Cryptocurrencies, Afghan coders and Brazilian inflation: a story of financial disruption with Peter Smith

Peter Smith is the CEO and co-founder of of Blockchain, an online bitcoin wallet that claims to be one of the fastest growing technology companies in the world. He stands at the helm of the emerging world of cryptocurrencies, and has gone further down the ‘bitcoin rabbit-hole’ than most dare to venture. 

What you will learn from reading this article:

  • How bitcoin is disrupting in Afghanistan
  • ‘If bitcoin works it’ll change the world’ - but just how big is that ‘if’?
  • Can we trust blockchain technology with our money?

In a world where the words ‘innovation’ and ‘disruption’ are uttered as often as please and thank you, especially in the realms of finance and financial technology, sometimes all you need is a good story. Shortly after Smith came off stage from an energetic panel discussion at the recent Virgin Disruptors event, I listened intently as he told me a story about how cryptocurrencies had transformed a programme in Afghanistan that teaches girls to code. 

“Roya Mahboob, a prominent Afghan business woman, set up Women’s Annex, a digital literacy programme that trains Afghan girls in digital skills so that they can make money online. Unfortunately, PayPal and Woo Commerce shut down in Afghanistan, so there was no way for these girls to actually get paid. Until they started using bitcoin. Hundreds of women are now getting paid for contract development work entirely in bitcoin by companies in New York and London."

One of these girls was Parisa Ahmadi, top of her class but who’s prospects was ‘limited by my room’s walls and school’. Whilst Ahmadi didn’t have a bank account of her own, all she needed to receive bitcoin was an internet connection and a digital wallet, like Smith’s company Blockchain provides. 

It’s easy to forget that two billion adults worldwide are unbanked, and even easier to forget that many women in countries like Afghanistan have bank accounts that are largely controlled by their father, husband or brother. In the Western world, we live in a society where financial services are essentially very large forms of intermediated trust. The earliest banks began as centralised safeguards of wealth, bookkeepers and skilled accountants. The immense wealth that these early banks possess allowed them to lend and borrow to make a profit, and over the centuries banks have developed thousands of complex and innovative ways to profit from their vast centralisation of riches and resources. 

Cryptocurrencies like bitcoin, and the technological infrastructure that they’re built on, known as the blockchain (note the small ‘b’), are the next stage in the evolution of financial innovation. To quote Paul Vigna and Michael J. Casey, authors of ‘The Age of Cryptocurrency’, "If bitcoin works - and that’s still a big if - an awful lot of things that today seem like part of the natural state of the world are going to look as antiquated as Gutenberg’s printing press.”

But just how big is that ‘if’? According to Smith, it’s smaller than it’s ever been.  

"The ideas are out of the bag. Bitcoin could fail, but something like bitcoin is going to be successful, and it’s going to enable a whole new way of doing finance. That’s going to happen regardless of whether it’s bitcoin or another successor."

Of course, nobody knows exactly what’s going to happen or when, but everybody knows that it’s going to happen. The question is whether bitcoin will be a Palm Pilot, or a Linux. 

“The Palm Pilot didn’t change the world, the iPhone did. But without the Palm Pilot we wouldn’t have the iPhone. However, there are other examples of where the original innovation has changed the world. Linux is a good example. There’s been no successor, it was the first of its kind and it still runs all over the world today."

Bitcoin - maybe. Cryptocurrencies on the blockchain becoming widespread and changing the face of finance as we know it - inevitable. But what of the role of trust? The greatest asset of systems of centralisation is the trust that they command. We all sleep at night whilst our money rests in an account operated by what is essentially a very big profit-driven company. In the disintermediated world that Smith promises, a world where we don’t need banks to keep and manage our money in exchange for a bit off the top, what role will trust play? 

“The thing about bitcoin,” Smith told me, "is that you don’t have to trust it, but a lot of consumers choose to. It’s unrealistic to expect consumers to readily operate in a completely trust-less environment. The point is that they’re going to have more flexibility over who they choose to trust."

I wondered whether a trust-less financial system would really work, and I asked Peter to tell me about a recent bitcoin user that he’d spoken to, and why they had need of a cryptocurrency wallet. 

“I was talking to one of our customers in Brazil recently, and he’s buying bitcoin to hedge against runaway inflation. He’s seen his family's personal wealth wiped out in the last 15 years, and he’s using bitcoin to make sure it doesn’t happen again."

Why would a completely technological financial system prove any less trustworthy than one run by people? I was reminded that the true value of this technology isn’t so that we in the UK have another form of money that we can use to do our online shopping. The disintermediation of centralised financial institutions and the formation of cryptocurrencies has the potential to transform the developing world by offering its citizens complete transparency, security and control over their financial lives.

Something like bitcoin is going to be successful, and it’s going to enable a whole new way of doing finance

If the technology of mutual distributed ledgers - the blockchain - has the power to disassemble the money middlemen, what else can it do? What other aspects of life could it transform? For Smith, the answer lies with Peruvian economist Hernando de Soto. 

In his seminal book, ‘The Mystery of Capital: Why Capitalism Triumphs in the West and Fails Everywhere Else’, de Soto argues that the answer has little to do with cultural differences, as is the widespread belief, but lies instead in how different countries manage the legal structure of property and property rights. Four-fifths of world economies still exist in a state of informal ownership, where deeds to property are unclear at best and non-existent at worst. Without clear deeds and titles, people can’t develop land, increase its value or use it as collateral. Most assets, therefore are ‘dead capital’. 

“Putting property on the blockchain, now that’s something worth working towards,” says Smith. Until then, giving Afghan women control over their finances and Brazilians the ability to protect their family’s future is a pretty good start. 

If you joined us in London and would like to share your highlights and how you've been inspired to make a change in your world, drop us an email on with the subject Virgin Disruptors 2016.

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