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Obi – Coinfloor: Bitcoin vs GBP/ USD? BTC truly Gold 2.0? Bitcoin stock to flow ratio 2019

October 3, 2019


Bitcoin was designed to solve specific
problems it was trying to be a form of
money that would not succumb to capture
so it would not be centralized and it
couldn’t be controlled by some central
authority so every property in every
part of Bitcoin came out from that. So we
sometimes sort of scratch our heads as
to why the founder was anonymous well
simply put, Bitcoin wasn’t the first
attempt at a decentralized and
censorship resistant money but every
previous attempt was either shut down
and often and in some cases, the founders
were actually put into jail so with that
history in mind, it was sort of inevitable
table that any successful currency would
have to have an a founder that was
anonymous
Dear crypto community and blockchain
buddies across the globe welcome back to
season two of Cryptonites, the no BS
blockchain channel built with the
community and for the community and as
always we have timeless interviews to
teach you everything you need to know
about Bitcoin, cryptocurrency and the
financial markets so without further due
we have another living legend and I’d
like to give a big shout out to Niind
the leader of the London Pow Wow, it’s
thanks to you that I connected with this
gentleman
the CEO of Coinfloor Obi, it’s a
pleasure to have you brother. Yeah yeah
so Obi, you are definitely defined as one
of the legends here and in London in the
UK. You’ve been in the space for years
and years and I know you’ve been through
a lot of struggles. if it was possible
for me to blush I would blush. Thank you
very much for saying that it’s really
weird to hear yourself described in
those terms so I wouldn’t
describe myself that way but thank you
yeah I mean that’s what everyone has
been saying and I really would love to
start off by hearing the struggles you
had because I know it wasn’t an easy
path to start off so early and still be
here in the crypto space so if you
don’t mind sharing that with us.. Okay
well coinfloor started at probably the
worst possible time. When we started it
was late 2013 and we started as an OTC
company we would do over-the-counter
trades which is a sort of a manual trading
approach we finally launched our
electronic digital trading system in the
first quarter of 2014 and that was
probably the worst possible time to
launch Christopher’s ich lade because it
was basically little did we know it was
the beginning of a bright pronged bear
market so we launched into a bear market
and price of Bitcoin went lower and
lower and lower over the following
twelve or so months so it was a real
struggle but it actually really hardened
us I talked a lot about Bitcoin the
Bitcoin is the world’s first anti
-fragile money
and so the more it’s attacked the
stronger it gets and coinfloor became an
anti fresh shell crypto currency
exchange so we were launching this
really sort of terrible time where we
came stronger we actually did something
really crazy first startup focused on
being profitable so it became profitable
but even so it was a really tough time
and by 2015 the price of Bitcoin was now
sort of starting to head towards the
couple of hundred pounds and I remember
really clearly, myself and my co-founder
Mark at the time we were invited to to
the Royal Festival Hall to be part of
this exhibition where the the public met
people from the city it was called I
think it was called a work for us and
they had actuaries and traders and
brokers and so on and they also had
crypto currency exchange runners and
that was myself and Mark and we were
there sort of the lower of the market
and the person off the person came up to
us and talked to us and we were trying
to explain them why bitcoin was and
because he really was just Bitcoin at
the time was so fundamentally
transformative and they were the only
thing I’m saying isn’t Bitcoin dead
isn’t big no it’s not really the
opportunity was massive at this time I
feels like 2019 and that was a real low
in terms of perception but we still held
strong we knew there’s something really
powerful happening here so fast forward
two or three years later and as to be
predicted the markets started becoming
really bullish and it increased and it
grew and our our team and company grew
and it got to the point where we were
asked to talk to various regulators with
the Bank of England, the FCA and finally
I was asked to give evidence in front of
the Treasury select committee which is
sort of the UK equivalent of of Senate
or the Senate hearing and various MPs
wanting to understand Bitcoin and
cryptocurrencies in his effect on
society and
so we came this massive distance from
2014 all the way through to 2017 and now
after that as you probably know we went
to another bear market and we’re back
into that situation but we’re seeing now
the the first fruits of the the next
bull run to happen over the next one to
two years now that’s absolutely
fascinating and when he comes to the
emotional side of being in this market
or having investments obviously the
prolonged bear markets like you were
talking about a lot of people feel
overwhelmed the capitulates
and a lot of people start losing belief
you know it’s it’s a very up-and-down
market I just don’t really want to ask
you o be like how did you still believe
in Bitcoin despite the prolonged bear
markets what really kept you and made
you want to stick to this I mean when
you first start it’s this new technology
it sounds interesting
some people say they read the white
paper and you know they immediately
understood it but my background was that
of a technologist I studied computer
science and cognitive science at
University of College of London and I
was 15 years of CTO so I’m an engineer
and the first thing I wanted to do was
understand the technology and when I I
got a chance to look at the white paper
to understand it I realized that this is
a really powerful technology but even
then it took me a while to really figure
out the potential because before
understanding the technology had to
understand the problem was trying to
solve and it took me much longer to
really understand how powerful money was
and there’s solving money and providing
an alternative form of money so what
once you realize that the technology
allowed you to have the best form of
money that would the world has ever seen
and we also realized that money was one
of the most powerful inventions that
human beings have ever made then it
became inevitable that this was
something really really powerful and
like other disruptive technologies like
the car it was when it first started the
first cars used to break down all the
time only very wealthy people can have
them there was no infrastructure to
support them so you’d be very
reasonable and thinking if you were if
you had a really nice horse and a
horse-drawn carriage that cars were
really stupid hey there you know at the
time you know horses could go anywhere
and cause pretty much couldn’t do
anything but if you were an engineer and
you really understood that this was the
best form of transport in theory the
world has ever made you would know that
over time once the infrastructure in the
place wants petrol stations services and
licensing and all this sort of stuff and
roads were in place cars would have
never to be take over and bitcoin was
the same it was still a total at the
time and even today at 10 years old it’s
still a young child but it inevitably
will be the best for money the words
I’ve seen it’s really funny that you
mentioned that because some of the
people back in the days and there are
some really famous people who said that
this machine will never replace a nice
carriage and horses you know exactly
what you’re saying people didn’t see it
but luckily your IBM said that there
would be a world requirement for more
than I by no more than I believe 7 or 11
computers worldwide and I think IBM also
said that smart phones would never take
off either Microsoft or IBM but is full
of people who under predict the power of
this of the technologies they really do
and there’s one thing they say was
fascinating you said the best form of
money I love that in tech I need to
quote what you just said and as you know
you know in order to qualify as money we
usually have the three boxes so unit of
account store a value and a medium of
exchange do you feel like as of today
and obviously you know different
currencies do not necessarily check all
the boxes but do you feel like Bitcoin
checks those three boxes as the best
form of money so in a word yes it does
but you are correct different currencies
will optimize for different things but
one of the biggest sort of
misconceptions and battles is around
unit of account versus store of value
now there are many currencies that have
optimized for unit of accounts ie they
allow you to transfer value today as
quickly as possible between one person
and another
person but here’s the thing
that is very useful for making
transactions but ultimately there are
many many examples of currencies that do
that very well and other systems at the
other world so most fiat currencies can
allow you to transact in a day to day
basis but on top of that you have
services like venmo PayPal MasterCard
Visa American Express etc in fact you
now have tap to pay where you with one
tap you can buy something and even
further you might know Amazon go go into
a store you walk in you take the item 91
off the shelf and you walk out so that’s
zero taps to buy so given that in theory
if you created an alternative you can
never get as good the best you can do is
get as good as zero taps unless you have
some sort of minority put reports been
going on where it can predict what you
want before you want it so if you’re
trying to make a disruptive technology
you always want to go for the market if
hasn’t been dealt with now in terms of
store of value think about it what are
the store of values now you’re a
millennial and what does store values
have access to you’ve pretty much got
you’ve got stocks and equities and bonds
etc and then you’ve got property real
estate ie or gold maybe but gold is
actually you know it’s heavy its
physical you have to it takes a lot to
store its you have to use a lot of
resources story–it property if you if
you want to sell or transfer property
from one person to another you’re
talking about probably many months to
sell and a lot of costs and most of the
other items well we you know many people
believe we’re heading into recession and
so the only way a lot of those are
moving over the next few years
potentially could be could be down and
so when you see you don’t have many
options to store your value or monies
that are good at storing value Bitcoin
comes into the market and compared to
those it’s far already even in its sort
of child state already as good if not
far better than all of those and far
transmits far more fungible etc etc
that’s really fascinating so if I can
just recap what you said in terms of a
medium exchange since we have PayPal and
we have credit cards and would how would
you place Bitcoin versus British pound
for example because obviously you know
as you know bitcoin is a borderless
peer-to-peer electronic cash but as you
said not everyone accepts it so would
you see Bitcoin as inferior superior for
example to Britain the British Pound or
I think storing as the clue is in the
name store of value is probably more
valuable because it’s storing value so I
would say a currency that is optimized
for storing value is more valuable than
the currency as optimized for
transferring by the ie giving away value
there is a roeckl Gresham’s law which
talks about if you have two money’s so
you have a good money and a bad money ie
a money that holds its value and the
money that doesn’t hold its value or is
debased in some way then the bad money
pushes the good money out of the economy
and that sort of makes common sense so
if I had one money that I knew would go
down in value in a year’s time and
another money that I knew would maintain
its value or go up in value which one
would you spend first you’re gonna spend
the money that’s gonna go down in value
so even if the money that goes up in
value over time was incredibly good at
trading and and and being a good medium
of exchange doesn’t matter because
you’ll have to get rid of every last
penny of the of the bad money first
before you use it
now given that the bad money is
inflationary and it has an infinite
supply it’s gonna take a while to get
rid of an infinite amounts potentially
infinite amount of money before you
spend that so you just need to be good
enough to meet the demands of if someone
for whatever reason really had to sell
and in that sense bitcoins seven to
twelve transactions per second are far
more than that requirements that’s a
really good point in terms of the store
of value so you you just touch upon
inflationary and obviously we have
deflationary I’m sure you’ve heard this
many of times from you know maybe your
grandpa
or your uncles and aunts and they’re
always like everything is so expensive
these days and a lot of people tend to
see like for example typical fiat
currency I remember going and when I
went to university and we used to
complain as students it would be free
University we would be paid 3,000 to
term and have all our cost paid so that
was and I we would complain about that
so it’s moved on a lot since then so I
know that’s a really good point was even
in London it’s difficult to live here
without roommate and stuff like that but
yeah so they use I remember my
grandmother always used to tell me that
he said these days everything is so
expensive blah blah and I didn’t really
understand what she was saying I was
like what is she talking about like this
seems normal to me until I used to see
charts where you would see the value of
the US dollar due to inflation losing
90% of its value and more in the past
century or since 1920
do you like the fact that bitcoin is
deflationary is that one of the kind of
ideas that makes you believe in Bitcoin
as a store of value are there any other
components that that you like in terms
of the store of value component Bitcoin
I mean that is one of the key aspects of
it being the ultimate store of value
money I think with any disruptive
technology you want to try and be the
best or have the potentially the best at
something
there’s no point Trek coming along and
putting in a lot of effort should be as
good as the existing systems disruptive
technologies need to be several times
better than what’s in the incumbents
absolutely so if you’ve got one-click
buying or 0 click playing with things
like Amazon go it’s very hard to see how
you’re going to be 10 times better than
that but in terms of store of value and
with the limited fixed supply or Bitcoin
and it can only go one way down in terms
of the supply of Bitcoin if people lose
Bitcoin you know that it’s fundamentally
and mathematically better than every
other store of value out there let’s
take gold there’s sort of the previous
king or still current king of store it’s
it’s has a it’s a known as
stop the flow ratio the amount of new
flow of gold that enters the economy is
I believe 62 so there’s 160 to 1 over 60
trees were of gold enter the economy
every year now this is a rough number
and if we found all gold on the planet
Earth it’s still there’s still the
potential that we could find gold on
other planets but with Bitcoin no matter
what you do there’s never gonna be more
than 21 million unless you got everybody
in the world who owns Bitcoin to agree
to inflate the Bitcoin supply so that
you have to get them to agree to do
something that’s to their detriment
which is highly unlikely to happen
people like unlikely to do things that
are not in their interest that’s a
really good point in talking about the
21st million Bitcoin that is actually
mined a lot of people are wondering like
what is gonna be the incentive for
miners to keep mining because that’s it
you know they’ll only be able to mine
and get rewarded through transaction
fees so they say that most of the miners
will give up like obviously it’s we’re –
we’ll probably we’re not going to be a
part of this world by then 21:40 teach
me how to I would love to be alive as
well but in that in terms of that future
does that do you have any concerns about
that about the whole rewarding ecosystem
for miners we mint so the idea is that
we have a fee economy so when you send a
transaction between one person or
another or one institution or another
you there’s a limited amount of space on
the blockchain and that may increase
over time but it will there will always
be limited to some extent and so there
will be competition for for your
transactions to be memorialized on this
sort of on this ledger that is basically
almost impossible to change as time goes
by and so because it’s competition and
the there’s a fee that you can attach to
a transaction and that fee will leave
we’ll be the thing that were replaces
the block reward overtime so at the
moment the block reward is the love is
by far the largest part of the rewards
that miners gets for mining but the hope
is in 140 years it won’t be that being
the case no one knows for sure that is
that that is probably one of the most
experimental parts of Bitcoin and
generations in future we’ll have to
decide to see what happens and hopefully
that does occur but that’s 140 years
from now I’d refer you and myself as
well but it’s really good point for me
the the way I kind of see it is that you
know mining is gonna be so cheap
technology will have advanced so rapidly
in the next hundred years that you know
if you you just want to transact Bitcoin
just through your phone you’ll be able
to mine through phones because the
technology will that move so much that
just by keeping your phone on there
could be some sort of support throughout
people to decide that I want to be a
part of this ecosystem just like running
a node without having to mind with
substation technology that’s one
possibility and if we were gonna
brainstorm I I mean one idea I like is
the either that actually if still be
this competition people so the resources
to mine will increase I think the if you
go for if you sort of think for that far
in the future
the vast majority if not all mining will
be free renewable sources as well so the
whole energy usage question war will go
away I’m excited that we have a
possibility for a financial system where
pretty much in theory everybody can be
part of it and that’s what’s really the
radical decentralization of the of a
financial institution I I think the
existing financial services space will
continue to exist because centralized
governance will continue to exist and
and such as governance wants to have an
element of control and needs to control
its money supply but we’re now going to
have an option and that’s really what
Bitcoin and other cryptocurrencies give
they give you option allottee and Nats
hasn’t existed for a very long time
ability to send money electronically
anywhere in the world but outside of
outside of central control absolutely so
you were talking a lot about the finite
supply and the 21 million bitcoins
there’s one topic that could be
overhyped but I’m not sure I’d love to
get your angle it’s talking about the
Bitcoin having for next year and since
it’s related to economics and the whole
supply side of a Bitcoin if you don’t
mind telling us so for those who are new
to the Bitcoin having idea it’s we used
to have 25 bitcoins as a reward for the
miners it’ll be cut in half next year to
12.5 bitcoins is that is that correct
so when Bitcoin first started so when it
was first made bacon was designed to
solve a specific problem it was trying
to be a former money that was not would
not succumb to capture so it would not
be centralized and it couldn’t be
controlled by some central authority so
every property and everything that
happened and every part of Bitcoin came
out from that so we sometimes sort of
scratch our heads as to why the founder
was anonymous well
simply put bacon wasn’t the first
attempt at a decentralized and
censorship resistant money but every
previous attempt was either shut down
and often and in some cases the founders
were actually put into jail so with that
history in mind it was sort of a
navigable that any successful currency
would have to have in a found that was
anonymous similarly the fact that if it
all previous currencies were that
attempted to do this were centralized
they were such down because one place to
shut turn off a light turn off a switch
so it had to be decentralized so
similarly when it comes to when it comes
to monetary policy we had to work out
how to do that in a way where there
wouldn’t be any form of regulatory
capture or there wouldn’t any be any
form of moral hazard as well because
there was there’s a lot of risk if you
have the control of money supply so it
had to be decided right at the beginning
and so the decision was made by this
group or person male/female group to
release a certain amount of Bitcoin over
time so with each block originally 50
Bitcoin were released and for the first
four years roughly first four years
after that it reduced to 25 Bitcoin for
the next four years
and then we’re now in the third face so
in years ten or eleven or so to twelve
and at the moment is 12.5 Bitcoin may
roughly May of next year it’s going to
half – you’re gonna have me in the mass
but 6.25 Bitcoin so it’s not that late I
still remember my basic Mouse 6.25
Bitcoin per block now in parallel we now
have over ten years of data on Bitcoin
and many people have conjectured as to
how bitcoins price is determined and
there’s been lots of theories but one
really interesting theory which I have a
lot of stock with is that Bitcoin
basically operates like a digital gold a
digital store of value and so gold and
other precious metals are valued based
on what’s called the stock to flow ratio
and as if you go online you can see a
guy called Plan B you know you know plan
B at a hundred trillion USD incredible
really really interesting writer and
also a Nick Carter as well shouts that’s
the Nick he also writes a lot about this
yeah planning I think there’s talk –
flow ratio was translated in like 78
languages so it’s but for people who
don’t know it’s incredibly interesting
but it’s basically using the same model
of valuation that precious metals use so
stock basically talks about the total
amounts of stock of that precious metal
Bitcoin in this case that currently
exists and the flow is that is the
amount of over new versions of that or
or digital or in the case of Bitcoin
that come into the market every year
and the ratio is is the division of one
by the other so currently silver I
believe has a stop to flow ratio of
about 22 so a 1 over 2200 enters the
economy every years mind etc gold is a
stock to flow ratio of 60 to roughly at
the moment Bitcoin has a stock to flow
ratio of 25 with the 12.5 Bitcoin being
released every 10 minutes it works out
if you divide the total amount of
Bitcoin by the new amount it being every
year roughly 25 now with the having
that’s going to double to 50 okay now
but what’s really interesting is if you
take the stock to flow ratio and map
the price of Bitcoin to that’s doctor
flow ratio over the loss and now we have
10 years of data the correlation is
striking it’s it’s insane so what this
tells you is that although there are
many other things that affect the price
when you think about in a long term the
stock to flow ratio seems to have an
incredible correlation now really this
theory has only come out in the last six
to eight months or so so we really need
to see how it operates for another few
years to be sure but it is really
striking and if that’s the case next
year with the stock to flow ratio dumb
doubling we’d expect the market cap to
move towards close to that of gold now
Silver’s market cap is currently about
300 billion Gold’s is a trillion
trillion yeah so that’s why many people
believe that the next hobbing the
correct price will become will tend
towards the well over 1 trillion mark
which could lead to a price of bitcoin
of well over 60 fell if you divided
divided by then I’m a Bitcoin well over
60,000 US dollars a Bitcoin now there’ll
be a lot of volatility around that but
there’s a lot of excitement for that
that is definitely fascinating and I
love the way you
but talking about investments if we want
to follow you and hear more about what
you have to say about Bitcoin learn more
about coinfloor where is the best
channel to actually catch you it’s it’s
Twitter I I tweet rarely but but it
tends to be around these things like
Bitcoin has a form of digital real
estate and so on so it’s Twitter for
coinfloor which is at coin floor and
also my own personal Twitter which is
Obi was an early twitter users
of a really cool twitter handle awesome
thank you so much for the wealth of
information definitely look forward to
having you again my friend and for those
watching out there you had all the
information you needed related to Bitcoin
the economics the having the stock to
flow ratio the finite supply and more
and more for this timeless interview
don’t forget to like comment do you have
any questions for Obi here at coinfloor
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