Few know the pulse of the bitcoin industry as well as Simon Dixon. Founder of a bitcoin-based crowdfunding platform named Bank to the Future and an investor in more than a dozen bitcoin related start-ups, he has become part of the center (if there is one) of this decentralized technology and community. We recently spoke with him about the current state and future of this digital currency.
TheStreet: Why are you interested in bitcoin and blockchain technology?
Dixon: Bitcoin invented the first form of money that allows anybody with an Internet connection to transfer any amount of value from A to B with virtually no cost and friction. It allows anybody to send money as simply as sending an email in fractions of pennies or in the millions. The blockchain is the largest supercomputer in the world made up of hundreds and thousands of computers that all plug together and audit every transaction sent through the system. It means there is no reliance on a bank or authority to send secure payments. The implications are that we now have the first secure form of programmable money, meaning we can do things with money that was never possible before and more people can participate unrestricted.
What is your view on the regulatory landscape of these technologies?
Bitcoin is a network that is regulated by maths and code that cannot be manipulated by any individual as every transaction is audited by hundreds of computers all around the world. Bitcoin regulates itself better than any regulator could with no central point of failure as with a traditional financial institutions.
However, financial institutions that operate bitcoin financial services businesses need to be subject to the same rules and regulations that traditional financial institutions are subject to with a few exceptions. All scandals and problems have occurred with financial institutions rather than Bitcoin itself. As Bitcoin is fully transparent, and every transaction can be seen by all it is possible to mathematically prove compliance with no need for a regulator in many cases and with more security than traditional payments.
For example, anybody can look up proof that a financial institution is not touching client money with no risk to the client. This eliminates the need to regulate that part of the business, but when they deal with traditional money, the same rules apply. Bitcoin solves the problem in some circumstances of "Who regulates the regulator?" as it takes the human element out of the system and replaces it with a transparent system that cannot be manipulated.
What are your thoughts on bitcoin as an investment for private investors?
At BnkToTheFuture.com over $35 million has been invested in the sector and because some of our investment products pay investors dividends in bitcoin, it is an example of what can be achieved when you make money programmable. Rather than waiting a year for dividends, we are able to pay investors real-time dividends every day through our fund Bitcoin Capital. This is only possible because we can automate the process of paying dividends, something that is not possible with traditional money. This is an example of how bitcoin produces many interesting investment opportunities. If programmable money is as useful to financial services in the future as I believe it will be, then bitcoin is very undervalued and has the potential to be worth significantly more as the technology becomes more useful in financial services.
What are your thoughts on bitcoin as an investment for institutional investors?
I believe it is an asset class that every institutional investor will want in their portfolio if they have a high-risk, high-return appetite. This year exchanges have been built that satisfy that volume and regulatory requirements to include institutional investors.
What are your thoughts on investing in bitcoin to diversify your portfolio?
Bitcoin has a lot of growth potential for those with a high risk appetite.
Are you invested/would you consider investing in bitcoin?
I have invested in over 15 companies in the sector and hold a portfolio of both bitcoin and alternative coins. It has been the highest performing asset class I own. I believe investors with an appetite for risk should have an amount they are comfortable losing invested in this high-growth sector. Over a billion in venture capital investment have been made in companies in this sector already, and this sector has created a vast amount of wealth for many investors. It will take several years to fully mature, in my opinion.
What is your opinion on the current price of bitcoin?
Bitcoin is priced like a stock. It is like an IPO for the usefulness of programmable money. Bitcoin is where the Internet was in 1995 -- hard to understand and use. Anybody that invests now is still an early adopter even though hundreds and thousands in transaction occur every day. I believe we are only just starting to see technology applications being built using bitcoin that have very large implications in financial services. All banks are investigating how they can use the technology, and the more it is used, the higher the price will go. I believe there is lot further to climb. Short term, the price is anybody's guess. I am not a short-term speculator. I am more of a long-term value investor.
What are you negative about regarding this industry?
Regulations slow down innovation, and regulators will get it wrong as the pace of innovation is far greater than any regulator can regulate. They have a very challenging job catching up with this one, but at least there are tasks that displace the need for a regulator.
What are you positive about regarding this industry?
Regulations produce a green light for institutional investors and traditional financial institutions. The more participants, the better it is for adoption. Unfortunately, it hinders the start-up business and decreases competition.
Would you like to add anything?
We are just starting to see the opportunity for financial inclusion that Bitcoin brings on a scale we have never seen before. The opportunity far outweighs any of the negatives that are often discussed when reporting on bitcoin. I believe it will be one of the most significant applications of the Internet we will see in financial services.