Bitcoinlegenden Tuur Demeester
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Could you tell us who you are and how you became a Bitcoin legend?
I’m an investor and market analyst. I think there are many very smart investors in this space, possibly the fact that I was early speaks to people’s imagination. I started writing about Bitcoin in 2011 for the subscribers of my Dutch newsletter, added it to our recommended currency basket at $5. So many of my readers did very well. In terms of approach, I like to analyze problems from the ground up by investigating philosophical assumptions, I try to find comparisons and contrasts in history books, and I’ve worked to build a network of highly technical people with a proven track record of performance and integrity.
How would you describe Bitcoin in one sentence?
Digital gold which uses proof-of-work: a mechanism to convert electricity into financial reliability.
Do you see Bitcoin as an asset, money or something else?
I see Bitcoin primarily as a store of value, and I see it disrupting the $100 trillion market for liquid reserve assets (cash, gold, short term government bonds, M2 money supply). But I expect that just like gold, Bitcoin will go through the four stages of becoming money: “firstly, as a commodity valuable for ornamental purposes; secondly, as stored wealth; thirdly, as a medium of exchange; and, lastly, as a measure of value.”
What is your outlook on the Bitcoin price in 2018?
Bullish as I am for Bitcoin’s long term, it appears most investors approach cryptocurrencies as an asset class, rather than Bitcoin individually. With that in mind, I view the current environment as frothy, and several factors make it not unlikely that we could see even lower prices later this year.
What are your reasons for investing in Bitcoin long term?
The lack of transparency in the management of traditional currencies and the fact that they can be printed ad libitum bothers me. I worry about inflation. Shortly after the second world war, many European countries faced severe devaluations. And then in the seventies a wave of inflations plagued the West. However because inflation has been so low for such a long time now, most people don’t see it as a threat. And yet debt levels are the highest they’ve been in decades, and interest rates are at historic lows. So I fear that in the next decade or so, we’ll see inflation pick up significantly, and that we’ll see the bond market (which has been in a bull market for +30 years) break down. With those expectations, I want to own assets with low counterparty risk that are highly liquid. These are the assets you need to own if you want purchasing power when nobody else has: in the Weimar of the 1920s, during the American bank bankruptcies of the 1930s, in Western Europe in the 1940s, in Argentina in 2001, and so on.
Bitcoin has a finite supply, a predictable monetary policy, is censorship resistant, is highly auditable, can be engineered to be privacy friendly, is politically neutral, and is very actively developed by engineers around the world. This makes me want to own it, as it holds the promise of taking a bite out of the $100 trillion asset class of liquid reserve assets in the years to come.
We have received questions about Initial Coin Offerings (ICOs). What is your outlook on ICOs in 2018?
The valuation of many of the ICOs that were launched in 2017 (the overwhelming majority having shipped no product whatsoever) could suffer greatly in 2018. Reasons for this: increased scrutiny and interventions from regulators,oversupply in low quality products,exposure of fraud and lack of discipline, and a string of class action lawsuits. The market lacks so much in fundamentals that to me it seems like a forest dry as bone, where panic can spread like wildfire. All this said, the current environment is driven by novelty and FOMO, so if regulators don’t step in, if the lawsuit fallout stays limited, and no major exchanges go bust, the ICO mania could further escalate in 2018.
Some exchanges use Tether (USDT) instead of real USD. What is your take on Tether (USDT)?
In my opinion the rally of the last 6 months was to a significant extent facilitated by theTether mechanism, which allows investors to purchase a dollar backed token ($USDT) that can quickly be transferred to some of the largest Bitcoin and altcoin exchanges. Despite the allegations to the contrary I’m more confident than many that the Tether tokens are actually backed by USD in a real bank, but I’m not sure whether regulators will allow for a privately issued digital dollar substitute to freely circulate in these markets. In case of a crackdown on Tether I would expect volatility to spike, inter-exchange spreads to increase, and overall price levels to drop.
What new interesting developments will we see for Bitcoin?
Lightning Network. In a nutshell, it allows for billions of low cost transactions per second across Bitcoin-like blockchains. Because all transactions not stored on a common ledger yet still cryptographically protected, it allows for cheap, fast, and pretty secure payments. In my opinion this will put the myth to sleep that Bitcoin is not suitable for e-commerce or micropayments.
Smart contracts: It’s interesting that one of the great myths about Bitcoin is that “it can’t do smart contracts”. The reality is that Satoshi purposefully built in smart contract capabilities into Bitcoin, as was eloquently explained by Mike Hearn in 2012. The scripting system in Bitcoin is limited in scope and has been rather under-used so far, which is probably why it isn’t more well known. That said, most core developers have had the view that publishing and executing actual smart contracts on the main Bitcoin blockchain (like Ethereum does) has little long term merit because blockchain space will eventually become too expensive for that purpose. Better to find ways to create the actual contracts off-chain and only use the blockchain to ensure the trustless nature of the contract.
Which exchange/s do you use and how do you store your Bitcoin?
I like Kraken as an exchange, that’s why I became an investor in them as well.
I never share specifics about how I store my bitcoins, but in general I’d recommend trust minimized solutions with backup redundancy. Keep in mind that by far the main source of Bitcoin losses is not theft but forgetting one’s password or a corrupt storage device.
Can you recommend our readers any books, twitter profiles, podcasts or sites about Bitcoin? Can you rank your top three crypto sites?
I’m curious about Saifedean’s book: “The Bitcoin Standard” though I haven’t read it yet. I think cryptoinfluencers.io is an interesting list of people, though it’s not Bitcoin only. As far as podcasts, I’d recommend Noded, WorldCryptoNet, Off Chain with Jimmy Song and Trace Mayer’s Bitcoin Knowledge Podcast.
Where can our readers find your work and thoughts on crypto?
On Twitter and Medium.
Finally, did you know that “Tuur” means luck in Swedish?
I did not know that! I lived a year in Norway, near Trondheim, so I am familiar with “aa gaa paa tur” though…
Tuur, we are very grateful that you took time to answer our questions!
Tack för mig!