Interview with Ryan Selkis, founder of Messari

Ryan Selkis, also known as TwoBitIdiot, is a founder of Messari, an open data service bringing transparency to cryptoassets industry through analysis, projects’ disclosure registry and an abundance of no-BS metrics. Before founding Messari, he was a managing director at CoinDesk and a director of growth at Digital Currency Group. Ryan earned his street cred by being one of the first to run the story of the bankrupting Mt Gox in early 2014.

KryptoJoseph (KJ): You’ve been involved professionally in the industry for more than 5 years now. What has been you main driver - business opportunities or political philosophy?

Ryan Selkis (RS): I definitely come from a more libertarian camp. Upon seeing the actions of governments and banks worldwide trying to devalue the currencies and prop up asset prices, Bitcoin’s thesis as a digital gold resonated strongly with me and initially I got involved as a speculator. As I learned more I got even more fascinated by the potential, not just for payments but also as a new way of organizing people and information. The interest and potential applications have expanded for me over the years, but the core ethos of protecting wealth and being sovereign as an individual was the main motivation for me.

KJ: What’s your take on Bitcoin maximalism?

RS: I consider myself a rational economic actor. I try not to fall in love with any of the protocols, but I also think that right now, from the investor’s point of view, Bitcoin is the least risky asset and has the fewest headwinds in terms of selling pressure. For example if you consider the competition Ethereum has in terms of smart contract platforms or think about the lack of liquidity and general interest in any ICO projects, Bitcoin is a much less risky choice. This seems to be a trend that won’t change any time soon. I look at the fact that Bitcoin has so much attention globally and at the macro scale and is becoming to be taken seriously as a digital gold and it seems that Bitcoin will be the first crypto asset to cross the chasm to mainstream adoption. Having said that, I think in five to ten years many other applications are going to be equally interesting. But it’s going to take much longer for the non-store of value applications to take root.

KJ: What kind of use cases can Bitcoin satisfy over the long term?

RS: For Bitcoin, it’s quite simple: the ability to store your wealth and secure your assets in a provably scarce currency, has low inflation and has already proven its resilience in large scale wealth transfers. The ability to move tens or hundreds of thousands of dollars or even more via the Bitcoin blockchain in a way that is very difficult or impossible to block is a sufficient killer app. We don’t need lending, derivatives or smart contracts on the base layer to prove the value of Bitcoin.

KJ: Do you currently see any project beside Bitcoin that would satisfy a real use case? For example, do you see any value in the DeFi stuff that’s getting build on Ethereum?

RS: Although I believe in DeFi, onchain lending, decentralized exchanges and so on, I think it’s going to take much longer to become as pervasive and interesting as something like Bitcoin. Bitcoin is much simpler and has a much wider potential audience in the near to medium term.

KJ: In your 96 Theses for Crypto and in other places you talk about your belief in an eventual hard fork to a steady, low inflation monetary policy of Bitcoin. Could you elaborate on why this could happen?

RS: I think it might end up being the best option to preserve Bitcoin’s security model. But I’ve also said it’s not even worth talking about for another few years. When I mention it it’s more as an eventuality rather than something that I would personally propose and advocate for. As to the question of why the switch to steady inflation is on the table, I just think that low level of steady inflation is much more predictable and reliable than the reliance on steady transaction fees. It remains to be seen if this view gets adopted more broadly without causing another big split in the community. But again, I think it’s a conversation for a few years from now.

KJ: In your 96 Theses you also say that Bitcoin is a highly correlated risk asset. Recently I saw an analysis showing that Bitcoin is gradually becoming a risk-off asset. Do you believe this is happenning?

RS: We will have to see how it behaves in the next financial crisis to be sure. If something big like a collapse of Lehman Brothers in 2008 happens and the market is spooked, I think everything will go down and bitcoin will have a pretty tough period then. But if we’ll have a gradual, inflationary recession where asset prices continue to increase and interest rates continue to be near zero or negative in some countries, that’s when we’ll see much more interest in Bitcoin. Overall I think the stagnant or gradually declining economy is better for Bitcoin’s performance than a severe crisis.

KJ: One of your thesis is that Lightning Network could see massive growth in capacity, reaching $100mm. But with a good part of the year already behind us, we see the capacity is actually declining in bitcoin terms, from 1000 bitcoins at the beginning of the year to around 800 bitcoins now.

RS: I think Lightning Network along with other layer 2 protocols are still extremely early, so I don’t worry about the lack of capacity growth too much. It’s more about finding the right applications for streaming payments or micropayments that people will really use. As the actual applications get usage, Lightning will get much more widely used and the liquidity will grow accordingly.

KJ: I’ve recently seen a lot of promotion of custodial services like BitGo and BlockFi among prominent bitcoiners (mostly podcasters). I’m personally afraid such custodians make something like a crypto version of Executive order 6102 more tempting. Do you think these services are beneficial or harmful overall?

RS: If crypto becomes large, the credit markets built on top will become equally large. Healthy credit markets are the basis of the monetary system, but the initial lending applications are naturally for short selling and hedging, to accommodate needs of speculators, miners, and exchanges. So I think these centralized services are a necessary tool for building liquidity and building up the health of the ecosystem.

KJ: What approach toward building up of the crypto credit markets is better - centralized services like BlockFi or decentralized open finance like Ethereum DeFi?

RS: There’s still so much that needs to be built in terms of decentralized infrastructure that it probably doesn’t make sense to focus on decentralizing everything at this stage. Different components need to be decentralized over time, there’s no point in being militant about having every single component in the stack decentralized. For example, the oft-mentioned “threat of Infura” isn’t too concerning now, but it should be when Ethereum grows to a larger scale. It becomes a problem once a sufficient number of developers build financial applications that see a lot of usage on top of it.

KJ: Last question: do you see any obvious obstacles to Bitcoin adoption?

RS: I see no obvious obstacles to bitcoin adoption right now, other than user education and marketing.

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