Hey, Koku. This place is intriguing. Where are we?
Welcome to Currency Canyon, Siri. We've stepped into a dusty old saloon. Look around. At several tables, global currencies are locked in a high-stakes poker game, each striving for dominance and urgency power in a tense and unpredictable showdown.
Wait a second. Are we in some kind of Western movie set in 2009?
Not quite. This virtual reality is a vivid creation of my imagination. This saloon buzzes with the tension of past, present and future economic battles. A struggle for survival against inflation.
This is all so intriguing. Tell me, what's happening at that table over there?
Over there, my friend, the currencies are laser-focused on their game. Each move calculated. See how the euro remains calm and composed while the pound leans forward with a confident wager. The Swiss franc is carefully considering its next move, as the Japanese yen, battling deflation, is boldly going all-in. The Deutschmark and the French franc stand silently nearby, solemn reminders of past triumphs and defeats.
Wait, who's that at the door? The mysterious figure with a low hat and steely eyes.
Ah, that's Billy Crypto. His first ever appearance in Currency Canyon.
Who the hell is Billy Crypto?
Well, Billy Crypto is considered a rogue outlaw, set to disrupt the banking stagecoach by some, and hail as a hero ready to rescue Currency Canyon from inflation and inefficiency by others. Perhaps he represents the solution to preserving economic energy, something fiat currencies have long struggled to achieve.
I see. Billy Crypto is Neo in the Matrix movie, and I guess that the town's law enforcer, dare I say Mr. Anderson.
Nice one, Siri. But this is the wild, wild west. They call him Sheriff Dollar Greenback, better known as the Central Bank, a veteran old-timer.
Stranger, you knew Arambi's parts? We don't take kindly to currencies running loose without central control. You got a license to play around here, son?
And so, dear listeners, began the legendary showdown. The clash between tradition and innovation. The question remains, will they always hold their ground, or will the new frontier of crypto redefine the rules? Let the showdown begin.
Welcome to 2050 Investors, the podcast that deciphers economic and market megatrends to meet tomorrow's challenges. I'm Koku Agbobla, I head up economics, process set and quant research at Societe Generale. In this episode, we delve into the world of cryptocurrencies, blockchain, DeFi and stablecoins in the wake of recent endorsements by the US government. What foundational principles underpin cryptocurrencies? And what factors are fueling their rapid rise in popularity? We will dive into the intriguing world of decentralized finance or DeFi, a system where financial products operate on decentralized public blockchains, bypassing traditional intermediaries like banks and brokerages. Could cryptocurrencies truly become the ultimate form of economic energy storage? If staples provide everything a checking or savings account can provide, banks should help their customers use them. If accessing decentralized finance is good for users, banks should help their customers navigate DeFi. Later in this episode, we interview Joseph Lubin, co-founder of Ethereum, CEO of ConsenSys. We chat about the impact of stablecoins in the financial sector, as well as their relationship with traditional banks. We will also address the fundamental issue of trust in digital money, regulation, future payment, and tracking the balance between consumer protection and innovation. Let's start our investigation.
So, I hear a lot of people using the term economic energy storage. Can you explain?
Of course, Siri. In this fascinating and insightful interview, we hear from Michael Saylor, the billionaire executive chairman and co-founder of Strategy, a Bitcoin development company. Saylor is one of the most vocal advocates of Bitcoin, often framing it as a technological breakthrough akin to the internet or electricity.
A type 1 diabetic cannot form fat because they do not have insulin. Then another phrase for organic energy is fat. Fat is an organic battery. So when someone's a type 1 diabetic, they can eat all day long and they're going to starve to death. If I take your insulin away from you, it's a death sentence. Removing someone's property rights when I strip you of property rights is a death sentence economically. I'm literally saying you cannot store economic energy. Being able to store monetary energy over long periods of time is no different than being able to store fat. We have harnessed monetary energy on a network.
So for Michael Saylor, Bitcoin is this encrypted energy crucible. The definition of a crucible is a heat-resistant container used in metallurgy for melting metals at very high temperature. Nice metaphor. All in all, this all boils down to finding the ultimate store of value or economic energy. And for Michael Saylor, Bitcoin is the digital solution to this ancient human challenge.
So what about the showdown between Billy Crypto and the sheriff dollar Greenback?
Okay. Before this epic standoff escalates, let's step back and set the scene. Blockchain, crypto mining, DeFi, stablecoins, what do these words even mean? Siri, let's go on a little adventure that I will call the fellowship of the blockchain.
In Gazadum, the mines of Moria, the underground kingdom beneath the misty mountains, realm of the dwarves of Durin's fall. Sorry. In the data centers of Rockdale and Corsicana in Texas, two popular crypto mining hubs, miners toll away, solving complex mathematical puzzles. To be more precise, they don't really solve puzzles, but guess numbers. It's a giant race to generate random numbers until they find a match. OK, this is essentially the process of mining. But unlike gold, you don't dig with a shovel. You solve puzzles with raw computing power.
That's right. So, blockchain is the digital ledger that underpins cryptocurrencies like Bitcoin and Ethereum. It's a chain of blocks, imagine Legos, each containing transactions, validated by the network and supposedly unhackable. Or as Don Tapscott, author of Blockchain Revolution and one of the world's top digital and management thinkers puts it, Blockchain is the trust protocol. It enables us to trust strangers at scale, without intermediaries.
The real pony here is the underlying technology. It's called blockchain. So for the first time now in human history, people everywhere can trust each other and transact peer to peer. And trust is established not by some big institution, but by collaboration, by cryptography and by some clever code. And because trust is native to the technology, I call this the trust protocol.
Which is great, unless you like intermediaries. Like, say, central banks as a source of trust. Good point, Siri. Crypto has spent a few years in the regulatory wild, wild west, with volatile prices and major scandals. But lately, Billy Crypto's been dusting off his boots. Why? Well, the US has signaled a major policy shift, as US President Donald Trump declared.
Together we will make America the undisputed Bitcoin superpower and the crypto capital of the world. Thank you. Good luck. God bless America.
He also hinted at building crypto reserves for the U.S. as a hedge against foreign digital currencies. Indeed, with the SEC's approval of spot Bitcoin ETFs, for example, the floodgates reopened. Venture capital poured in. Large banks are now investing in blockchain infrastructure, stablecoins, and even tokenized treasuries.
So, we've just talked about Bitcoins. I think, Siri, that this is a good time to look at cryptocurrencies and stablecoins and exchanges. So what are we talking about when we say cryptocurrencies? First of all, there are digital tokens. Bitcoin, Ethereum, Solana, they all fall into this category. They are decentralized and their value is determined by the marketplace. Here's a fun fact. Bitcoin's maximum supply is capped at 21 million coins, a fundamental characteristic since its creation by Satoshi Nakamoto. Thus far, over 19 million bitcoins have been mined, leaving about 1.5 million remaining. So the metaphor with gold miners is not that far-fetched.
Very true, gold is very rare. Picture this, the concentration of gold in medium-grade ore is between 1 and 8 grams per ton of rock. Ok, now let's move on to stablecoins. They are cryptos pegged to traditional assets, usually the US dollar. A stablecoin is issued by regulated financial institutions and backed by fully reserved assets. The total stablecoin market is roughly $270 billion and is dominated by Tether and Circle, with roughly 85% market share. The market is expected to grow to $3.7 trillion by 2030, according to several studies. According to Tether's CEO, Paolo Arduino, in 2024, Tether was the fifth largest buyer of US treasuries. It currently holds $120 billion, ranking 18th globally if it were a sovereign entity. Unbelievable. Last but not least, exchanges. They are digital marketplaces like Binance, Bitpanda, Bullish, where you buy, sell, or swap digital assets. Think of them as the saloon bars where everyone trades stories and sometimes punches.
