For this week’s thought leader interview, Chain Reaction was delighted to catch up with Meltem Demirors, Director of Development at Digital Currency Group to talk about ‘magical thinking’, women in tech, bitcoin scaling debates and industrial transformation:
“Hi Meltem – You spend quite a bit of your time speaking to total newcomers about bitcoin and blockchain technology. How have perceptions changed since you started out educating businesses about these ideas?
When I joined Digital Currency Group (DCG) 2 years ago, we spent a lot of our time meeting with financial institutions, global corporations, and investors educating them about bitcoin and how it could transform parts of our economy. In 2015, the word ‘blockchain’ was not part of the common lexicon. Bitcoin was worth about $200 and had a $4 billion market capitalisation, so people didn’t take it very seriously. Fast forward 2 years, and bitcoin now has approximately a $30 billion market cap. While there are some lingering negative perceptions of bitcoin, we’re increasingly seeing major financial firms, hedge funds and family offices investing in this asset class and that has been a huge change. Digital currencies are now growing as an asset class and more companies are viewing them as a payment rail. At DCG, we’ve now invested in 100 companies around the world, and these companies are sending upwards of $50 million a month in digital currencies across borders. Companies like Veem and Wyre are working with businesses around the world to enable more efficient payments. A lot of this activity is “under the radar,” so people don’t really realise how many companies are getting involved in using digital currency as a global payment rail.
That said, I believe few people really understand what a Blockchain is and there are still a lot of ‘magical thinking’ articles being written about blockchain technology,. Framing the potential of blockchain around ‘technology’ is a very ineffective way of communicating the value proposition to a business executive or your average person. People really just want to know: “what can Blockhain do for me?” A number of new companies are essentially building new types of databases – which will probably be very useful – but they are not really using blockchain technology. The reality is that it takes time and iteration to see blockchain applications reach their potential. And yet people want this to happen immediately, and I sense their expectations are a bit detached from reality. When I was growing up, we had a lot of films based on what would happen with Artificial Intelligence. Yet most of those projecions are still very far from being realised. Blockchain is a bit like that – we are still sometimes at the stage of fantasy. I’m not dismissing the role of thinking big – there are definitely exciting “moonshot” ideas, but I really focus on being pragmatic and managing expectations when I advocate for this technology.
What was it that first attracted you to start a career in this space which is still seen by many as very experimental and risky – was there a lightning bolt moment or was it a more gradual process?
I wish I could say there was a cogent process I went through that led me here but I think it was more of a combination of being in the right place at the right time. My background was in oil and gas, commodity trading, and management consulting. I learned about bitcoin around 2011. Having played video games as a teenager, I was used to hanging out online and found the bitcoin community appealing in the same way as gaming communities – you are sharing value as part of a community with a common interest. A few years later, in 2013, Coinbase enabled people to actually buy and easily manage bitcoin using a bank account and the standard username and password instead of cryptographic keys. This marked the start of a new wave of entrepreneurs building consumer and enterprise facing businesses, which began the process of commercializing the bitcoin ecosystem. Having worked with a lot of start-ups, I found the idea of bitcoin – of being able to ‘be your own bank’ – a very compelling one. You had what started out as a socio-technical system growing into a financial system. I felt that there was something important happening here and I wanted to be a part of it. When I was presented with the opportunity to join Barry Silbert to work on building what would become DCG, I couldn’t say no. Where we’ll be in 20 years time, who knows? For now, it’s incredible to work with hundreds of founders, investors, corporate leaders, and technologists on building the foundations for this wave of distributed systems and platforms, and the re-imagining of decentralized value exchange.
I know that you, like me, have a passion for getting more women involved in tech – and of course digital currencies and blockchain technology in particular. What kinds of things do you think of as the major barriers and what is DCG doing to address them?
We are still a long way from seeing workplace equality and pervasive forms of gender bias still exist but I think it’s important to separate this from structural issues like the skills gap. We still have too few women graduating with computer science degrees and STEM degrees and this problem can’t be addressed overnight. Fantastic groups like Girls who Code and others are springing up to address this problem of skills and helping women start their careers in technical fields. I focus on the areas that are immediately addressable, which is helping to surface great talent. We need to encourage executives to look outside of their networks when recruiting and we need to highlight the career paths of women in the industry so women who are looking to join feel there is a place for them. It’s also important to track diversity and understand why there are fewer women in the industry. When I analyzed our portfolio companies in 2016, a third of our companies had no female employees and they also all had under 10 employees. This indicated to me that fewer women are involved in the early stages of company building. We need to think why that might be and what can be done constructively. In my view, it is not helpful if women come to the conversation without having a clear understanding of the problems and constructive ideas on how to drive change.
Which sectors do you think are seeing exciting transformation as a result of blockchain(s)?
I would say there are a few key areas and most of the best developed applications are still in the financial services realm. Firstly, digital currencies are creating an important new asset class. Secondly, we have the growth of the global payments side – be it Bitcoin, Ripple, or private blockchains between banks, etc. The clearing and settlement/trading markets will take a lot of time to change, in my view, as these are heavily regulated industries so it’s a tough place to bring on board new ideas. In distributed ledgers, there is a clear application in supply chain management, where you have the need for a shared dataset to track an asset and attach identities and payments to that. On the back office side, there is a lot of opportunity in improving identity management for regulatory compliance such as Know Your Customer (KYC) and Anti-Money Laundering (AML). Last but not least, aid and charitable giving is an exciting area where large institutions could bring transparency and visibility to donors fairly quickly. Land registry gets talked about a lot, and may end up being useful in places where governments are not trusted. In the near term, we’ve found projects tend to progress quite slowly, because business processes have to change as well. It’s nice to imagine a future ‘crypto-utopia’ where everything runs on blockchains, but that kind of thinking is ultimately not very actionable. I like to see entrepreneurs who are solving a very specific, actionable problem.
Obviously we are now in a turbulent time as far as Bitcoin is concerned with a very public and fierce battle going on around a hard fork. How damaging is this kind of argument towards efforts to mainstream Bitcoin, when the community itself can’t seem to agree on a way forward?
The scaling debates have been fascinating. I’ve tried to spend time understanding the communities around both Bitcoin Core and Bitcoin Unlimited, and I view it more from a social and psychological perspective rather than that of a technologist. In my view – which is shared by many others – this debate has little to do with technology and is more about different factions wanting to exercise power. Bitcoin has no real governance structure, which can be both a strength and a weakness. Different factions have differing sets of incentives and there is currently no clear path ahead. At the same time, the Bitcoin price this week reached all time highs so, in some senses, market confidence is Bitcoin has not been affected. The really interesting thing about Bitcoin is that it is a financial system no one can control. So far, despite the scaling debate, Bitcoin is not broken. Some business models based around Bitcoin might fail but others will be unaffected. I think the story has probably been over-sensationalised but what is a shame is how much time gets wasted by incredibly talented people on these debates when it could be used more productively. Ultimately, people have the power of choice and if Bitcoin doesn’t provide the technical functionality they need, they have the choice to use a different blockchain and digital currency – there are now literally hundreds to choose from!
How do you see the landscape changing for start-ups in the industry?
What has happened to many start-ups is that they have had to go about building a market rather than waiting for a market to happen. For example, merchant adoption did not happen at anything like the rate that many Bitcoin start-ups hoped that it would. DCG has been working closely with financial institutions and venture capitalists in various ways to help educate them and build a market for digital currency businesses. In October 2015, I created the first DCG Tech Summit where we brought together start ups, financial institutions, corporations, and investors in the heart of Palo Alto. This has created a lot of energy and enabled our companies to educate and advocate at scale instead of having to go out and have 100 individual meetings. Attendees were surprised and fascinated to see what was being built by bitcoin and blockchain start-ups, and it changed many people’s perception of bitcoin. More importantly, I’m constantly trying to identify what the barriers to growth are and create channels to bring companies together to find ways to overcome them. In fact, I am about to launch our newest venture, DCG Connect, to build a more collaborative business environment. It’s also about changing the narrative and driving a new story about what the innovation of digital currency and blockchain means – taking more control over what language we use. By doing all of these things to support start-ups and change the quantity and quality of the interactions they are able to have, we hope that we will really be able to help this ecosystem to grow. To use an analogy from space, by starting to use a telescope rather than a microscope, we will be able to see the whole galaxy of possibilities opening up”.