Andrew: Hey everyone. My name is Andrew Warner. I’m the founder of Mixergy, where I interview entrepreneurs about how they built their businesses. One of my listeners, a guy named Chris Pritchard, he Facebook messaged me and texted me and emailed me and said, “Andrew, you’re completely ignoring cryptocurrency. And I said, “Yeah, I guess I am. I don’t fully understand it and I also don’t want to be part of this hype cycle that’s going on.” And he said, “No, Andrew, it’s more than hype. There’s this thing that’s going on. You’re not aware of it.”
I said, “Chris, what’s your input on it? Why do you care so much?” He said, “Andrew, I’m so obsessed with trading that I’m actually discovering these guys who are expert traders.” I said, “Expert traders?” He said, “Yeah, yeah. They’re expert traders, giving people advice.” I said, “Okay.” He says, “I’m actually creating a place, something called Coin Trade Pros, where anyone can find the ideal trader and learn from them, or if they’re great pro traders, they could come on and they could find a marketplace of customers to learn from.” I said, “This whole thing is that big?” He says, “Yeah.” I said, “All right. I better find a way to do this. Chris, who should I interview?” And he said, “You know what? The first person you should interview is a guy named Charlie Lee, the creator of Litecoin.” I said, “Oh, of course I know Litecoin. Do you think you could get Charlie Lee?” He says, “Yeah, yeah. I’ll work on it.”
The reason I know Litecoin is because my dad, for the longest time, wanted me to help him buy Litecoin. The guy can barely operate his iPhone 6 plus but he wants Litecoin. This is one of those cryptocurrencies that because of the way it started became a major currency and the creator is here with me today. His name is Charlie Lee. He has left his previous job to focus on the Litecoin Foundation that he created. I invited him here to talk about both Litecoin, how he created it, why he created it, and also just cryptocurrencies in general. I’ve gone back in time. I found some old posts that he did. I want to ask him about how his ideas have changed since then.
This interview is sponsored by two companies. The first will help you hire your next great developer. It’s called Toptal and the second will help you send out emails properly. It’s called ActiveCampaign but first, Charlie, it’s good to have you on here.
Charlie: Hi Andrew. Thanks for having me.
Andrew: I went back and I looked at your old blog posts . . . blog posts, yeah, but your old forum posts, including the first one on bitcointalks.org, where you launched Litecoin and you said, “This is going to be like silver.” Can you talk about the silver to gold thing because you’ve made that analogy before, and I think it’s spot on for understanding your vision?
Charlie: Yeah, so when I first found out about BitCoin, I realized it was very similar to gold. It’s more like digital gold, and when I created Litecoin, I set out to create the silver equivalent of digital gold, so Litecoin being silver to BitCoin’s gold. So I made that kind of like a tag line. It kind of just caught on because Litecoin is faster in terms of transaction speed than BitCoin, and there’s more Litecoin in the world than BitCoin, so it’s more like a plentiful version, an easier-to-use version of BitCoin, and it’s also cheaper, so it fit the analogy really well.
Andrew: I think it was up until 1964 that the U.S. mints used to create 90% silver coins, right? And that’s your vision. You wouldn’t walk into a store in the 1950s and buy something with gold, but you’d have coins that happened to be made out of silver, so you trusted the value of them and you were therefore able to go and buy a stick of gum.
Charlie: Mm-hmm. It’s more like a coin that is better suited for a store value. So you keep gold in the bank safe, but you would use silver daily. So a similar idea, where you would keep BitCoin for its store value, but you may use Litecoin for daily purchases.
Andrew: I see a lot of cryptocurrencies wanting desperately to take off, and they often will not go anywhere. Yours did and I wanted to understand why. I think part of the way that you released it seems to have helped. Like, for example, you did not get rich off of creating Litecoin and that is part of what helped it. Can you talk about this pre-mining and why that helped Litecoin take off but why it kept you from being the zillionaire that I can hardly reach?
Charlie: Sure. So before I launched Litecoin, there were quite a few alternate currencies out there, and most of them were created by creators that wanted to get rich quick, so they would pre-mine a lot of coins. What that means is they would mine a lot of coins themselves before their release, so hundreds of thousands of coins, and then when they released it, then it became [inaudible 00:04:32] pre-minable and people were mined on top of the blocks that they already mined. And then they would try to advertise. They would try to promote it, try to pump it, try to create value, so that the coins that they mined themselves would become worth something.
When I created Litecoin, I decided I didn’t want to do something like that. I wanted to make it as fair as possible, so I launched it without pre-mining any blocks and made it open to everyone and made it as fair as possible, and I think that added to the fact that people would rather support my coin that was fair than supporting someone else’s coin that helped them get rich.
Andrew: Satoshi, the creator of BitCoin, pre-mined, right?
Charlie: No, he didn’t pre-mine. He actually launched it publicly, but because BitCoin wasn’t well known in the beginning, it was just him and a few others that were mining initially, so they mined quite a bit of coins. Supposedly he mined like a million BitCoins before he stopped and before it became more publicly well known and more people were mining.
Andrew: I see. All right. I didn’t realize that. So, again, I’m looking at this post that you did on bitcointalk and you’re saying “Here are the coins that are out there and here’s what we learned from them and what we’re going to be doing differently.” One of them you said was pre-mined. What else did you see that was going on that you liked and included in Litecoin and what didn’t you? I want to understand why this thing worked and what your philosophy was.
Charlie: Sure. So one thing that I liked about the other coins is they were testing out faster transaction speeds. So BitCoin was set to 10 minutes per block. It’s very conservative. It’s set to 10 minutes per block so that if there is any disruption in a network where communication got broken off and two different sets of miners were working on the block chain separately, that they’d have enough time to kind of reconcile and come back together to form one block chain. So 10 minutes I felt was very conservative, and I reduced that to two-and-a-half minutes, so like four times faster than BitCoin. If you’re sending BitCoins, you will realize how slow it is. I just send some coins and it takes about 10 minutes before your transaction makes it through the block chain. Whereas, if you send Litecoin, it’s two-and-a-half minutes. It’s really quick.
So I took kind of a different tradeoff where there may be more orphans, orphans being miners that mine a block that gets . . . On the other side, some other miners mine two blocks, so your block gets orphaned, so you lose the block rewards for that block as a miner, so it’s like wasted work. So with faster transaction speeds, block speed, there’s more orphans, but it’s worth it because the transactions are faster, so this is one thing I changed for Litecoin.
The other thing is I saw that some of the altcoins were competing with BitCoin for hash rate, so they were using the same mining algorithm, sha256, and because of that miners would switch to mine this altcoin when it’s more profitable and then when it’s not it would switch back to BitCoin and it would leave the altcoin in a bad state where the BitCoin would be really high. I know this is a little bit technical, but basically competing with BitCoin for miners wasn’t the smartest thing to do because you’re competing with the most popular coin, so I switched Litecoin to using scrypt, another proof-of-work, which made it CPU minable. At that time when I released my coin, BitCoin was mined on GPUs and being CPUs made it more attractive to regular people because . . .
Andrew: They can mine both at the same time, you’re saying? Or is it a different kind of miner that you’re opening?
Charlie: They can mine both. If they have GPUs that mine BitCoin, they can mine BitCoin and then they can use their CPU to mine my coin.
Andrew: I see. And then, the miners are the people who make money by keeping the data the network, right?
Charlie: Yeah, by building on top of the block chain. Initially, when the coin launched, basically the miners were the users. Like it wasn’t really separate. People who were mining were also the people who were using the currency because it was on their CPU, mining on their CPU.
Andrew: So they were mining it for themselves and using it. Here’s the thing that I don’t understand. I see that you saw a problem and you said, “I’m going to spend some time.” You were a Google engineer at the time, right?
Charlie: Yes.
Andrew: “I see a problem, I’m going to create a solution for it.” What I’m wondering is, and maybe this is like the selfish part of me, the guy who grew up in New York who doesn’t understand people just doing good for the world . . . I don’t understand why you didn’t just say, “Hey, you know what? Someone should just create it, but I’ve got a job. Someone should do this, but there’s not enough money for me in it. You guys do it. I’m going to stay here. I’ve got my life here in Silicon Valley.” Why did you decide that you were going to do this? What was the reason?
Charlie: I did it as a fun, side project. Initially, I didn’t start off to say I wanted to create it into something that would kind of become really successful and compete with BitCoin. It was more like getting used to the writing some BitCoin, [inaudible 00:09:45] the currency code, creating something of my own and kind of just launch out there and see what happens.
Andrew: I see. Kind of like somebody writing a blog post as a way of thinking through an idea and exposing it to the world and getting feedback, you decided you were going to write and create this cryptocurrency.
Charlie: Yes.
Andrew: I see. Okay, and what was your vision for yourself? Was it part of a goal that you had in mind for yourself? Was it something else?
Charlie: It was more to kind of experience like cryptocurrency, writing code and launching.
Andrew: You just wanted to learn about it.
Charlie: Mm-hmm. Yeah, back then when I really got hooked into BitCoin, I basically did everything, read all the blog posts, read all the forum posts. I mined on my computer and with GPUs I built two computers with like eight GPUs in them to mine BitCoin. I created a lot of heat, spent a lot of electricity. It was just fun to get your hands dirty and just play around with everything cryptocurrency related.
Andrew: What were you doing with Google?
Charlie: I was working at YouTube Mobile and then also worked on Chrome OS, so Chromebooks.
Andrew: I love my Chromebook, by the way. Look at this. I think Chromebook is one of the least valued or least appreciated device. For 200 bucks I got one that does so fricking much. It keeps me focused.
Here’s the other thing. So I’m looking at your very first post, I think it was, on bitcointalk.org from June 27, 2011. The good guests, by the way, love when I go back in time and understand how they got to where they got, but the shady ones always feel a little on edge, like, “What the hell is Andrew doing?” Here’s the interesting thing about you. You said, “I want to know the value of all my coins without having to decrypt my wallet and expose myself to risk of somebody or some software stealing my data, so I created this spreadsheet that will understand how many BitCoins I have and then see the value of the BitCoin at any given moment and then it will tell me what my BitCoins are worth.” You created it for yourself and then you published it for the world to use. I saw the fricking feedback on this. People love it.
What I’m wondering is, you seem to have found a problem. People want to know the value of their BitCoins. They don’t have an easy way to do it without security. Why didn’t you say, “I started with a spreadsheet, that’s the minimum viable product. I’m going to create this new tool for all cryptocurrency to let everyone know how much money they have without risking theft of the money they have in BitCoins?”
Charlie: Well, that was an interesting kind of thing I just did for myself. Nowadays, there’s like a lot of these crypto portfolio apps that you can use on the web and also on mobile, so I wasn’t very excited about that at the beginning I guess.
Andrew: Tell me more about that. And by the way, I’m only asking this to just understand the way you think about this. I’ve done now over 1,500 interviews with entrepreneurs. It’s so common now for me to see the pattern. They sell gum as kids, they start out with an idea that doesn’t go anywhere, they hope to get rich, they discover that they need to understand how to work with people. The pattern is fairly common now. I want to understand your philosophy, someone who says, “I’m not going to create this currency to get rich tomorrow and get Paris Hilton to buy into my thing. I’m just curious and I want to learn.” So when you say, “This wasn’t exciting to me,” I want to understand more about what part excitement and interest plays in the direction for your life and the projects you take on.
Charlie: Well, I guess what happens with me is a lot of times I create value for myself and that applies to more people and I just publish it. So I can tell you a little story of many years ago. I have a kind of universal remote to control like the TV, VCR, DVD player, and whatnot and it wasn’t doing exactly what I wanted it to do, so I just hacked it. I wrote a program that hacked it so that I can create like a new home screen. Basically, before it was very clunky and I just made it a much better UI just by hacking the code. I released it publicly and a lot of people just loved it because it turned their kind of clunky universal remote . . . If I remember correctly, it was called Pronto. It was a Pronto Universal Remote by Simmons, I think. It turned this remote into something that’s just much cooler, and it was a very simple hack that I just created for myself.
I released it and launched it and just let everyone use it, and someone really was so happy with what I created, they sent me a check for $25 just out of nowhere. I wasn’t really asking for money or anything, and I was very appreciative of how much I affected people. That’s what drives me . . . just doing something that really just helps myself but also helps everyone else.
Andrew: I see. And the curiosity of “How can I solve it and share it with the world and make it useful?” That’s the thing and that’s what drove you to create your spreadsheet for yourself and then make it available to others. And you weren’t looking for money from them, you were looking for the kind of feedback that I saw, where people said, “This is incredible. Thanks for creating it.”
Charlie: Yeah, I would say that.
Andrew: So when you were at Google, did you feel that that satisfied that need to create stuff that people love, or when you’re part of a bigger organization and no one knows what part you play, does some of that go away for you?
Charlie: It definitely goes away. At Google, I got to work on awesome projects, YouTube and Chrome OS, but I’m kind of like a small part of a big product and it’s hard to kind of make a difference. I guess that’s why I left Google. I wanted to do something different, do something that actually made a difference, so I joined CoinBase four years ago and really felt like I made a difference there.
Andrew: When you joined CoinBase, people were thinking that you were going to manipulate Litecoin through CoinBase. Can you talk about that? Like there’s some validity to people’s concern, do you think?
Charlie: What do you mean by manipulate Litecoin?
Andrew: I couldn’t fully understand. I think what they were saying was, “He’s going to see what people are trading. He’s going to see where people’s interests are. It’s somehow going to allow him . . .” And I couldn’t fully understand it. And the truth is, it happened mostly in comments about the announcement that you were going there, less so in longer blog posts as far as I could tell.
Charlie: I think what you’re referring to is when I joined CoinBase people were speculating that CoinBase was going to add Litecoin trading. So when I joined CoinBase, I guess a far-fetched goal was to eventually convince CoinBase to add Litecoin, but initially it was mostly about I realized that for BitCoin and Litecoin to succeed, it had to be really easy to use, so CoinBase was a site where people like my mom and dad can actually create an account, buy some BitCoins and store it securely. Before CoinBase, there was really no way for the average person to actually buy some Bitcoin and hold onto it. So I wanted to kind of help that movement make BitCoin easy to use, and that’s what CoinBase was all about.
Andrew: Okay, going over there and saying, “I’m going to help people buy any kind of cryptocurrency and in the back of my head, maybe they’re going to add Litecoin.” You joined them in 2013 and it wasn’t until 2017, four years later, I think, that they added Litecoin. Is that right?
Charlie: Yeah, so for the first three years we were focused on BitCoin, but last year I was able to convince CoinBase to become kind of a multi-currency company, that BitCoin is not the only game in town, that adding Ethereum and also Litecoin actually is better for the users and also made CoinBase a lot more money, so it was a win-win.
Andrew: All right, let me take a moment here to talk about my sponsor and then I’m going to come back and ask about this multi-currency world that we’re living in right now and see what you think about that.
The sponsor, guys, is a company called ActiveCampaign. If you’re sending out email and it’s the same email that goes out to everybody, you’re making a mistake. We used to make that mistake. Just email everybody and we thought we were doing great because email marketing is the way to reach your audience. And then I realized, “You know what? There are some people who are new entrepreneurs and some people who are experienced entrepreneurs. The new ones probably want the interviews that have to do with starting a company. The experienced ones want something that has to do with continuing the company, hiring, managing, etc.” I said, “How do we do this?”
Well, what you want to do is get into marketing automation. That allows you to tag people based on what they’re doing. It allows you to send out the right email to the right person at the right time, not just based on what they tell you but also what are they doing on your site? Where are they spending the most time? So, if someone spends the most time on your site . . . Let’s say you’ve got an athletic company and someone spends more time on running shoes than on cycling shoes, you might want to send them email about running and understand that cycling is a secondary interest potentially but running is their passion. And that’s the idea behind ActiveCampaign. It’ll help you increase your sales. It’ll help you talk to your audience right. It’ll help you also keep your sanity.
Now, there’s other software out there and there was before ActiveCampaign that did marketing automation but what ActiveCampaign did right, it made it so simple that you don’t have to hire a team of consultants to manage it for you, that you don’t have to worry about someone on your team screwing it up, and so that’s the one that I recommend you go check out. And I’ve got a special URL where if you go there, you are going to get, first of all, a free trial so you can actually try this just like you could see that Charlie was interested in cryptocurrencies and started messing around, experimenting with it, learning from it by doing.
So you’re going to get a free trial that you can experiment with. You’re also going to get your second month free, so they do want you to pay for your first month before they give you this long month for free. They’re going to give you two free one-on-one sessions with their consultants so you can understand how to add marketing automation to your business right to get the results you’re looking for. And finally, if you’re already on some other email system that doesn’t do this intelligent tracking and messaging, well, you can get free migration.
So here’s the URL where you get all of that for free and you get tagged as a Mixergy customer, which means that people will take good care of you because they know I’ve got a big mouth and I will not stand for my customers being mishandled. I want everyone taken care of right if I’m recommending a sponsor. The URL is activecampaign.com/mixergy. When you go to the top of the page, you’re going to see exactly how smart marketing automation works because you’ll see the first sentence on that page knows you well enough to address you properly and shows you that they know who you are and not just some random person hitting their site. Go to activecampaign.com/mixergy for that.
Charlie, I’m wondering what you think about me doing ads here. I don’t fully have a beat on you, like are you a person who just wants to do good in the world and me doing an ad feels like schlocky? Or are you someone who thinks, “Hey, this is business. I’m really interested in being a part of this?”
Charlie: I don’t mind ads at all. I mean, it’s a good way to make money and pay for your podcast.
Andrew: So you come out with BitCoin, you start to work at a company that makes it easy for people to own and safeguard their BitCoins, and you suggest that they add Litecoin, and you understand when they start adding lots of other currencies like Ethereum. My question is, we have all these different currencies. Can they really all be useful? I understand that you had a utility in yours. Or are we creating this fake market where people are buying and selling and there’s so many experts teaching you what to buy and sell that Chris Pritchard has to create his own site to help teach people? What are we doing? Are we creating something meaningful, or are we creating another market in something that’s intangible and useless?
Charlie: A bit of both. I think there are quite a few coins that will be useful in the foreseeable future. Also, there are quite a few coins that are useless and just pure marketing without a lot of substance. So I guess right now the market is trying to figure out what’s what, right? So the market cap of a coin tells you what people will think . . . if there’s any value in a coin or if it’s not useful.
Andrew: Take me to the future. I understand . . . You come out and you say, “Look, BitCoin is great. It’s a store of value the way gold is. You might want to buy a house with BitCoin, but you’re not going to buy a stick of gum with BitCoin. Let’s create something that’s meant just for the stick of gum, just for those smaller purchases.” I see the world as you saw it back then. Today, with all these different currencies, take me into the future, 5, 10 years from now. What’s the ideal world that allows them all to function without having us go back to Europe pre-euro, where we have to figure out whether we’re paying them lira or dinar or something else? What’s the world 5, 10 years from now as you see it?
Charlie: I think it might take longer than 5 or 10 years, but the way I see is that right now, when you’re spending BitCoin, you actually know what you’re doing. You’re sending BitCoin to an address and then you’re waiting for a confirmation. In the future, you may not realize what’s going on in the backend, like you may be using BitCoin, Litecoin, Ethereum, or any other coin in the backend, but you just don’t know what’s going on and you’re actually just spending money. I don’t know what that will be called. Maybe everybody thinks they’re spending BitCoin, but in the backend they may not be and it’s just called BitCoin.
So that’s the future I see, kind of similar to where right now if you use a credit card. You swipe your credit card, and you don’t really know or care what happens in the backend, where the card swipes and then it calls the issuing bank and whatnot to verify this card is legit and also to get the credit and to pay for the transaction, and how the money gets to the merchant. You don’t care. All you care is that you get your item. So I think in the future, similarly, something like this will happen where you would spend money and BitCoin and you don’t care if it’s actually on the BitCoin network, if it’s Layer 2, like using lightning network or if it actually goes through Litecoin because it’s cheaper to go through Litecoin and back, or it doesn’t mean something totally different that we haven’t thought of today.
Andrew: And why would we need all that? Why would we need all these different currencies instead of just one or two . . . one for the big purchases and one for the small ones?
Charlie: I don’t know. Maybe we’ll only need one. Maybe we’ll only need two. Maybe we need a dozen. I don’t know. Right now, like Ethereum is useful. People compare that to like digital oil, right? To gas, where it like powers decentralized application. Maybe in the future, Ether is best used for powering decentralized applications but all you hold is BitCoin, so what happens? You send BitCoin, it automatically converts to Ether, and then it uses Ether to power this application. You don’t really care to hold Ether as a store value, but you can potentially use it every day. Kind of compared to today, you’re not holding barrels of oil in your home to power your car when you need, right? You only buy oil when you run out of gas to power your car. So that’s the kind of comparison I see in the future.
Andrew: When you say that Ether is used for decentralized applications, I see you guys at CoinDesk a while back created a post with the different applications that are interesting. Can you describe how Ether does that, or the part that Ether plays in that in decentralized applications?
Charlie: Yeah, so Ethereum, what’s good about Ethereum is that it allows people to write any kind of applications using the Ethereum virtual machine. And all those applications are . . . all the code is powered by the Ether that you spend to run the code. So you need to spend some Ether to actually run the code.
Andrew: I see and so there’s like an example of Eth-Twitter type network. What is it called? You’ve got Eth-Tweet, which is supposed to be decentralized Twitter, so there’s nobody who says, “I don’t like your politics. I’m going to block you.” “I don’t like how you’re cursing. I’m going to block you.” It’s just a universally effective piece of software.
Charlie: Sure.
Andrew: I see. So you’re saying, “I can’t predict the future because I don’t know what use cases are going to happen, just like I couldn’t predict that the iPhone was going to create Uber. I just could predict that it’d make it easier to open email. I can’t predict what having multiple currencies is going to do.” But what you are thinking is we can have one kind of currency that we think of as the value that we have in the bank and the value that we spend on things and that will get converted as fast as possible to whatever currency we need to do the job that needs to get done.
Charlie: Mm-hmm.
Andrew: I see. Okay. And then, you’ve also created a way to make . . . or you work with a way to make it easier for us to convert Litecoin into BitCoin. Can you talk about that? This was a recent thing, wasn’t it?
Charlie: Yeah, so with BitCoin activating Segwit, this allows a new technology called lightning networks. Lightning networks is a new kind of payment technology where it settles on top of BitCoin, but it’s kind of like an IOU system, where if I owe you $10 and you owe the other person $10 and effectively I owe that person $10, it’s an IOU system built on top of BitCoin and Litecoin. And with that, it allows something called cross chain atomic swaps, so it allows you to convert from BitCoin to Litecoin and vice versa instantaneously and securely, so it would allow for kind of like a decentralized exchange where you wouldn’t need a central exchange to convert to when you trade between BitCoin and Litecoin. You could just do it through the lightning network. And any coin that’s also part of this lightning network can kind of be used to decentrally convert between other coins, so it becomes a very powerful feature.
Andrew: Okay. All right, I can see that. The ability to quickly convert is going to bring about the future that you’re talking about, and also it will make more currencies more useful because it avoids the switching cost between one and the other.
Let’s go back to CoinBase for a moment. CoinBase was actually created by a long-time Mixergy fan, Brian Armstrong. I met him when I lived in Argentina. I saw he was a really nice guy, smart guy, but I could never have imagined that he was going to create this huge company that is this essential part of cryptocurrency. What it is about him that you think Brian Armstrong was able to create this? Tell me a little bit about, now that you’ve seen his personality, what allowed him to do that?
Charlie: I would say he has good vision and that he really believes in it. He believed in his vision when no one else did, and he tries towards it and makes it happen.
Andrew: What do you think is his vision and what do you mean by when no one else believed his vision? What is the vision?
Charlie: The first thing it’s cryptocurrency in general, that cryptocurrency will be big. The second is that you need to tie cryptocurrency into the current financial system to make it easy for people to go from their current U.S. dollar to crypto and back. It’s not like crypto is just going to all of a sudden take over the world by itself. You need to have kind of the rails between the legacy system and the new cryptosystem, and that’s what he built in CoinBase, connecting ACH credit cards with BitCoin, Litecoin, and Ether.
Andrew: So I could very easily say, “I want some BitCoins and go buy it, where it was harder before? I could more easily buy a T-shirt than buy BitCoin. So when you say people didn’t believe in it, do you remember the days when people didn’t believe in that vision?
Charlie: Yeah, well, like four years ago when CoinBase first started, people were kind of on extreme sides of the camp. There are the people who don’t understand BitCoin and crypto and just say, “It’s a Ponzi scheme. It’s going to fail.” And then there’s the other side, where people are libertarians. They really believe in cryptocurrencies, but they feel like they don’t want it to be regulated, they don’t want anything to do with the legacy system. They want to just live in crypto world. So Brian kind of needed to connect the two groups of people.
Andrew: I see. And when he believed and the rest of the world didn’t, what did you see that happened internally at the company? What did you see that he did that allowed people to still stay behind the vision and still stay with the company?
Charlie: What do you mean?
Andrew: What I’m curious about is if you’re a leader, and you’re going to be in a situation like this too, a leader at BitCoin, where you believe something, you see the future but no one else does. You can’t just say, “Screw you. I’m going to prove you right in 10 years.” You have to say, “Here’s my vision. Get behind me so that I could be proven right in 10 years.” What did you see that he did and what did you learn about that for Litecoin?
Charlie: Well, what he did was it was important he build a team that believed in this [inaudible 00:32:15], to build a strong team, to build a product, to make it happen, and I think that was the most important thing.
Andrew: To just have a strong team, people like you that you still believed in and he didn’t have to convince you. You saw that vision.
Charlie: Mm-hmm.
Andrew: Got it. What else did you learn about working for CoinBase? What did you learn about business? What did you learn that you didn’t when you were working at Google? What did you learn by working at CoinBase?
Charlie: What did I learn by working at CoinBase? You have to celebrate small wins. At Google, anything you launch, you get like a million users, right? At CoinBase, you start small. Like, if you make $1 million, it’s like a huge thing, so it’s very different where you kind of have to just start from scratch and just build something from the ground up and that’s tough.
Andrew: Yeah, and so it’s easy to say, “You know what? This is not big enough. There are so many things that are so much bigger. I’m just going to move on,” or “I think I’m a failure.” I know I think that way. I had this really big success early on in my career and then everything afterward felt like, “Well, this is so small compared to that and it’s insignificant.” It seems like you identify with that.
Charlie: Mm-hmm.
Andrew: Litecoin just took off. Do you remember when you became the second-most-valuable currency by Market Cap?
Charlie: Well, it actually didn’t just take off. It took a while.
Andrew: How long did it take? I always felt like it was Number 2 very quickly, but tell me.
Charlie: It took a year or two. When it first launched, it was just one of many altcoins. I think the silver to Bitcoin’s gold really helped Litecoin and kind of made it easy to understand and by saying that it’s silver it became a self-fulfilling prophecy, where it became Number 2 just because I called it Number 2.
Andrew: I see.
Charlie: Also, for many years, Litecoin was kind of just . . . not much was happening. It’s kind of just there, but BitCoin was always like the focus of everyone.
Andrew: Okay, and then what did you do in the year or two before it started to really get traction?
Charlie: So I actually focused on CoinBase and on BitCoin. In those years, I realized that I could spend all my time on Litecoin and it wouldn’t really make a difference because I needed to help BitCoin kind of succeed before Litecoin would actually become something. So I spent my time at CoinBase making BitCoin easy to use and just making BitCoin more and more popular.
Andrew: Really? Even though it could have actually made yours less significant?
Charlie: Yeah, because I kind of viewed the whole thing as I’m trying to help cryptocurrencies succeed, right? I would rather Litecoin totally fail and BitCoin become like the world reserve currency and just become like the dominant currency than to have BitCoin and Litecoin both be kind of mediocre and not really do anything in the world and still existing, right?
Andrew: You know, I’m looking at the Market Cap on coinmarketcap.com and it seems like it took off in November 2013 roughly and that’s where it started to shoot up. What happened at that point that let it start to climb?
Charlie: If I remember correctly, BitCoin shot up past $1,000, and then I think people thought that BitCoin was just too expensive to buy, so they bought Litecoin also or in addition. So, Litecoin kind of took off and went to $50 and that was a huge rise. It clipped the $1 billion Market Cap for the first time back then. And then, unfortunately, after that, both coins dropped quite a bit.
Andrew: Yeah, it looked like it hit that high until the end of 2013, and then it started to go down, down, down, until midway through 2015 and that’s when things started to go up for a little bit and then down. And it wasn’t until March 2017 that things really shot up, right?
Charlie: Yep.
Andrew: What happened in March 2017?
Charlie: Late last year I decided to spend more of my time on Litecoin to add what’s called Segwit to Litecoin. It’s a technology improvement that the BitCoin developers have worked on and have been trying to add to BitCoin, but it was stalled because of miners not wanting it. I figured that it was time for me to kind of start working on Litecoin to help push this through on Litecoin and to kind of set an example for BitCoin so show that this was actually a good technology for scaling BitCoin and also pave the way for lightning networks. So earlier this year, we managed to get Segwit passed and activated on Litecoin by convincing Litecoin miners to do it and when that happened, the price shot up.
Andrew: I see. And so you said, “Look, this is going to help BitCoin, but BitCoin isn’t jumping on it. My role here as the guy who created Litecoin is to bring it into the world. I could do it in Litecoin first and then it’ll get adopted in other places.” That’s what it was and that helped. Is that right?
Charlie: Yeah. So I knew I could make a difference for Litecoin and that would eventually help BitCoin and I think that really did help BitCoin get Segwit eventually.
Andrew: I read a little bit in preparation for this interview on Wikipedia. Here’s a sentence that I thought helped explain a little bit. It says, “It’s intended to solve a block chain size limitation problem that reduces BitCoin transaction speed. It does this by splitting the transaction into two segments, removing the unlocking signature (‘witness’ data) from the original portion and appending it as a separate structure at the end.”
Charlie: Yeah, close enough.
Andrew: What do you think? It’s not clear? You know, by the way, I don’t know this stuff very well. I’d prefer it if you’d say, “Andrew you’re wrong.” I don’t have any emotional connection to being right here. So tell me. How would you explain it?
Charlie: Well, your explanation is good for the average person, I think. I could get a little more technical, but I’m not sure if it would really help that much.
Andrew: I see.
Charlie: The term Segwit is short for Segregated Witness, and the idea is the witness being the signature of a transaction. The idea is that the signature of a transaction can be moved to a separate part of the block chain so that it’s not part of the transactions. The reason why that was done is to fix something called transaction malleability, where you can actually tweak the signature a bit and still keep the signature valid, but it would cause the transaction ID, which is the hash of the whole thing to change. So, because of the transaction malleability, you cannot create transactions that depend on the previous transaction that hasn’t confirmed. So you can’t say, “I send coins to you and then you send those coins to someone else.” That second transaction may be invalid if someone messes with the signature of the first transaction before it actually gets into the block chain.
So, because of this problem, something like lightning network cannot work as easily because you can’t create transactions that depend on a previous unconfirmed transaction. That’s why, by moving the signature out of the transaction block, the transaction ID will not change anymore, even if the [inaudible 00:40:41] changes. So it’s a very technical fix. The side benefit of that is it allows larger blocks because the signatures are stored separately. It’s kind of a win-win, where you fix a big problem that makes it easier for a second layer solution, like lightning network, and also you get a small block-size bump and all that can be done with a [inaudible 00:41:08], which means that there’s no risk of splitting the chain.
Andrew: And creating multiple currencies that are competing with each other. All right, let me take a moment here to talk about my second sponsor and then I want to come back and ask you a few questions about ICOs and about the things you do on Twitter. The reason I said Twitter by accident and Tech Crunch as your past company is because I’ve got Twitter and Tech Crunch on my screen with some things you’ve done where they’ve talked about you. And I also want to understand your future and why you’re doing interviews like this and like some of the ones I’ve seen you do on Twitter.
The sponsor I’m going to talk about is a company called Toptal. You live in Mountain View. Is that right, Charlie?
Charlie: Yep. Well, the Bay area.
Andrew: In the Bay area. Where do you live, roughly?
Charlie: Mountain View area.
Andrew: So you live fairly close to Google. You understand that things are very expensive over there, that many people prefer to live in San Francisco and then they drive all the way down to Mountain View, which I don’t know how they work on that fricking Google bus. I heard that it was so posh. If you look inside, it’s not posh. I mean, there’s nothing posh enough to make me want to sit there for an hour and a half each way from San Francisco, right?
Charlie: Mm-hmm.
Andrew: I’m not the only one. There are a lot of great developers who say, “I don’t need that life. I’m going to go back to whatever country I’m from, whatever city I’m from, and I’m just going to work from there and I can still work on great projects, interesting challenges and that’s what Toptal recognized. They found all these incredible developers who really are Google-worthy, worthy of working at Facebook and some of these other major companies but just don’t want to deal with the commute, don’t want to deal with the lifestyle that goes into sleeping basically at your desk all the time. And so Toptal put them in a network and now when anyone wants to hire the best of the best developers, they can go to Toptal and Toptal will introduce them to them.
I can imagine somebody listening to me and saying, “Hey, you know what? Andrew’s about to talk about ICOs. Maybe I just hire someone from Toptal to create my ICO. I’ll write the white paper and then we do the ICOs. Toptal will create it. Yeah. Anything that you want they can do because they have some of the smartest people on the planet in their network. So, if you’re out there building something and you want Google-caliber developers, Facebook-caliber developers because they’ll really grow your projects and in a direction that you can’t think of on your own, I want you to go and check out not just toptal.com. That’s for the regular people. I want you to check out a special URL that they created for us because Toptal is founded by two Mixergy listeners, where they’re going to give you 80 hours of Toptal developer credit when you pay for your first 80 hours and that’s in addition to a no-risk trial period of up to two weeks, so they really are committed to giving you a good developer or developer team. Go to toptal.com/mixergy.
All right, Charlie. I saw you on Twitter saying “Hey guys, leave me out of this whole ICO thing. I’m not looking to show your ICO, no matter how rich I am.” ICO is Initial Coin Offering.
I understand what an IPO is, right? I have my business, I’m going to sell a few shares of my business to other people. They essentially own a piece of my business now, and I have fiduciary responsibility to them. They’ve given me money that I invest in the business in a way that helps all of us grow, right? They give me money, they get shares, I grow their business and the business is now owned by both of us.
In an ICO, I would just create a Mixergy coin. What does somebody get for that?
Charlie: Probably nothing.
Andrew: Nothing. They just get a coin. That’s like my own version of Litecoin. I could basically copy your whole Litecoin thing. I could just relabel it and call it LiteAndrewCoin and people will buy the initial batch of them. I get their money, they get these coins, what happens? Nothing.
Charlie: Yeah, so initially people create ICOs where they are creating a coin that supposedly has a function in whatever product they are creating, like if you’re doing a kind of decentralized casino, let’s say. The coins would be used for the casino, so the coins would have some inherent value. So you’re selling the coins to your investors and saying, “I want to use the invested money to build this decentralized casino and then, in the future, when the casino is up and running, the coins will have value.”
The thing with ICOs is that it’s not regulated so some ICOs the coin actually has a purpose, but for most ICOs the coin doesn’t represent anything. It’s just coins that don’t represent any [inaudible 00:45:42]. It doesn’t even represent any utility. The thing I feel is that most of them have actually pumped up in value. Like you sell to these investors and then when it actually gets on the exchange, the value goes up and then you can easily sell the coins you bought for like 10 times the price you paid for it. So it creates kind of like a pump-and-dump kind of environment, which is really bad. It’s kind of just gambling.
Andrew: Where I wouldn’t necessarily have any functionality for an AndrewCoin or a LiteAndrewCoin or whatever I would call it but I’d sell it and I’m making money and people feel like maybe they have an ownership of the business but they really don’t and I get out as soon as it’s published. Do you see a world or do you see good uses for it that we haven’t noticed yet?
Charlie: Well, I feel it’s a good way to kind of raise money, but the problem with that is it does it in a way where it’s not good for either party because the company that’s using ICOs to raise money, then incentives aren’t really aligned where they get all this money, like tens and hundreds and millions of dollars like right away before they even have a product. And once you have the money, where’s your incentive to actually build a product? You’ve actually already cashed out in some sense, so I think it’s really bad for everyone involved and the coin becomes a place where it’s kind of like penny stocks. People are just gambling and throwing money at it.
Andrew: I saw you argue with someone about this on Twitter and they said, “Well, what about Kickstarter?” And you said, “Well, in Kickstarter they have to actually get a product. If someone’s paying into a Kickstarter campaign, they have to get one. Here they’re getting coins with the expectation that something’s going to happen but not an obligation on the creator’s part to create this casino or whatever it is that they’re going to do.”
Charlie: Yeah. The reason I made that post is I’ve gotten a lot of inbound requests for me to become an advisor for a coin and they would give me shares of, or I feel tokens, at the low market price even. So what they actually want to do is they want to use my name to kind of promote their coin and people would see like “Oh, Charlie is an advisor for this coin, so it means that the coin actually is good. It actually has good technology behind it, so I’m going to buy it also.” So just by attaching my name to it, it would help bring more investors and yeah, it’s kind of like they’re trying to bribe me and I don’t even have to do any work. I don’t even have to advise them, just put my name to the project and they’ll make some money.
Andrew: Is Gurbaksh Chabal one of the people who asked you to be an advisor?
Charlie: Who is that? No, probably not.
Andrew: All right. He’s a guy who just came out with that ICO that Paris Hilton’s connected with.
Charlie: Oh, no.
Andrew: No, that’s not one of those people? I do wonder then about your finances. You’re now in a nonprofit, right? Your foundation is nonprofit.
Charlie: Mm-hmm.
Andrew: Why aren’t you building a business around this? Help me go back to your personality and your attitude on life. I want to understand and get inside Charlie’s head. Why not create a for-profit business? Why stay in the nonprofit world?
Charlie: Well, being like a decentralized currency, it’s not really like a for-profit company. Now, a lot of people say like I’m a CEO of Litecoin, which makes no sense, so I’m just the creator of Litecoin and I’m promoting it and then developing it, but I’m not running a company that makes money from my coin. For our nonprofit, we sell like Litecoin branded T-shirts or whatnot or a wallet. But it’s not like we’re preventing other people from doing the same. You can create your own Litecoin T-shirts using the logo. Everything is like open source and is free to use. You can sell Litecoin stuff. We’re not going to sue people to make it so that only our foundation can sell Litecoin-related products, so we’re not really out there to just make money. We want to promote Litecoin and help make Litecoin succeed and be [inaudible 00:50:14].
Andrew: You’re focused on this. You will make a salary, I guess, from the foundation, right?
Charlie: Well, I get paid one Litecoin a month.
Andrew: That’s it?
Charlie: Just a token.
Andrew: So why not do something else? You know what? I get why you wouldn’t do something else. I’m wondering what then, is your vision? Remember we talked earlier about the vision behind CoinBase? What’s your vision here? What’s the world as you see it for Litecoin five, 10 years from now, the world that you are sacrificing so much and spending so much time on creating?
Charlie: My vision is that Litecoin would be used alongside BitCoin for everyday purchases. Everyone would just use Litecoin.
Andrew: That’s it? You see me going in and getting a sandwich and paying for it with Litecoin and that’s the future that you want to work toward?
Charlie: Yep.
Andrew: Why? Why not BitCoin? Why not cash? Why is it so important?
Charlie: Well, the value of cryptocurrency is uncensorable transactions. It’s basically freedom of money where I can use money however I see fit without anyone being able to block me or stop me. When I first found out about BitCoin, I saw the value of BitCoin. Things like Wikileaks, for example. You can’t donate to Wikileaks with Visa or Mastercard or bank checks or whatnot because the government blocks it, right? And Wikileaks has a BitCoin and now a Litecoin address where you can donate to them via BitCoin and Litecoin and if I want to donate 10 Litecoin because I like what they’re doing to Wikileaks, I can and no one can stop me and I feel like that’s an important human right to have, which is freedom of money.
Isn’t there benefit in having the government create and manage a flow of money that in a recession they could increase the flow of money? And they don’t do it by printing more money but they do it by using lending but they’re creating essentially more money and so they enable the economy to grow when it needs to and when it needs to shrink because it’s overheated, they can do something about that too. Aren’t we now taking away the power for the people to do that, to manage their own economy?
Charlie: I feel like messing with the economy is not really the government’s role to do. Kind of just let it be and it will manage itself. I don’t agree where they would print more money to kind of spur the economy. I don’t feel like that’s the right thing.
Andrew: You don’t feel that’s the right place for the government to be?
Charlie: Yeah.
Andrew: And so that’s part of what you’re taking away just so we can make it easier for Wikileaks to process payments. Try and think of other examples where you can’t use a credit card.
Charlie: Well, it’s also like . . . For example, I play poker and I used to play poker online and I feel like that’s something that doesn’t harm anyone. It’s my money. And poker is a game of skill. It’s not even like gambling, so the fact that the government can just shut down all the online poker sites and say I can’t play poker anymore I feel like is just wrong.
Andrew: I see. So, we have poker, Wikileaks, I’m guessing Weed is an issue, right? That for a long time, governments around the world or certainly North America were against weed. Now I’m seeing that things are easing up but in those periods where weed was just as potent as it is today and people couldn’t access it, BitCoin and cryptocurrencies would have made that accessible. Where else? What other products are we being kept from buying and selling and that this is going to ease up and allow us to do it?
Charlie: Another thing is cryptocurrency makes it very easy for cross-border payments, where someone on the other side of the world can try to sell something to me but currently they can’t, right? It’s just hard for me to actually pay them. They can ship the item to me. It could be anything, right? It could be a basket made in China that I like, but there’s really no way for me to pay them, like, it’s just almost impossible, like, they don’t accept U.S. credit cards. But you can put up a QR Code that accepts BitCoin or Litecoin payments and I can send them money. This is something that I think will flourish. It will become more and more popular where you can just have global trade or where using cryptocurrency just makes it very easy.
Andrew: You know, I thought this was a solved problem, but you’re right, it still is not. The problem is it’s not even about shipping. I got together with one of my past interviewees, the founder of Needles. All he does is he makes it easy for plumbers and small-to-medium size businesses to buy ads online because they don’t know what they’re doing. His software will do it for them. He’s a Canadian. He’s just from fricking Canada. He’s not even like on the other side of the world. He’s not in a country that the U.S. hates. He’s in Canada. He just wants to accept payment, and he says when he accepts U.S. credit cards on his Canadian processor, people’s credit cards get blocked for a moment because they think that the credit card was used overseas.
I said, “What about Atlas? The Stripe guys are making Atlas available to international companies.” He said, “Yes, I use it, but that guy over there can’t.” I said, “Why not? He’s a new company. He could just start as a U.S. company through Atlas, which is Stripe’s offering to enable international companies to operate kind of/sort of as U.S. companies and accept credit card payments.” He said, “You know what? Even with Atlas, it takes me $10,000 to $20,000 in accounting fees just to accept payment from the U.S.”
All right. I get it. I see the world that you’re trying to bring about. Let me ask one last thing. I saw you on Twitter. The reason I sent you a mic is you engage with everyone on Twitter. Someone said, “Great interview,” that you did somewhere else. “The mic is crappy.” You didn’t just blow it off. You said, “What’s a good mic I should buy?” You are posting interviews that you do. What’s your vision here for Twitter? Why are you active on Twitter?
Charlie: I feel like Twitter is a good social network where I can actually talk to people who use Litecoin. Yeah, recently I’ve been very active on Twitter. It’s a good way for me to kind of express my thoughts, just quick blurbs of what I feel that day and it’s a good way for me to kind of explain to people what I understand about cryptocurrency. I feel like cryptocurrency is such a complicated topic. Most people don’t really understand it and me being in this space for six years now, I know a lot about it and I feel like I can kind of help other people understand it.
Andrew: Partially as an evangelist for cryptocurrency and Litecoin, right?
Charlie: Yeah.
Andrew: All right. I’m going to close this out.
Charlie: It’s also funny that people follow me for different reasons. So I have people follow me because I am the creator of Litecoin. I have people following me because I know a lot about cryptocurrency, and a lot of people follow me because they want me to kind of pump Litecoin, so when I don’t do that, they’re like “You should just get back to your job of just creating Litecoin code and just pump Litecoin, right? Why do you care so much about BitCoin and everything else?” But it’s about the whole cryptocurrency space. It’s not just about Litecoin. Yes, I did create Litecoin but that doesn’t prevent me from commenting about BitCoin because I created Litecoin, right?
Andrew: Yeah. I love your handle on Twitter. It is SatoshiLite. Such a great fricking name. Thank you so much for doing this. The place for anyone who wants to go find out more about Litecoin, should I recommend they just go check out Litecoin.org?
Charlie: Yeah. Litecoin.org or Litecoin.com. Check out my Twitter.
Andrew: Oh yeah. SatoshiLite, a really great Twitter account. And finally, the two sponsors who made this possible, activecampaign.com/mixergy and toptal.com/mixergy. Charlie, thanks for hanging on a little bit longer than we expected. I appreciate it and thanks for doing this interview.
Charlie: Sure and thanks, Andrew.
Andrew: Bye everyone.