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In the 6th episode of Block Stars, David Schwartz interviews Adam Traidman, the CEO of BRD, a company that desires to give financial freedom and independence to others through financial services and cryptocurrency. Their known for being the first to offer a crypto wallet app for smartphones all the way back in 2014.

Here is a summary and my thoughts on the interview. If you want to read my thoughts on previous or future episodes, please go here.

Episode Summary

Initially an open-source project, BRD (formerly Bread) was at first only of interest to Bitcoin maximalists (people who only invest in Bitcoin). Since then, BRD has grown to include 4 million customers in 170 different countries, with a combined total $6 billion of different cryptocurrencies stored in their BRD wallets today.

The BRD wallet (and other similar crypto wallets) basically function like physical wallets in the real world. In the digital world, it allows you to control and use the cryptocurrencies (think cash) within it as you see fit, just like a physical wallet would. Ideally, you can then use the money in your digital wallet to pay for real world goods and services. For Traidman, it ideally also includes functions that are similar to what we use banks for today, including receiving payment or salaries or paying off a credit card.

In the past, the phrase “not your keys, not your wallet” was a popular mantra to help newcomers in the crypto space understand the importance of having your own wallet that you held the passcode and key phrases for. This is in contrast to the real world, where institutions like banks hold the vast majority of our wealth. Such a difference comes from how the cryptocurrency space began, where the idea of being able to freely do what you want with your money grew due to the 2008 global financial crisis.

The BRD wallet, being an app, deals with both these points by allowing you to hold your crypto on your phone, but also giving users back that money in cases where they lose their phone (though Traidman is quick to point out that the company itself cannot ever gain access to users' wallets). In this way, BRD focuses on making sure the user experience with the wallet is top notch so that anyone can use it, while providing as much security for the wallet as possible. While no one is using crypto to buy coffee at Starbucks regularly yet, that ideal is what the company is striving for.

Here, he points out that customers today aren't very enthusiastic about the libertarian ideals cryptocurrency was founded on, and instead are looking for ways to utilize crypto in their daily lives. And so, BRD strives to provide good value to their users, whatever their ideology might be.

In this way, a good wallet needs to be able to easily send and receive money, just as a normal bank app would. In being able to do so easily, users then need to be able to invest that money in various different coins. This speculative investing is often why people get into crypto in the first place. But others may be interested in coins that have utility (e.g. XRP for remittance), and still others curious about online transacting through crypto.

Another advantage for BRD is that it is so easy to set up, since users don't need to register with any form of ID. He is quick to point out, though, that it's not that the user is necessarily anonymous, and therefore BRD is non-compliant to laws and regulations. Rather, the wallet acts like a physical cash wallet, and users are responsible for their own digital money, rather than a financial institution. This enables people around the world who don't necessarily have bank accounts, but do have a smartphone, to be able to more easily participate in various local markets.

Of course, volatile prices is still a big part of crypto today, but Traidman points to stablecoins as the current remedy.

Here, the conversation shifts to the differences between finance apps that enable individuals to participate in traditional markets (e.g. Robinhood, Fidelity, etc.) and crypto apps. Traidman sees more synergy than competition, as each of these services allow all kinds of individuals to move money to where they want.

Thus, from his perspective, it seems the apps that give the best user experiences as well as the best benefits or rewards are predicted to win out. And so, BRD has implemented things like rewards and points into their wallet. Then, when younger millennials search, download, and use the wallet, they feel instantly rewarded with well-designed user experience. The advantage, as mentioned before, is how quickly one can get into the experience.

There is a bit of overlap between the different services, but there may be a shift coming where value for fiat and crypto are negatively correlated. This is indicated by the fact that there is now billions of dollars in crypto, whereas only a few years ago, it was only a few million.

Transformation in the financial space takes a lot of time, perhaps decades, since no one wants to lose value. But in this time, it may be that a lot of new companies will rise up and overtake older, more traditional companies in financial sectors.

Schwartz and Traidman also mention Blockset, a tool built by BRD targeting enterprise customers. It allows developers to more easily use blockchain solutions in their software. It's a streamlined API that allows developers to access any blockchain, “sort of like an AWS [Amazon Web Services] for blockchains”. They currently have banks and other large software companies using this technology to help grow the entire space. They refer here to the fact that there were years where certain technologies like TCP/IP, DHCP, and even modem/broadband hardware, had to be developed before the Internet really became mainstream. They point out that there is a whole industry that has to be developed (which BRD sees itself part of) that troubleshoots and provides various, niche solutions, so that others can rely on these third-party companies without needing to waste resources developing what's already available.

Is there a utility for blockchain outside of finance? Traidman definitely believes so. He relates that, in the early days of the Internet, people thought that it could only be used for basic text or messaging services. But, of course, today, the Internet is the backbone for almost entire industries. Such is the potential of blockchain. Things like identity verification and authentication, and the fallout of those spheres (including privacy and security), could be majorly impacted by blockchain.

The concern for security and privacy, however, is a tricky one in the crypto space. In the early days, it seemed like crypto offered an alternative to regulatory compliance. Traidman contradicts this, believing that the modern world requires businesses and individuals follow laws in the locale they are involved in. Instead, it's a user experience problem. In other words, apps should not force users to submit private information until it is absolutely required. This is in contrast to traditional services, which require customers to submit personal data no matter what kind of service they offer. In this way, the crypto industry can actually help customers by providing that in-between, so users can feel safe and protected.

The crypto space is in many ways based on real world models. For example, just as crypto can be moved wallet to wallet without a third party, people can move cash around in the same, near-anonymous way. But many countries (e.g. China, India) are starting to clamp down on physical cash, and this trend may come over to the crypto space as well. The ideas of KYC (know your customer) and AML (anti-money laundering) are already seeping into crypto, and it seems inevitable that they will converge. There are Zcash and Monero, but there will probably not be much privacy-centric cryptos moving forward.

In the traditional financial world, there's various insurance companies and guarantees that allow people to feel safe with their bank, brokerage, or other financial institutions. In crypto, these kinds of safeguards are beginning to bloom as well, though not necessarily hooked into government regulations. But, as Traidman sees it, this isn't really an issue that holds customers back. Instead, it's lack of knowledge and confidence in what crypto and digital assets really are, and how to get money into crypto at all. Here, Traidman provides some good business advice, saying that entrepreneurs (and their employees) need to more intimately understand how customers view their products, in order to provide better service.

With the global pandemic (this podcast was recorded in May 2020), there has certainly been an acceleration in countries and businesses around the world moving towards contactless payments, crypto included. Even in the United States, when the stimulus bill was first discussed, it included the idea of a digital dollar. Additionally, many people are checking their finances more due to being locked down. As such, BRD has actually seen an increase in user engagement since it all started.

However, the crypto industry may not yet be ready for mass adoption. Even BRD doesn't have support for on-boarding fiat currencies directly. But development in this direction can be accelerated so that customers can receive something like a stimulus check directly in their digital wallet, and then go use it at a local store. But really, according to Traidman, the general population still needs to shift their mindset in how digital money works in order for adoption to happen.

Many had an expectation that the global pandemic would have pushed many people into crypto. But this “safe haven” idea changed when crypto basically fell along with other financial assets around the world. There has been a small resurgence, perhaps due to the Bitcoin halving. On the other side, crypto still suffered less volatility than some other commodity markets, so there may be a little bit of hope there.

In the next few years, Traidman sees an acceleration from physical to digital currencies, especially with China developing their digital RMB. As governments around the world catch up, the current crypto companies that are developing foundational technologies will have provided a platform for blockchain to flourish, just as Amazon and PayPal did for the Internet decades ago.

My Thoughts

There's lots to unpack here, but because this post is already a bit overlong, I'll try to keep my thoughts short.

CBDCs and Crypto

Mentioned in spatters throughout the interview, and then lots at the end, is the idea that governments will eventually develop their own CBDCs (Central Bank Digital Currency). This is compounded by the fact that China is already testing a digital version of their fiat (called RMB, or RenMinBi).

There are a couple dangers, I feel, to this. First, of course, given that the current government in China is pretty much the definition of an oppressive authoritarian regime, the idea of that government gaining first mover status in government crypto is certainly frightening. Such a transition would make China not just immune to sanctions designed to keep them accountable for heinous acts, it could position the RMB as the replacement for USD as the global reserve currency. This is definitively NOT GOOD for the rest of the world.

The creation of a CBDC of the USD is probably inevitable (even if a bit slow). However, what's more fascinating to me is the fact that, because of how free business enterprises are, technically, a digital version of the US dollar already exists. In fact, several of them exist, in the form of stablecoins. From the likes of USDC, DAI, TUSD, and even USDT, if anyone wants a digital version of the dollar, they can already obtain it.

So what would be the difference between those and the CBDC that is officially developed by the United States' government? For one, it would allow things like stimulus bills to be paid directly to citizens without much hassle. It could potentially quicken the payment rails of banks transferring money within the nation. And it could help people and businesses adjust far more quickly to contactless payments.

But here's the thing. All of this already technically exists. Just the other day, I was transferring XRP from my Uphold wallet to another wallet app. And by the time I had finished clicking the “confirm” button and migrated over to the page of the other app, the money was already there. It was insanely fast. Being able to move money that quickly, and the potential to be able to do it globally, really gave me a taste of the future.

I think this is perhaps why there are those at Ripple (and other companies) who want regulatory clarity rather than simply more regulation (especially limiting ones). We don't actually need any more regulation in crypto. Spaces outside of China, including other Southeast Asian nations like Japan and Korea, are developing crypto far faster than any government ever could. More regulation is not needed to stay competitive (except in a small case I mentioned in a previous post). Instead, clarity that this development will not be hindered or stopped, and instead all crypto problems will be investigated on a case-by-case basis, will be far better.

Wallets and the Current Crypto Ecosystem

I was a bit surprised that BRD doesn't have a direct way for users to buy crypto in their wallet. In their wallet, users must first buy bitcoin, and then convert it to another coin. There are other wallets (like Argent, which I use) that directly support purchasing a variety of coins, including stablecoins.

However, currently, the whole crypto ecosystem is still a bit cumbersome for most users. First, one typically needs to find an exchange or a wallet that supports the coin they want. Then, he or she needs to go through a variety of methods to register. Then, that person would have to either do a bank transfer or use a credit/debit card to buy a specific coin. After that, if that person wants to use their wallet for normal purchases, they would need to get something like Coinbase Card or Ternio Blockcard. And all of this, of course, requires quite a bit of trust.

Disclaimer: I am not in any way recommending anything that I mention in any posts I make. Everything I write is meant as informational, not advice of any kind.

That's not to say, however, that the current ecosystem doesn't work, or even that it works poorly. In fact, I think if someone educates him or herself, it all works quite well. Yes, I have more than a single wallet, which is quite annoying. But these different wallets all represent a sort of modular experience, where I get to have control over where my money goes, and how it is used. It certainly is possible in this day and age to have more control and freedom over our finances. The libertarian-style dream of crypto is actually reality today.

I'm quite happy that this week's episode of Block Stars was about crypto wallets and mainstream consumers, because for me, it has to do with the idea of un-banking, or becoming your own bank. In my next blog post, I'm going to be covering a company that can potentially open it up for all cryptocurrencies, while keeping the blockchain ideal of decentralization. See you then!