, on your phone in one minute, and five seconds later, um a company in Argentina, in Australia, in Siberia, I don't know, has it on their mobile phone via the Nosta network, which is a uh decentralized communication network, which essentially takes takes um the spot of Swift. Yeah.

SPEAKER_00 32:28

And and and and if I'm not mistaken, Swift is controlled by the US government. It was it that's where it originated.

SPEAKER_02 32:34

Yeah, and it's controlled by government, which is which means it's not in times like this with increasing geopolitical tension, um, you you can't have that. Yeah, and and and it's actually the fiat system which is is responsible partly for that. Because one of the things which we which we have in the fiat system, which didn't exist before, is floating exchange rates. So as an importer-exporter, you never know what your situation is next in year. Okay, you can hedge a little bit for half a year, for a year, but ultimately you're exposed to let's say the currency manipulations, which are possible because it's monopolists everywhere. Yeah, and and so the return of sound money would bring back the situation which we had under the gold standard, obviously under a cryptographic monetary standard, where if if in one country in general there was too much imports, then Bitcoin would flow out of the country, would be scarcer, which means the prices would go down, that country would become more competitive, yeah, and could export more. Yeah, and the other countries could buy more. So until 1913, there was never any persistent trade imbalance like we have today, and which is a huge political topic all the time. Yeah, you hear trade wars, tariffs, and craziness going on all just because of a failed monetary experiment. So we are we are fixing that with the Bit Credit Protocol. And and I hope this is now clear on the electronic build of exchange side, but there's a second part missing in Bitcoin, which we also had to build, which is why it took us uh yeah, um, since since 2023 to build it essentially, three years almost.

SPEAKER_00 34:15

So if if I understand correctly, um this is a not-for-profit organization. Um you were uh enshrining a lot of the leading principles in terms of how this is this is done. It's uh decentralized control. You've adopted the uh the DAO as the governance mechanism, uh open source. Um, who is funding the development of of the BitCreator protocol?

SPEAKER_02 34:42

Uh see see uh the bill of exchange itself used to be just a bill of a piece of paper. So why should people pay for that? The what's what I did not mention is how do you actually well and that's the fourth part. So the BitCredit Network uses this free open source software so that anybody who wants can download it and run a mint, a mint of electronic bills of exchange. We call them e-bill. Just like on the Bitcoin network, anybody can download the Bitcoin software and run it run a miner, yeah, to to mine Bitcoin. So in the future, that's gonna happen on the on the money layer and on the currency layer. There will be, hopefully, if this works, if people like it, actually they do, um, um, there will be thousands and tens of thousands of mints minting e-bills into liquid e-cash. Now, eCash is a is a in the second key technology in the bit credit protocol. So essentially what it is, I mentioned already that banks should never ever have been allowed to issue money. Yeah, yes. I mean, obviously, a bank can't issue gold coin. Yeah, it's it's a mint which mints the lump of gold into a coin and not the bank. The bank can then deposits in gold and give out loans in gold. So they're intermediaries of money, but they do create money. I mentioned that central banks create money, they shouldn't. Commercial banks create money, they shouldn't. Yeah, so these mints will create the currency, the credit on top by essentially splitting bills of exchange issued by productive companies. That's very important. Not for speculation, yeah, not for funding deficits, not for funding consumer loans. Yeah, they split bills of exchange in payment against goods in the supply chain into little Satoshi-sized pieces. Yeah, so Satoshi are the little bitcoins. And and you can use this, this is so to say, uh a highly interesting technology, has been around uh since the 80s. A guy called David Chom invented it. Um banks tried it, but it didn't really help any any purpose of the banks. Anyway, what they can do is now I can send to you wherever you are in the world in 200 milliseconds from phone to phone without any intermediary, Bitcoin in 200 milliseconds. Yeah, totally permissionless. Nobody can block you. There's no intermediary uh who who could interfere. It's like handing over a banknote just digital, yeah. Yeah, and it goes directly from my phone to your phone. If you want, we can do it, but yeah.

SPEAKER_00 37:30

So a couple of follow-up questions there. Um what what would be the the bank's position? Would it would it try to block it? I mean, I as I mentioned uh early in our conversation, we we we do a lot of uh what a lot of trading with uh with foreigners. And for example, we recently had an issue with an Italian partner where we tried to send money to them, and the bank said, This this bank account is not authorized to receive foreign currency or foreign trades. I'm like, how can you have an account that's not allowed to receive like it's getting madder by the by the day, Maxim.

SPEAKER_02 38:09

So so yes, you your story is really typical. You have to know that currently in in Europe, several hundred thousand people and companies actually closed the bank account, which is a dramatic situation in a in digital age. Yeah, so so clearly the the fiat system and the this overblown partly absurd regulation it is just not coping anymore. That's why we rebuilt BitCredit Protocol. Because now you can just take your wallet. Yeah, so I have my my wallet here. Yeah, I I I open this is one week before launch, so I can show it already, kind of big preview. Yeah, so you have yours you're you're seeing it here for the first time. Yeah, let me just enter my pin here. Yeah, yeah. So so this is this is all you need for a BitCredit wallet. Yeah, you know how many Satoshi or uh Euros or Dollar you have, yeah. Uh you have receive, you have pay, you have NFC for tap2pay, yeah, and you have scan if you want to use QR codes. Yeah, and you can send two anywhere in the world, in presence, remote, directly. Nobody, nobody can block your your Italian uh customer or to to to pay you. Yeah, you can live as a small and medium company. Yeah, a big company can call them and say, Are you guys mad? We I'm gonna take my business away. And and and they might give in, they might not these days, actually. Um business, you have no chance.

SPEAKER_00 39:39

I mean, I see like um in Europe, where there's there's a lot of noise for some reason. Um in Europe, like Revolut has really taken hold in with with a lot of the customers we deal with because the the local banks within the specific countries we deal with, they're still very antiquated in terms of how they process. So at least Revolut, a digital bank, allows for some of this ease of access and ease of transfer. But I I agree from and this was the same principle that we're trying to do with the loyalty rewards, is just allow for flexibility and ease of transfer, ease of transaction any anyway. Earn and redeem.

SPEAKER_02 40:22

I just cut out for a moment. I I thought you had finished. No, I just I'm saying, yes, yes. So so yeah, there are new banks which are so to say trying out these things, uh, but I have very I fear yeah that that in reality, since they're too much embedded in the fiat system with all these regulations, that ultimately they will they will have to do the same risk-off attitude uh than the more established banks, because as you know, audits come in and uh uh this crazy overhead gets implemented. So I I I mean I think there is no way around having it uh neutral, sound money again, because the fiat system uh automatically goes into this direction of over-bureaucracy, over-regulation, and centralization. And the ultimate centralization is of course when the central banks only have the money. When the smaller banks die, die, die, they do that all every time, every every day, smaller banks die in the United States, everywhere in the world, it's getting less and less and less. And the large banks, of course, only care for the large corporations. So the small and medium enterprises that they're losing, the normal people they're losing. So it's a it's a natural it's an unavoidable situation in my in my mind that the fiat banking system is coming to an end. That's why we built BitCredit to have something uh in these years as this progresses.

SPEAKER_00 41:55

Where do you get your biggest opposition from?

SPEAKER_02 42:01

Um well, obviously, the the central banks, yeah, they're making huge campaigns against Bitcoin with all kinds of fear and doubt. For instance, just the other day, the president of a European central bank, whom I don't want to name her, uh uh said, Oh, yeah, Bitcoin is only used for criminals, and all the Bitcoiners should go to jail. Yeah. And and so the answer which you have to give to her is the United Nations estimates. Well, let's let's start with Bitcoin. So there's a company called Chainalysis, which issued an equal part, which said that in the whole of crypto and Bitcoin, uh, there's about 40 on the high side, yeah, it may be only 20, but looking at the high side, there may be up to 40 billion in in specific um crime, fraud, tax evasion, whatever happening. 40 billion, of which Bitcoin is the minor part. Yeah, most of it happens in in crypto. Yeah, Bitcoin is not crypto, it's a it's a very different animal. Um, and then you look at the overall size, so you get a study from the United Nations which puts the total amount of of fraud, crime, and and money laundering at two trillion. Yeah, so you make this huge pie of it, and you have this almost unnoticeable slice, which is Bitcoin. But of course, that lady did not suggest that now every user of the euro should go to jail. Uh she wouldn't have any customers then. Or I guess she would, because there's a law forcing you to use it to pay taxes, for instance. So, so yeah, it's it's ridiculous. So the other doubt that they're seeing is sort of say, oh, it uses so much energy. What they, of course, don't tell you is that by now most of Bitcoin is renewables. And because the Bitcoin miners stabilize the grid, which is completely irregular when the sun shines and wind. And wind blows, yeah, but the networks actually break down with trillions of dollars of damage. What's happening is now is that some electricity companies pay Bitcoiners to switch the mining gricks on and off to make sure that the network stays safe and stable. In South Africa, the government's uh uh electricity company, ESCOM, I was just in in Kapstadt, uh Cape Town, to to present to a couple of uh at the trade finance show how Bitcoin will do this now now very soon. And so they announced that the state company will be investing in in Bitcoin at the same time. While the South African national bank is fighting Bitcoin by wanting to put in a legislation whereby anybody who crosses the border has to give their private keys to the border to the border um patrol person, which is crazy because they don't, I mean, you you transfer the ownership of your Bitcoin when you do that. Of course. Yeah, yeah. It's madness. So there's one branch of government who realizes this is a good thing, it could make energy supply better, because South Africa is is in a terrible situation here, yeah. Um, and at the same time, you have the the monopolists trying to save the monopoly on the very bad money. So for me, it's it's no question which one should go.

SPEAKER_00 45:22

Well, and if we're to parlay to take this even further, um with with with data centers, uh, the most expensive electricity that we have is when the peaking plants are uh fired up in order to meet the the peak demands. And so the the the the initiative there is like if we can have a uh a consortium or if we can have a coordinated effort in terms of when data centers come up, when data centers come down, how do we build redundancy? Same thing with with Bitcoin. The reason why Bitcoin comes uh Bitcoin mining comes on stream when they come on stream when electricity is cheaper, they're not gonna fire it up when electricity is expensive. So the more stable the grid is, and and so the statistics that they come in out of the United States is at the moment is a 10% shortage of electricity with all of the data center capacity that's being built. But if if there's a coordinated effort, we're actually gonna have 10% surplus, and all we're trying to do is smoothen the volatility of when electricity is being consumed and when it's not, and so the more stable the grid is, the like the the utility providers, the the electricity, the generation plants, they can they can have more predictability in terms of when they're running.

SPEAKER_02 46:33

Yeah, and and you know what it means? There have been studies now that just because of today's status of Bitcoin, the the countries where there is that they can lower the energy prices by 30 percent because they save all this investment for peak capacity, which only needs to be switched on with very expensive energy when there is a thought. Yeah, yeah. So 20 20 to 30 percent cheaper energy because of Bitcoin, and the central banks won't tell you that. But you asked before how how this makes money. So so what we are building is is not a company that's very important to understand. We're building a perpetual institution in this credit superstructure, like Bitcoin is a perpetual institution. There's no company, it's no company for BitCredit Protocol, it's just software. You download it for free from the internet, and there you are. But what happens is obviously there is now a whole layer on Bitcoin, or that there should be a whole new layer of mints happening on Bitcoin. So the capital in the future can be deployed. So what I envisage here is that capital can be employed in in four ways in the future in that new uh layer of Bitcoin. First of all, obviously, when a company is paid in a bill of exchange during 60 days, they can either go to a Bitcoin BitCredit Mint and say, okay, please mint that to me into uh uh uh um Bitcoin credit money, Satoshis, or they could go to somebody who has a balance of Bitcoin in a in a passive treasury in the in the in the investment section and put it to work in the real economy by buying a bill of exchange with existing money so that the that the exporter gets immediate liquidity, they can pay the workers, they can pay the suppliers, they can grow. Yeah, and they can minimize the capital which they need to buffer the fluctuations in the year in the capital requirement. Uh so that's one thing. So so I see in a market emerging for bill of exchange where 30, 60, 90 days uh are traded, and you make a good, quite safe return because bills of exchange are quite safe instruments because of the uh Rico's chain. Then I see that that passive Bitcoin holders can also essentially lend out type of money market Bitcoin to mints to make sure that the uh intramint uh cross-real-time settlement works on Bitcoin M0 on main chain, verifiable. So there can be no cheating like like between normal banks where they they say they have gold and then it's not there, or you know, they have uh some lead underneath and just a little pile of gold coins on top. That can't happen on Bitcoin because everything is verifiable, yeah. So lending Bitcoin. And so that's those are the the two new debt markets which I see emerging in this in this um uh new layer.

SPEAKER_00 49:29

So but with regards to number two, does this mean does this mean that then the the deposit requirements will disappear? Companies like in Canada, we have the Canadian Deposit Insurance Corporation. So essentially saying, hey, like this 10% of like of the money that's owed to you, it's it's it's held somewhere. Kind of like how would how would this change the existing banking system or the structure? Because I'm assuming that a lot of the existing legacy organization will cease to be relevant.

SPEAKER_02 49:58

No, I I I I don't I don't think so. Look, I I think it will change, yeah. But but but listen, I was around I ran a telecom company, yeah, and and the reason for that is what I've been around pretty much since the telecom sectors got privatized in the 80s. Yeah, it used to be State Departments, and they still exist, just now there are free market companies, yeah. So capitalism wins. So so we still have telecom. We have much better telecom than when there were a state department, yeah. Yeah, I I yeah, you don't want to know how how much trouble even a uh uh remote call was in their own country when when I was, so to say, uh a teenager. Anyway, let's let's leave that. So I can see those things just changing into free market, normal, non-monopolistic, not state-owned, but privately owned companies. Denationalization of the monetary system back into a sound money. So so and the banks would still have a bank insurance scheme, hopefully not one centralized, but decentralized because it can cushion uh problems better. And it's just the money production would rest now with the productive sector. So when somebody ships the the stake from Argentina to Canada, is it self-liquidating? Because when those stakes are sold, they can be paid in Bitcoin. So so it's just carving out a function which the banking system should have never had and give it back to the productive sector. And all the problems which we ever had in banking mostly emerge from two things. One from the government, so to say, putting on companies on banks the obligation to take their bonds in thin air, which where there was nothing produced, like they would say, Oh, here is a ten thousand dollar war bond, give me currency for it, and then if they put the war bond into the vault and print banknotes, yeah, and and hand it out, and people think it's good money because it it looks just the same, like real money against goods in the supply chain. Yeah, that's one thing. The other thing, something which is in the lection of the English word, you can also take in equities, for instance, yeah, and say, Okay, I I use these equities, these stocks as a collateral, and you get more money. Yeah, again, the the stock has not produced it anything, it may pay dividends in the future, but it has not yet. Nothing has been produced. So when if you issue money against that, it blows up artificially the fiat system, the stocks rise hugely, and and so the same you get inflation and instability and distortions. The same with with house prices, yeah. So if you create money in the banking system to fund house prices, house prices balloon all the time. Yeah, if you if you don't enter early, you're priced out. If you if you're young, you can't afford it. So once we are back on a sound money system, young people will again be able to buy a house, their own house, found, have a family, yeah, have a proper normal, normal life, a happy life without some of the madness which is I mean in Italy, kids kids leave their parents now till 40 years. They never, yeah. In in Japan, uh, which had the craziest monetary system, yeah. The the there's now a whole generation which doesn't want to get married anymore because they can't can't marry anymore. It's it's it's wild actually what the 15 years of this feared experiment we've done. And as I said, so I'm I'm I'm very hopeful and proud actually that we managed to build something which can fully replace that.

SPEAKER_00 53:46

So you said four things. You you covered the bill of exchange, you covered the direct landing kind of like what are the other two?

SPEAKER_02 53:52

Yeah, so the other two are more related to equity. Yeah. Okay. So since since we have a base layer of Bitcoin and a credit layer of Bitcoin-denominated electronic bills of exchange, a bill of exchange can fail. Yeah. And one of the easy way outs which the fiat system invented to make the money secure is oh, we're going to implement the central bank, which can essentially print money out of thin air, so nobody will ever lose their money. Yeah, that's called the the lender of last resort.

SPEAKER_01 54:22

Yeah.

SPEAKER_02 54:23

Obviously, there's nothing against it except the power of the government to collect taxes. But even collecting the taxes, they accumulate deficits these days. So it's it's uh yeah, it's it's not like that anymore. Anyway, so but in a free market, um, in a in a in a sound money system, or in our sound money system, what's happening is every mint, in order to be allowed into the system, has to prove a certain amount of risk capital on Bitcoin main chain. So we do that as a special, we call it special guarantee asset, which is a token also inscribed on the Bitcoin network to be verifiable. And the value of this guarantee capital, which a mint holds, secures their own their own uh e bill splittings as well as the the e bill splittings of other mints. So which means if there's somewhere a hole, then from all the mints, uh so the guarantee capital runs to that point to plug it so that never ever anything can happen to the people who use it as the day-to-day money for tapping at the supermarket, for paying their rent, for paying the utilities, whatever. Yeah, so so you there's a secure now, and it's not as easy as just printing money centrally, it's it's more complicated because it's decentralized. But the good thing is now nobody has power. Yeah, it's just all decentralized mints. You can join anyone, it doesn't really matter uh where you are because the system, if it allows a mint, it will always secure the mint.

SPEAKER_00 56:01

Makes sense. Uh how many mints do you have to have on the on the net in the network in order to create the the flow that's required to information that daily transactions could be so so we're now on on what's called Bitcoin Testnet.

SPEAKER_02 56:16

I don't know if you know that it's kind of a uh a second Bitcoin network running where you just have testnet Satoshi for for for testing, and we're switching on the mainnet version uh uh in still this month, yeah. Before uh a certain year, and and we will be starting with one so-called clouder. So I don't know if you know the word, so uh a mint we call wildcat. Yeah, okay. Uh these things which snip the e-bills into little satoshis, they're called wildcat in honor of the wildcat bank in the United States. It used to be a derogatory term uh for you know wildcat banks. We are the the ones in Philadelphia and New York, St. Louis, we are the big guys, and this is just uh in Oklahoma, third village of the left, a wild cat. Anyway, so so we use that. So every mint is called wildcat, and uh we will start with one crowd of wildcat. So a clowder is like a herd of cows, uh uh uh flock of seagulls, yeah. It's a it's a group of wild cats, yeah. So we start with one cowder, uh, which is seven seven wildcats acting in a certain thing, and then anybody who wants can plug into the system.

SPEAKER_00 57:34

Got it. So it's kind of like a note with different uh wild cards around it. Got it. Okay. Makes sense. I know we're coming on uh at the end of the schedule time. Oh yeah, Max in the last one.

SPEAKER_02 57:48

So yeah, yeah, so so you can in so anybody can, so to say, hold such guarantee capital, which means that the the protection for the people who use it rises because the the more guarantee capital in the system, the safer the people are. So this should grow in lockstep with international trade moving onto the system. And first of all, of course, those 2.5 trillion which cannot be served by the so this is an empty market which nobody uses right now. Yeah, uh, so that's but then the fourth one is the real one. So if you hold Bitcoin, or you can always um start, download the software, deploy your own capital into running a wild cat cat mint, hold hold the operation, uh invest in guarantee capital so that you have enough to join the system and and participate that so bill market, liquidity, money market, the guarantee market, or self-operation in mints. So that's that's sort of the economic layer how how this will work. Fantastic. So if anybody wants to talk about doing such a thing, so entrepreneurs, this uh you know, anybody could start a miner in 2009-2010 on Bitcoin. Yeah, some some people did. Some have very large companies these days. So so uh so this is now the moment to start something in this new network which is coming up. As I said, it's free, it's open source. We teach anybody who wants to know.

SPEAKER_00 59:18

Amazing, amazing. And we'll drop links to uh to BitCredit, uh the protocol in any uh way white papers we want to share. Um, just last question for you, Hubertus. Um what's any can choose? What's the best advice you have ever received, or what's the kindest thing that somebody has ever done for you?

SPEAKER_02 59:42

Um well, I I can't even name all the kind things which which have been done to me because essentially I'm trying to figure out um no, uh too many, but I think I think uh you warned me about that question. So I I could I couldn't have told you, but then I thought, okay, what really changed my life was that during when I was at Peace School in Barcelona, in Spain, um one of the departments had done a study of alumni of the of the B School. Yeah, so this was since 1915, 50 or something, 60, 50, 50, 50, yeah, 50. And so the outcome was that those who after school went to become entrepreneurs led the happiest life, irrespective even whether the venture succeeded or not, which was surprising. So I thought, okay, what do you have to get to lose? You want a happy, happy life, become an entrepreneur. So I had to work kind of a couple of years to to pay off my school fees, but as soon as I could, I founded my first company, and that was 1999. Yeah.

SPEAKER_00 1:00:54

No regrets, nothing to look, nothing, nothing to uh okay. Amazing, amazing. Um, let's finish on that note because I mean our audience is primarily comprised of uh founders. Um, so that's a good idea. I think the right choice. Yeah, fantastic. Well, thank you so much for the generosity of time and the insights. I'm looking forward to see what's uh um like what's next for for BitCredit. I may myself become a mint. Like I'm really interested in the idea. So let's continue the conversation. But uh, thank you so much for for your time on a Saturday morning.

SPEAKER_02 1:01:28

Very good. It's Saturday afternoon here, and it's only raining, so uh I I kind of but I like talking about about these monetary things anyway, as you as you can hear. Anyway, thank you so much for your interest. Thanks for having me. And maybe we speak and feel free to keep in touch for sure, for sure.