Towards machines as first class citizens in the world of money

A chat with Ben Chan, CTO of BitGo

Hello DeFiers,

In this edition of My Two Gwei we are very excited to bring you a chat with Ben Chan, CTO of BitGo, one of the world’s largest custodians of crypto.

Read this edition of My Two Gwei as Ben gives us his take on the future of custodians, the upcoming explosion of BTC-on-Ethereum projects and how wBTC liquidity will improve soon.


A Chat with Ben Chan

Hi Ben! Thanks for taking the time for a chat with My Two Gwei - it’s a pleasure to have you here.

As usual we like to start back in time: how did you get into crypto? Why?

As an engineer at heart, I’m always excited about making as much impact as possible in the world. Technology has changed so much of our daily lives from shopping to socialising online, but money felt like it had hardly changed until I discovered Bitcoin in 2012. By holding private keys, finally, machines can be first class citizens in the world of money. And with the subsequent introduction of smart contracts, code now plays a central role in how money moves according to a set of transparent rules, with no need for a centralised party.

So if money is the language of value, now machines can finally speak this language natively!

Indeed! And the next logical step is that if you really believe in AI and its capabilities in the long run, then AI will have to use crypto in order to get property rights, to have an active economic role and manage its own resources. Crypto is laying the foundations for this future. And with this future in mind I started working on different side projects on oracles, micropayments, and identity (problems that are still interesting today!). In the end, I ultimately realised that in 2014 the most important infrastructure to build was secure wallets - which is what BitGo did to start!

BitGo is one of the world’s largest custodians of crypto. The Ethereum DeFi world that we like to cover often feels distant to this world: what is a crypto custodian today?

Whether it’s crypto or any other asset like gold, fundamentally a custodian is the safe keeper of an asset. Just as you probably wouldn’t store gold under your bed, some people don’t want to deal with self-custody of crypto, and feel safer trusting a custodian. In other cases people or institutions want to focus on managing the assets rather than doing custody, and most likely have to use custodians if they are managing these assets on behalf of others in regulated environments. 

With the ever evolving crypto ecosystem and the rise of DeFi, what do you think will be the role of custodians in 5 years?

There are two major themes that will affect custodians for the coming years. First, better understanding and awareness of the risks and challenges between digital asset custody, and the security and risk of smart contracts. Over time, we’ll see more competitive pricing as these risks are better understood, less bugs in smart contracts as secure coding patterns and auditing techniques are developed, and improved products for a bigger range of users and use cases. The second challenge is more specific to custodians: the delicate balance between keeping the assets safe under custody and making the assets accessible to the owners. There is a clear difference we see in the demands coming from BitGo Ethereum vs Bitcoin custody customers: although Bitcoin is mostly buy, lend, and sell, there are endless ways to make your Ethereum assets productive, from Uniswap pools to Compound and MakerDAO. With DeFi it became increasingly clear that digital assets have many ways to generate significant yield and custodians like BitGo will enable this in the safest way possible. 

BitGo is also behind wBTC, the first BTC-on-Ethereum project. Since the launch last year, how do you feel about wBTC progress?

With crypto products, the toughest challenge is standing the test of time and I am very happy that since launch, wBTC has been growing in both adoption and usage from the DeFi ecosystem: recently we crossed the 1’000 BTC locked threshold and as you can verify on Etherscan, the number of transfers of wBTC has also been growing. wBTC could have grown even faster with more places to perform 1:1 swaps. Many of our merchants in the community are primarily DeFi projects & teams, so up till very recently, most consumers had to obtain wBTC by trading for it within DeFi. This will change very soon, because Coinlist is launching the 1:1 swaps of BTC:wBTC for their users, making this liquidity available to a much larger set of consumers!

Similarly to how the stablecoin market evolved, wBTC will soon be joined by a growing number of BTC-on-Ethereum projects, with tBTC launching later this month. What are your thoughts?

Personally, I am very supportive of more projects trying to port BTC on Ethereum and tBTC is definitely a good project! Until we get to the point where we can fully validate the Bitcoin blockchain on Ethereum, which is currently expensive, we need to rely on custodian based systems, either decentralised or centralised, to bridge the two blockchains. Fundamentally Bitcoin and Ethereum are on two different blockchains so you need incentives to convince someone to bridge the two. Will incentives be strong enough to mint tBTC to meet demand? Capital efficiency is also an important point as posting collateral, as happens in the tBTC system, has costs [tBTC will require 150% over-collateralisation at launch - M2G]. Looking forward to seeing how things will evolve! 

And looking again at the future, what are you most excited for DeFi in 2020?

DeFi coming of age. March 12, or crypto black Thursday, was a true trial by fire for many DeFi platforms. Many dApps had not yet been tested in such challenging blockchain environments, and this manifested in the form of slow trades, delayed price feeds to MakerDao keeper auction issues, but most of these projects survived the adverse conditions and have not only survived, but grown stronger from it. I am very encouraged by how people and teams are responding to the crisis because this is what truly builds trust in the DeFi space: people and builders that are here to stay for the long run.