Digital Currencies for a Digital World: Junior William Leach Shares His Knowledge

Zephyrus: Could you start off by briefly describe in your own words what a cryptocurrency is?

William Leach: A Cryptocurrency is an open-source commerce system utilizing digital cryptography to create a fully-digital, fully decentralized currency.


Z: How long have you been interested in cryptocurrencies?

WL: I have been interested in cryptocurrencies since late 2013.

Z: What first got you into them?

WL: What first caught my interest was finding out about Bitcoin’s decentralized nature. The innovation wasn’t that bitcoin is fully digital, currency has been mostly digital for a long time now. The innovation is that it’s the first ever fully-decentralized currency, meaning no government or corporation controls Bitcoin. Decentralized systems have completely transformed our society. Some examples are Uber which decentralized transportation, Airbnb which decentralized housing, and BitTorrent which decentralized file sharing. I would quickly come to the realization that the blockchain technology is the single most important invention since the creation of the internet.


Z: Are you invested in any? if so how many?

WL: Currently, I am invested in two cryptocurrencies.


Z: Are you trading as the market for cryptos goes up and down or are you holding onto them?

WL: I’m holding onto them for at least until I go off to college, but I’d like to hold onto them longer if possible.


Z: Are you willing to disclose the net worth of all of your coins?

WL: I am not.


Z: Do you invest mostly in Bitcoin or other alt-coins?

WL: I originally invested into bitcoin, and I have since converted all of my bitcoin into the two cryptocurrencies “Ethereum” and “IOTA” due to their superior tech, additional niche uses, and similar market caps.


Z: What’s your favorite coin at this time?

WL: Either Ethereum or IOTA. Ethereum has all same the advantages over fiat currency that Bitcoin has, plus a more efficient mining process (proof of stake instead of proof of work) which significantly reduces transaction fees and power usage from miners (helping the environment). Ethereum’s main innovation is that it has “programmability”. I’m confident the most important uses that will come out of its programmability haven’t even been thought of yet, similarly to how we had no idea of what modern internet usage would look like when it was first created.

IOTA takes a completely different approach. Instead of using the blockchain, it uses what’s called the “Tangle” system. People approve two transactions before sending one, completely eliminating transaction fees (there’s no need for miners), while still maintaining complete decentralization (Ripple, for example, has no transaction fees but is not decentralized). The more people on the bitcoin network, the higher the transaction fees become. The more people on Tangle network, the faster the transactions occur (while still having free transactions). IOTA’s “white papers” (the open-source code that makes up the system) are being written at MIT right now, and the currency recently caught the interest of Microsoft. IOTA is looking to be the real deal.


Z: Did you buy into these cryptos or mine?

WL: Both.


Z: Which coins are you mining? What do you use to mine? ASICs or GPUs?

WL: In the past, I mined bitcoin with an ASIC (“application specific integrated circuit”, or hardware built specifically to mine bitcoin), but more recently I built a computer with a high-VRAM graphics card that I’m in the process of setting up to mine Ethereum.


Z: How do you see cryptos affecting the global market?

WL: International trade will be cheaper, faster, and more accessible than ever making the global GDP increase. The blockchain technology also has many applications in supply chain management, cloud computing, the healthcare industry, decentralized data storage, and “IPFS” (a new internet protocol, that stands for InterPlanetary File System) that could very well make the existing Hypertext Transfer Protocol that the internet runs on today, obsolete. Cryptocurrencies bring forth major governmental and private sector innovations that will change the world for the better.


Z: Do you see them as the future of commerce, overtaking other currencies backed by nations?

WL: If the choice were between decentralized Cryptocurrency and fiat paper currencies, I’d say yriad decentralized cryptocurrencies are the future no doubt, but his question is much more complicated. I don’t think it’ll be too long until we see government-backed cryptocurrencies (Russia is thinking about doing this right now), and their long-term viability will be determined by a mf factors on how they’re implemented. Are these government-backed cryptocurrencies going to compete with the existing ones, or are governments going to simply ban competition with coercion? With the US government already subsidizing the cost of minting their fiat currency, would they do this with their cryptocurrency too? How will the tech of these cryptocurrencies compare to existing ones in the private sector? What will their monetary policy look like? Despite the resources being available, I’d be extremely surprised to see governments implement cryptocurrency in a way that can compete with the already existing ones (Even with a complete subsidization of transaction fees). I think we’ll see decentralized cryptocurrencies beat out their centralized counterparts for the future of commerce.


Z: At this moment in time, are cryptocurrencies more of something with an arbitrary value that only comes from having someone who is willing to pay more for them then you or do they actually hold real tangible worth in your eyes? Especially considering the very few businesses at this time accept cryptocurrencies as payment.

WL: It’s pretty easy to see that they have value, this has been shown time again through price discovery. Its low trade volume makes me want to say it’s not a full-fledged currency, but more of a digital asset at this point. Metcalfe’s law states that the usefulness of the telecommunications network equals the square of the number of users, but I think you’ll also find this applies to currency as well. Snapchat with one user is useless but suddenly becomes useful once it reaches critical mass and everyone around you has an account. When computer ownership was low, email was fairly useless. However, once computers began phasing into middle-class homes, and the network of email users expanded, email made communication via the US postal industry and long-distance phone call-fees obsolete. For cryptocurrencies to be a“currency”, its purchasing power has to increase significantly from where it is today. I think the phasing of cryptocurrencies into our everyday life will happen ever quicker though since they offer significant niche uses catching the interests of early adopters.


Z: How much do the fluctuations in the price of cryptocurrencies affect their usability in the market? When do you see these slowing down and the volatility lowering?

WL: They highly affect their usability, prompting people to convert into fiat currency to evade Price fluctuation. Today this can be entirely circumvented without even having to exit the realm of cryptocurrencies thanks to a cryptocurrency called “Tether”. Tether’s value is pegged to the USD, 1 tether is worth 1 US dollar. For every tether in circulation, there is a corresponding US Dollar held in reserve. Any of the top 20 cryptocurrencies can easily be converted into the major fiat currencies (USD, EUR, GBP), for a 0%-3.5% fee depending on which online/peer-to-peer exchange you choose to go through. In the long term though, we’ll see further price stabilization (price fluctuation has been on a downward trend), and conversion to fiat/tether won’t be as necessary.


Z: Why would someone choose to use a cryptocurrency instead of a traditional currency?

WL: If I wanted to send $1,000 to a family in across seas, I’d have to go through a 3rd party like Western Union, it’d take 1-3 days, they’d charge me a ~10% fee, and I’d have to put trust in Western Union to actually execute the transaction. With Bitcoin/Ethereum/IOTA, I could send that same $1,000 to the family almost instantly, without trusting a third party, for a <1%, <0.1%, and 0% fee respectively (calculated at the time of this interview, February 5th), and no one can stop the transaction from happening.

Another benefit that is the because cryptocurrencies are decentralized, there is no central authority to stop you from expressing yourself with it . If I wanted to donate money to a political entity like WikiLeaks for example (please disregard what you think about WikiLeaks for this example), VISA, Wells Fargo, Western Union, and PayPal won’t let me. With cryptocurrency, I can send money to whoever I want and nobody can stop the transaction. Allowing people to express themselves is an extremely important freedom.

Another benefit is that cryptocurrencies provide a financial safeguard against the Keynesian economic practices carried out by today’s governments. Right now the US government is allowed to print as much money as it wants, and they don’t even release this information publicly Cryptocurrencies still use inflation, but they use it very conservatively, only as a means to get the currency out to a large network of people, not as a means to alter people’s purchasing decisions. Currency is simply a technology used as an abstraction of value, and inflation erodes that value hurting everyone, ESPECIALLY the poor since they are the least capable to safeguard their money into assets (stocks, gold, cryptocurrencies, etc). Keynesian economists acknowledge that inflation robs people’s money of its value, but defend the practice stating that it helps to alleviate the peaks and troughs of the business cycle. Even if the latter was true, Keynesian economic models still wouldn’t be the way to go, but with a little research on the Austrian Economics School of Thought, it’s not hard to see how Keynesian models are undesirable on both the micro and macro scale. Cryptocurrencies will be useful in countries where their financial system works fairly well, but will revolutionary in the countries where they don’t at all, just look at Venezuela right now. You

Another benefit is that cryptocurrencies have no borders, so there are zero currency exchange fees.

Another benefit is that cryptocurrencies can be broken up into smaller increments than their fiat counterparts because they are fully digital. The smallest increment of a Bitcoin is called a “Satoshi” (named after the creator of Bitcoin Satoshi Nakamoto) and is a 100,000,000th of a Bitcoin. This feature is extremely useful for investment banking.


Z: Are you worried at all how the blockchain and cryptocurrencies make it easier for criminals to exchange funds?

WL: Absolutely! The Cryptocurrency “Monero” was created in 2014 by a person or people under the pseudonym “ Nicolas van Saberhagen”, which uses encryption to make the ledger completely private. Cryptocurrency public ledgers provide vital information for tracking criminal activity on the dark web, and the creator(s) of Monero completely took that safeguard away. Whenever a transaction is made with a regular cryptocurrency, both party’s address’ (a 25-34 character address) are recorded in the public ledger, accessible to everyone. Businesses can check to see if your bitcoin address has any connections to known dark-web address’. If confirmed positive, they can then report your bitcoin address along with your personal information (IP address, account info, etc) to your government. With Monero, the dark-web information is encrypted and tracking criminals becomes impossible.


Z: Do increasing regulations on cryptocurrencies worry you at all?

WL: In the US I’m not worried. In countries where they have arbitrarily declared a ban, you’ll find that they can’t actually enforce that ban. Where the rule of law is weak enough that a centralized power can simply ban a form of money, their ability to actually enforce that is going to be very weak too. Their ability to actually affect change on the ground is mediated by layers and layers of bureaucracy, which are more and more corrupt. The bigger the crisis, the easier they are to corrupt. People today in Venezuela are breaking the law using cryptocurrency instead of their government’s hyper-inflated fiat currency. When the choice is between feeding your family and not feeding your family, the issue of whether you’ve broken the law is a very small issue. If I force you at the point of a gun (or through onerous rules) to keep all of your savings/earnings/spendings in my and ONLY my currency, and then I proceed to debase that currency, eroding what keeps your family alive, it’s apparent that something very unfair is afoot. Whether you want to call that theft or outright thuggery is just a matter of semantics. Most governments in the world, when they see the idea of people being able to use a free electronic commerce system that is efficient, creates growth/opportunities/jobs, giving people access to the world of commerce across borders, what’s not to like? If your government does not believe that

people should be free to associate, free to express, and free to make choices, then your government is not free, which is already a much bigger problem than cryptocurrencies. I would be less worried about their power over cryptocurrencies and more worried about the fact that they have all the guns.


Z: In what manner would you like to see cryptocurrencies regulated?

WL: I would like to see governments set up infrastructure to tax cryptocurrencies. Without taxes, the very foundations of society would collapse into a feudal capitalist state, where individual corporate enterprises must now find a way to enforce law and order on their own, by generating their own will from the people, or by taking the power of force for their own.


Z: High transaction fees for bitcoin make it impractical for many daily applications, do you see this changing anytime soon?

WL: For Bitcoin probably not, bitcoin is a poor implementation of a revolutionary technology. The larger transaction volume Bitcoin gets, the larger the transaction fees become, which are already too high to be viable for regular commerce. This can be completely circumvented if both users go through the popular service “Coinbase”, but having to put trust in a third-party like Coinbase I think defeats the purpose of cryptocurrency.

Ethereum’s proof of stake mining protocol significantly reduces transaction fees, but also suffers from similar scalability problems. IOTA has free transactions, complete decentralization, and is a scalable system. I think people will gravitate towards a cryptocurrency that has negligible/no transaction fees since that’s what we’re used to today for paper currency transactions.


Z: Are there any alt-coins that you see promise in that you think could come close to rival BTC?

WL: I think both Ethereum and IOTA are going to Bitcoin a run for its money due to their tech innovations (described in question 8). Ethereum’s market cap is already at more than 55% of Bitcoin’s (calculated at the time of this interview, February 5th), and that percentage been on an upward trend.