Grove: Are there applications for Bitcoin beyond use as a currency?
Berger: Absolutely, one of the most interesting is that Bitcoin allows for each unit of value to be programmed for a specific use.
Grove: Does that mean that charitable contributions can be earmarked for specific activities? Or, in more practical terms, that a parent could give a child money for text books and clothes and be confident that the money wasn’t spent on, say, video games and cigarettes?
Berger: There are entrepreneurs working on exactly that application right now. The blockchain technology also permanently records events, whether contracts or publications or anything else. Bitcoin allows for applications that had never before been imagined and likely many that have yet to be imagined.
Grove: Has Bitcoin helped create new wealth?
Berger: A lot of wealth has already been created and much more is likely to be generated in the future. My expectation is that the wealth created from Bitcoin will rival the fortunes created by the internet.
The Bitcoin economy has grown and changed exponentially since the concept was first presented at the end of 2008. The value of bitcoin, while volatile, has grown from zero to more than $300 a unit. At one point, in early 2014, each unit was valued at more than $1000. Over $300 million of venture capital has poured into businesses in the ecosystem and companies have emerged to raise and manage Bitcoin-related assets. We are talking about something truly revolutionary with tremendous growth potential.
Grove: In Reinventing Finance (Private Wealth, Nov/Dec 2014) venture investor Marc Andreessen talks about the opportunity that crypto-currencies have to reinvent the entire financial system outside of the current processes. What does that mean for the role of trusted advisors?
Berger: First, financial advisors must provide real and valuable advice to survive. Anyone that simply sits in the middle of a transaction will be dis-intermediated over time. Second, financial advisors need to get educated on the opportunities and risks presented by Bitcoin. Those that do can be part of defining the future of finance. Those that don’t will miss this exciting phase and be left to determine how they can best function in a redefined environment.
Grove: What’s the regulatory landscape for Bitcoin like now and how do you expect it to change over the short-term?