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Crypto/Blockchain Interviews

JP Thieriot (YC 91), CEO of Uphold, Leading Digital Money Platform

JP Thieriot is Chief Executive Officer of Uphold Inc., previously serving as the company’s Vice-Chairman for five years, and Co-founder of the Universal Protocol Alliance, where he spearheads strategy and operations with the goal of onboarding 100 million people to cryptocurrency. Since its inception, Uphold has powered more than $4 billion in transactions, serving 184+ countries across 23 fiat currencies, 12 cryptocurrencies and tokens, and 4 commodities. Notable Uphold partners include UTRUST, Ledger, Brave Software, BitGive, and at least 12 others. To date, they’ve acquired JNK Securities, Scytale, Bitnet, and Cortex MCP.

Mr. Thieriot also serves as Co-founder and Director of San Francisco-based Estancia Beef. His prior experiences include co-founding Catalan Advisors, a fund specializing in sustainable cattle production, high-end beef, organic agriculture, and land investment, and working for Hambrecht & Quist out of college. Mr. Thieriot received his BA in History from Yale University.

The Politic: What’s your background? How did you get involved in crypto?

JP Thieriot: In terms of the various things which led me here, one of them occurred literally at birth. I was born in Argentina in 1968. Argentina’s problems certainly started before then; they started in earnest with Perón. But the time of my childhood in the 70s was a period of hyperinflation. In fact, it was the type of hyperinflation seen in pre-war Germany and today in Venezuela.

That was my childhood, and not coincidentally, it was also the childhood of Wences Casares, the guy widely regarded as “patient zero” of Bitcoin. Wences started Xapo, and many people think he might be the single largest holder of Bitcoin in the world. Certainly, he’s the guy that got Silicon Valley interested in Bitcoin by giving it away to them and by generally proselytizing it early in the game. I’m talking 2011, 2012, or 2013.

In his case, he’s also Argentine, he’s roughly my age, and he constantly alludes to the fact that in a culture very, very different from American culture, you don’t come out of the womb assuming that the bedrock, or the base pair for everything is your home currency. Americans unquestioningly relate everything to the US dollar. When you grow up in a place like Argentina, you realize you don’t have that illusion. Currencies are relative to one another, and if you live in a place like Argentina, then you have to figure out how to work around the shortcoming of whatever currency you had the misfortune of being your local currency. What that meant as a kid was that your grandfather would give you 100 Argentine pesos to buy a magazine or a plastic toy, and if you didn’t buy those within a couple of hours, your bank note would no longer cover the costs. So, that’s one big component of my interest.

The other component was that I’d been on the East Coast since boarding school, and after leaving Yale, I wanted to move back to California. All of my buddies went to work for banks or consulting firms in New York, and I did the unusual thing of going back to San Francisco to work for Hambrecht & Quist (H&Q), a bank that was very, very small at the time. They were really the first technology investment bank.

Bill Hambrecht perceived that these new companies springing up around Stanford University, weren’t well serviced by the New York-centric, Bulge Bracket investment banks. So, Bill Hambrecht and George Quist started H&Q. Before I got there, they’d done the IPOs for Apple, Genentech, and Adobe in the 1980s. Luckily for me, I graduated in 1991, and I arrived at H&Q six months before anyone had heard of the term, “World Wide Web.” When the internet came around, H&Q did the IPOs for Netscape, MP3.com, Amazon.com, and CNET. We went on to have major market share with all the internet IPOs.

What eventually happened is that a couple of other banks sprang up as competitors, including San Francisco-based Robertson Stephens and Montgomery Securities. All three of us were bought by large New York firms. We were bought by Chase in 1999, and I literally left the day after we were acquired to start up my first entrepreneurial business. I guess the combination of both the Argentine component and the internet component are what made me sensitive to the nature of opportunity when something like Bitcoin comes around.

To me, the significance of Bitcoin was, “Holy shit!” For the longest time, the financial industry had dodged being torn down to its studs and rebuilt in the internet’s image– just like every other industry. Bitcoin heralded the end of that by presenting a solution for some longstanding cryptographic and computer science issues: It was the harbinger of an internet of money.

So, we started what was then Bitreserve, before changing the name to Uphold, in early 2013. Our view is a bit different. We never thought Bitcoin was going to be, of itself, a mass consumer value proposition. But, we understood Bitcoin to be revolutionary, and again, a harbinger of something that could easily end up being as big as the internet itself.

Do you think this tech resembles the ultimately-consolidated U.S. motor vehicle industry of the 1920s, or the less-consolidated internet boom of the late 1990s/early 2000s?

Look. It’s very early, and I spend a great deal of my time trying to parse between what was the Google that would have gone to sell itself to Alta Vista for $750,000 versus the Pets.coms that managed to IPO. The change is feverous. I think Bitcoin itself has very likely settled into something that everybody regards as digital gold, and I think there’s just no need for anybody to knock it off of that perch. It’s got first-mover advantage. It’s the original. It’s got a large network, a large community, and a lot of good developers.

Obviously, all of these forks and other things sometimes relate to disagreements and most of the time relate to opportunism. But, I think that’s rapidly become a game of diminishing returns, so I see less people attempting that kind of opportunism and less reason for them to try it in the first place. Bitcoin is gold 2.0.

Here’s the question: What remains? Actual utility tokens and transactionally-oriented technology directed at a system which still depends on checks, SWIFT, and IBAN, not to mention a correspondent banking system that’s unchanged since the fifteenth-century Medicis.

All of those institutions are going to be attacked head on, as you can see with Ripple going after correspondent banking and Dash going after street-level merchant acceptance and transactionality. I’m not sure that they’re made it to the level of Bitcoin, but they’re worth many, many billions of dollars, and I suspect that a lot of these companies are here to stay.

China’s inserted itself into the equation by driving so much of the speculative hype bubble. There’s an odd dynamic where American companies are somewhat stifled by the local regulatory apparatus, while at the same time, Chinese competitors are allowed to run rampant. A lot of the market is over in China, so I guess that’s okay. But, I do think that the regulatory picture will have to become clearer in order to stop hamstringing American competitors. In fact, you’re already seeing a lot of would-be-American companies going overseas.

It’s interesting for me to see Libra, in its ill-advised attempt, set itself up as a Swiss company. But yeah, I think the long and short answer is that plenty of folks around today will be very large in the future, and plenty of them will go away.

To understand this tech, do you need to put yourself in the position of somebody from an emerging economy or the developing world?

If you’re a young American today, you’re pretty well served by PayPal, Venmo, and banks with decent technology, access to credit, and all that. The Americans that are participants today are not participants because of any survival necessity. They’re participants out of curiosity, and they think it’s nice to have things.

If you’re an Uphold participant in Venezuela, it’s probably not nice to own crypto. It’s survival. You’re paid in Venezuelan bolívars, and the 15-thousand percent inflation of Austria Hungary would be a luxury. Venezuela is closer to 200 thousand.

The people of Venezuela need crypto assets to preserve the fruit of their labor as quickly as possible. We’ve presented a means for them to access U.S. dollars, physical gold, and Bitcoin, which though it may be speculative and volatile, is still a whole lot better than Venezuelan bolívars. Not to mention, at least it’s volatile in both directions.

What does Uphold do exactly?

Uphold is a global platform that allows seamless conversion between 30 fiat currencies, 9 cryptocurrencies, and a handful of commodities including gold. Very soon, we expect to get our SEC license, allowing us to add fractional shares: Apple, Google, Tesla, and basically all other, mostly tech-related, U.S. securities.

Think about it. If you’re a Venezuelan, you’ve probably never had access to those securities in the past. Now, you’ll be able to access them from your mobile device, pretty much anywhere but the OFAC countries. We’ve got clients in 182 countries, we’ve got 1.5 million users, and we’re growing about two thousand users per day.

We don’t really market that much, but we’ll probably start towards the end of the year. We’re issuing a debit card which will allow people to hold their balances in whichever form they’d prefer and ultimately spend it, too. I think it will be the first card of its kind. There are fiat cards, but they don’t allow users to toggle between the two forms, crypto and fiat, and spend their assets. We have lots of new feature releases, new geographies, and new types of financial content all coming out between now and the end of the year.

Who are your competitors? Why are you better, for instance, than Coinbase?

Our competitors are Coinbase, Robinhood, and Revolut. Those are the big three. We have much broader content than Coinbase, we’re much more global than Coinbase, and I’d argue that we’ve historically been much more innovative than Coinbase. They essentially started as a place for people to buy Bitcoin, and their main differentiator was their connection to U.S. banking through ACH. We have that. A year ago, we allowed people to buy XRP, Bitcoin Cash, and crypto assets of that nature. Coinbase has since followed us into broadening the nature of the crypto space they cover. They’re eight times bigger than us, maybe a little more at this stage, but they’re very U.S. centric.

The other thing I’d call out is that we really emphasize open API for third-party digital applications. Today, our growth is really driven by partners building on our API. For instance, everybody should use the Brave Browser. It’s faster, it’s better, and it’s more private than Safari or Chrome. When we partnered with them three years ago, they maybe had 500 thousand users. Today, they’re approaching 50 million users. They exceeded Chrome and Safari for downloads last month, or the month before, and my feeling is that they’re about to go Supernova.

How does Brave work?

The Brave Browser captures your behavior just like Safari or Chrome, but they have no way of using your private information: They can’t sell it, it can’t be hacked, and it’s generalized.

That leads to a reorganization of the flow of money between advertisers, publishers, and us consumers of the internet, and what they propose is that we–the end users–are paid for our basic attention. If an advertiser comes to Brave and says, “How many people are looking at golfing content more than one hour a week?” they’ll say, “We have 150 thousand of those users. We don’t know their names, so we can’t have you stalking them in every online context, but we can allow you to offer them–again, on a generalized basis–money for looking at your five-minute video on your new fancy driver or golf destination.

You, as a Brave user, would be notified that Titleist will pay you $10 for watching that five-minute video. Most people would be very excited: It’s content of interest, and they’re paid for watching. How? Brave is sharing 70 percent of their advertising revenue with the end-users. In doing so, they are entirely reorganizing the way that money flows, and they strip the internet of $10 billion in parasitic adware, completely removing the possibility of Facebook and Google selling your private information.

By partnering with companies like Brave and allowing them to use our payment capabilities, we’re basically the mission-critical wallet and payment infrastructure for them. Aside from them, we’ve signed up the next three-to-four largest crypto ecosystems. That’s how we’re markedly different from Coinbase, Robinhood, or Revolute.

How does Brave make money?

The guy that founded Brave is Brendan Eich, the inventor of JavaScript and the former CEO of Mozilla. Brendan is quite possibly–no hyperbole–the single most respected technologist on Earth. You’d think that anybody else trying to take down Apple and Google in this game is tilting at windmills, but nobody perceives what Brendan’s doing as that. If you end up owning decent browser market share, you’re already well-monetized. If you had 30 percent the advertising income of a browser that has 10 percent of world market share, you’d be rolling in income.

Any thoughts on Yale?

Hopefully most people are thinking this way, but if I were a Yale student, I’d be torn between profit motive and improving the world. There’s not a single industry that’s even vaguely as interesting as, let’s call it, “Finance 2.0.” Finance 2.0 has crypto and blockchain as major constituents, but there’s more plain vanilla, five-party-payment system-type FinTech too. I’m referring to the more truly revolutionary ones that will be the beneficiaries of 1s and 0s drifting out of the five-party payment, banking sort of system and into a real internet of money. I’d say that’s the single most interesting place I could imagine being involved in as a young person today.

The flipside is that sometimes I really do wonder whether all of this technology matters at all in a world of seven billion consumers, where Trump is trying to take us back to oil and coal. So, I don’t know. If I’m 21-years old today, I’d think long and hard. There’s an ocean of plastic in the Pacific. Fish species are dying out. All of these problems are tractable and fixable, but not unless a whole generation makes it a priority, and it’s getting grim.

I’ve heard that that Bitcoin is pretty terrible for the environment in terms of energy consumption. Is that accurate?

That’s absolutely true, but that’s for “Proof of Work,” and specifically Bitcoin. It’s pretty staggering. The tech consumes more electricity than the country of Australia. We’re starting to move from a “Proof of Work” model to a “Proof of Stake” model which doesn’t burn any meaningful electricity.

Then, at Uphold, we launched something called the Universal Protocols Alliance, and our idea was to wrap everything in Ethereum, knowing that they were moving toward Proof of Stake. We can wrap Bitcoin and ERC-20 in Ethereum, and in order to transact, you’re using Ethereum-based smart contracts and an ERC format which, again, will move us away from any Proof of Work and completely mitigate that idea you mentioned.

Additionally, you eventually get to so many efficiencies through Finance 2.0 that translate all the way down the supply chains, including transport and commerce of every variety, that you end up solving a lot of the problems that were present at Proof of Work’s conception.

Final thoughts?

It’s an exciting area because it’s essentially the internet extending itself into a huge domain from which it’s always been locked out, and because of the notion that Bitcoin has changed all of that. It’s going to take 20 years for finance to be reinvented, but hopefully we end up with a far more equitable world where somebody can live in Madagascar and get the banking services they would receive in New York, or even cheaper access to financial services. It’s immensely exciting and immensely valuable for the world.

One thing we do at Uphold is make a point of being hyper-transparent. You can go to our transparency page and ask yourself if you’ve ever seen a financial institution that–in real time–lays out what they and their clients are holding in reserve. No bank does that, and the fact that no bank does that is what led to the savings and loans crisis and the 2008 crisis. The banking system of today is not transparent, continues to be built to fail, and only works because there’s government insurance and taxpayer money making sure that when things go wrong, not everybody loses all their money.

What’s very possible through this new paradigm is a financial system where the taxpayer doesn’t have to be there to bail out the crappy DNA of the system. We’ve invented an alternative system which is a lot better and actually works. Often, I think what gets lost, due to people being pretty religious about decentralization and a lot of other buzzwords, is the simple fact that increased transparency alone would be a huge improvement on the current system along with first-time access. Decentralization is great, but that trips over into that line that’s perhaps a little too libertarian to be in the best interest of what should come first: mass adoption.