By Rishon Blumberg, 10x Management Co-Founder
Bitcoin. Just saying the word can make people tired of hearing about it or stir wild fantasies in a novice investor.
Blockchain. Just saying the word can confuse people.
How are these two words related? Blockchain is a revolutionary technology that enables bitcoin to exist. Blockchain facilitates the creation of distributed applications by maintaining a secure shared database. It’s an entirely new way of thinking about shared content, security, currency, trust and digital information.
I spoke with blockchain and bitcoin expert Idan Gelbourt to get his thoughts on cryptocurrency and whether or not bitcoin is here to stay. Here’s what he had to say.
“Whenever there is a new technology with a lot of speculation around it, it takes a while to figure out how it can be best used, and in the process, the excitement and hype might form a bubble. But just because speculation and a bubble exist does not necessarily mean that a technology is useless.”
Rishon: Idan, thank you for taking the time to speak with me. How did you come to be an expert on blockchain and bitcoin?
Idan: Ten years ago, blockchain for all intents and purposes didn’t exist. Fast forward to today, and blockchain is becoming a household name, but people still don’t understand how it works.
“I was fortunate enough to be exposed early on to cyber-technologies in the Israeli army, and I always had a keen interest in finance and algorithmic trading in New York City, so blockchain was a natural, lucky fit for me.”
Rishon — Tell me more about how your experiences have informed your blockchain expertise.
Idan: I worked on security-related projects in the Israeli army. Together with my interest and experience in cryptography, peer-to-peer communication, and finance, I was always curious about new developments in these fields. I became interested in bitcoin and started learning about it, reading forums and articles and trying to get hands-on experience with relevant projects. Plus, your code likely has significant financial implications, which adds to the complexity of blockchain and makes finding the right talent harder.
“Building and developing blockchain technology requires you to be well-versed in various fields because of the multiple building blocks required to understand it.”
Rishon — What is the biggest misconception around bitcoin?
Idan: Bitcoin is going through some wild valuations right now, and there’s a lot of speculation around the cryptocurrency. I think the headlines surrounding bitcoin should teach us about the disruptive potential of this technology. At the same time, going forward, we will have to find scenarios where distributed applications actually make sense apart from bitcoin.
“Many people don’t realize that there are dozens of other cryptocurrencies beyond bitcoin — Ethereum and Litecoin being two examples with new ones added weekly. “
Rishon — Do you see any valid comparisons between bitcoin and the Dotcom Bubble of the early 2000s?
Idan: Let’s look at it this way: bitcoin is to blockchain as a dotcom company is to the internet. The rapid rise in valuation of bitcoin certainly makes one think of it as a bubble. But long term, if there is real usage, blockchain technology would survive past bitcoin.
“Take search engines in the early 2000s for instance, we had AltaVista and WebCrawler and Lycos and all sorts of young companies. Just because those companies came and went does not mean that the search engine went away.”
Bitcoin might crash under the weight of speculation, be met with unfriendly regulatory environments and might even be banned by countries, and we would see a slowdown. But it’s still a young, attractive technology that gets people excited about, and sparks their imagination with new opportunities, and while it’s not a cure for everything, eventually companies will find out when and why it makes sense to use it.
Rishon — Aside from bitcoin, what else is blockchain good for?
Idan: I believe we will see more distributed solutions in the fields of finance, insurance and even governmental functions. Another place I would look at for growth of blockchain is outside of Western society. In Western society, we enjoy a relatively high level of stability and confidence in our infrastructures, something many citizens of other parts of the world do not enjoy that can be changed with this technology.
I’d like to mention the majority of centralized apps we currently use work fine and do not necessarily need to be superseded by blockchain. Take Dropbox for example, if the owners of Dropbox shut down the system tomorrow, then everyone will be locked out and all of the content that you placed on Dropbox’s servers would be lost to you. But on the other hand, if you lose your password to Dropbox, there’s a simple password recovery process you can use.
Blockchain technologies enable building more robust, resilient systems that are less fragile due to being distributed.
“Following the news of recent hacks, one might conclude that blockchain is less secure than traditional, centralized applications. But most hacks happen in the exchanges of information — the connecting link between the network and the external world — and not in the network itself.”
Rishon — What do you think the major challenges for bitcoin will be going forward?
Idan: Putting aside regulatory, technological and security concerns, there are major user interface challenges to make bitcoin practical and mainstream. Right now, if you want to use a bitcoin wallet — which allows you to store, receive and send coins — you’d have to understand the unique technical language surrounding it.
“I’d compare bitcoin wallets to owning a car: you know you need gasoline or diesel, but most people don’t know why they use one type of gas to another. That’s why you have a mechanic. With a bitcoin wallet right now, it’s kind of like you have to be a mechanic in order to operate it.”
Rishon — How are you trying to solve current problems with bitcoin wallets?
Idan: I’m working with a 10x customer on a new bitcoin wallet that is much more user-friendly and allows me to bring together my passion for cryptography, security and building easy-to-use, beautiful apps. It’s a project I’m very excited about. This wallet will be much easier for people to use as they make their first steps in the world of cryptocurrencies. We pay special attention to balance security features and ease of use. Form meets function.
Rishon — Can you speak more to the challenges in finding experts in this new technology?
Idan: The handful of true blockchain experts in the world right now are building their own startups, their own technology, or writing books on the subject. But then let’s say you have another ten thousand people that are not quite of the same expertise level, but understand blockchain technology well and might actively be working with cryptocurrency. It’s still difficult to find those people, but they exist, and if you know the right places to find them (like the agency that reps me, 10x Management), you might be able to bring one onboard.
What’s so interesting to me about blockchain is that New York has historically been second to Silicon Valley, and maybe Israel, as far as technology goes. But in regard to cryptocurrency and blockchain-related technologies, being in New York is actually a huge advantage as it’s at the heart of the finance world.
If you like this article, you might enjoy reading I Asked 5 Entrepreneurs: How Do You Find Tech Talent?