7 Up: An Interview with…Llew Claasenbr>
Llew Claasen serves as a Managing Partner of Newtown Partners Ltd., a venture capital firm based in Capetown, South Africa. He is a long-standing technology start-up expert, focused on designing, building, merchandising and marketing online and with mobile software products and services. His past businesses include Clicks2customers, SynthaSite and Traffic Synergy.
Claasen has been the executive director of the Bitcoin Foundation since last July. The organization is the oldest and largest industry group focused on bitcoin. Its aims include increasing adoption, fostering development, and encouraging decision-makers to seek technical over regulatory solutions.
BlockTribune.com asked Claasen for his views on a recent speech at the Blockchain Africa Conference and other industry matters.
BLOCK TRIBUNE: Explain your remarks on how bitcoin (and other digital currencies) will be a viable alternative to the current monetary system. What are the advantages that you see, and what kind of timeline are we looking at for implementation, particularly among the unbanked and those lacking digital access?
LLEW CLAASEN: Bitcoin has the potential to be both a viable store of value and a medium of exchange. Most importantly, it has the potential to do so in a P2P manner, without the need for either trust & assurance industries or government control. Removing the middleman while using Bitcoin as a medium of exchange is expected to bring down significantly transaction costs & make even micropayment possible and economical. On the other hand, when everyone is able to make use of Bitcoin as a store of value that is largely immune to inflationary monetary policy, then Bitcoin will enable real savings by the poor, that is not eroded by inflation. These two effects combined can create an inclusive parallel monetary system that enables financial inclusion.
BLOCK TRIBUNE: Tell me about the state of digital currency/blockchain business activity in Africa. Beyond South Africa, are there other countries that boast a number of blockchain/cryptocurrency businesses? Anything you can tout (please note if you have an investment in them)
CLAASEN: I think it’s still early days for Africa in blockchain and cryptocurrencies. Many use cases for cryptocurrencies in Africa are currently inhibited by a lack of exchanges, liquidity and high on-chain transaction costs. On the other hand, I don’t believe that blockchain tech is mature enough to be deployed at scale. I don’t think anyone has blockchain truly figured out yet, but banking groups are surprisingly nervous about it’s potential to disrupt. By far the largest investments in blockchain in Africa are in payment, clearing & settlement POCs for banks and security exchanges.
BLOCK TRIBUNE: China’s central bank is said to be trying to develop its own digital currency. What effect will that have on the world market?
CLAASEN: I think that demonetization, or the removal of physical cash from circulation, for the purposes of issuing it in a purely digital form, is a terrible idea for the citizens of a country. It makes government control of the economy absolute and forces people to hold their savings in alternative assets. We should expect that arbitrary taxes, negative interest rates, strict exchange controls and laws making it a crime to have unexplained assets to follow shortly thereafter.
On the other hand, the Renminbi became a reserve currency in just September 2016 and that will tend drive down demand and the price of other currencies in the SDR basket. That effect has little to do with the increasing digitization of currency.
BLOCK TRIBUNE: What do you see as the biggest challenge going forward for bitcoin adoption? How will any hard fork help or hinder that activity?
CLAASEN: Bitcoin is not a very good form of cash at the moment, because the transaction costs are too high. On the other hand, it has become a surprisingly good store of value.
From an architecture perspective, I think that Bitcoin must evolve so that most transactions will take place at layer two, typically the lightning network, and that the main chain becomes a settlement layer. Unless transaction and block properties change significantly, Bitcoin cannot securely scale to the level required of a payments network if it attempts to keep all transaction on the main chain.
I don’t think that a network hard fork will happen – there is too much risk that value will be destroyed during such a mess. Both sides are now in a temporary stalemate and seeking a viable option that is not strongly aligned with either Bitcoin Core or Bitmain. In the medium term, both a block size increase and the activation of Segwit or some similar enabler of layer two solutions must happen for Bitcoin to succeed.
BLOCK TRIBUNE: Are there enough software engineers with an interest in digital currencies to help bitcoin and blockchains grow? If not, what are you doing to promote interest?
LLEW CLAASEN: I think there are absolutely enough people interested in this technology. We’re inundated with interest to host conference workshops and hackathons, but we’re severely constrained by our resources. Bitcoin’s prolonged scaling debate and the trolling on both sides has harmed useful discussion and productive developer entry into this space, but development in other altcoins is gathering momentum. Whether Bitcoin makes it or not, decentralized cryptocurrencies and blockchains are here to stay.
BLOCK TRIBUNE: Will bitcoin and/or other digital currencies ever become the method we use to buy a morning cup of coffee?
CLAASEN: No. I think you’re probably quite happy to pay for your coffee with cash or a credit card. I think the need for Bitcoin as a medium of exchange is currently low in developed markets, because the financial system mostly works for everyday transactions.
I’m more interested in when you will use Bitcoin in Zimbabwe to purchase the fruit & vegetables for your family’s dinner because it’s easier, safer and more reliable than walking around with a wad of worthless bond notes pretending to be USD. I think we’re at least 10 years away before that happens where the need it greatest.
BLOCK TRIBUNE: What’s your biggest challenge as the leader of the Bitcoin Foundation?
CLAASEN: Bitcoin doesn’t trust anyone. It resists influence, coordination, governance and control by design and culture. Trolling and censorship make useful public discussion and partnerships very difficult. All of this makes Bitcoin exceptionally resistant to change, which can be good and frustrating at the same time.