Mr Schwab, before we get into the topic, tell us something about your career so far and especially how and why you got into the world of cryptocurrencies?
Frank Schwab: I trained as a banker 32 years ago and then studied business informatics, but have remained loyal to banking for 32 years now and, among other things, was at Deutsche Bank for 21 years and implemented the Yahoo Deutsche Bank 24 credit card there in 2001, for example. In principle, that was already a digital currency with which you could pay at the first online shops. In 2010, I started my own business and worked as a consultant for banks when it came to transformation and change. In the same year, I joined Fidor Bank, which is also where I first came into contact with cryptocurrencies and blockchain.
How would you explain Bitcoin to someone in a short and simple way? Why are the blockchain and Bitcoin really a revolution?
Frank Schwab: The monetary system and the payment system we know and use it today dates back to the 19th and 20th centuries. The payment processes were never built for this digital world as we experience it today. And that is completely different with a Bitcoin: The Bitcoin was only built for this world and that is already a significant difference in handling. The other thing is the transaction fees. They are very different in an international comparison, depending on whether you pay with your credit card, by bank transfer, etc. The fact that the Bitcoin is ultimately a private matter is also important, that the Bitcoin is private money or a private digital asset. With Bitcoin, there is neither a state nor a bank nor a central bank behind it, but only this open-source software. And all those involved who make this Bitcoin network available and who believe that Bitcoin is a digital asset for the digital world.
In any case, the regulators are having a hard time classifying it. Is Bitcoin an asset, a currency? How would you actually classify Bitcoin?
Frank Schwab: First of all, there is the traditional, so at the very end, money is what two parties who want to exchange value accept as payment. And if there are two people who say okay, Bitcoin is good for me, then for those two people it is exactly a medium of exchange. Traditionally, there are three criteria with which you can define money: Is it good as a unit of account? You can do that with bitcoin, but not very easily. For example, a car costs 1 or 2 Bitcoins, a bread roll is a zero with several decimal places, but somewhat inconvenient in everyday life. The other thing is service as a payment transaction. So Bitcoin is totally easy to transfer from A to B if you have a corresponding app - for the digital natives that's no problem. And then you also get over the store of value. Bitcoin is admittedly insanely volatile seen in its very large fluctuations in value, but it's not like gold doesn't have fluctuations and it's already somehow comparable to gold. So all in all, I would say that bitcoin fulfils all three requirements for money, and many cryptocurrencies do. But there is another capability that money traditionally does not have, whereas bitcoin or other cryptocurrencies do. Many cryptocurrencies have the property that they are also programmable. As an example, you could trigger certain payments depending on the published profit, for example, or you could think of a currency for people under 18 that they can use to buy everything except alcohol, etc. That's what ultimately makes cryptocurrencies potential currencies. And that was the question: is it money, what makes it potential money? But we also have to somehow take into account how young this concept and these thoughts are. The general public has only been talking about it for five or six years, if at all.
In your book you describe an analogy to the automobile. Here, the skepticism was so great at the very beginning that people had to walk with flags next to the moving cars.
Frank Schwab: That's the way it is when it comes to innovation. At the beginning, you don't know exactly what you have and where it will lead. In the end, however, it is not relevant for the masses how it is technically, but rather the question: What benefit does this kind of money bring? But at the moment when it is useful for a certain group, there is a very high probability that it will be used.
We established earlier that money is trust. Why should I trust the blockchain and no longer a central authority such as a central bank or commercial bank or the state?
Frank Schwab: I'll try to explain it another way. Why do we believe that the plane will land? Why do we get on a plane? Ordinary mortals don't understand why these many tonnes of steel are flying in the air, nor do the majority understand how such a plane actually works. I can imagine a little bit, but honestly, I don't know. Why do I get on anyway? Because I've seen enough others get off. And when I flew the third time myself, the fear of flying also disappeared, simply because of the repeated positive experience. And then I just have to trust the people who fly such a plane. Comparing the blockchain to a digital land register or a digital cash register is a very good comparison, because every cash entry is recorded. For example - and this is what distinguishes the blockchain from everything else - I can't reverse a transaction. So once I have made a transaction, it is recorded for all eternity. And the special thing is that anyone who has a certain technical understanding can understand it. And that's a big difference from many other things. I don't know how many people there are on earth who know exactly how an airplane works and who can build and control one. Many more people could check whether what is happening in the blockchain is legal. And that is the big difference. It is also built in an open source way. This means that everyone can see the code, everyone can contribute to the code and make a contribution. If the majority of those involved find this change to be good, then it even goes into the further development of the code.