Everything in Crypto Land feels new and young. The tech is new, the devs are young, and most blockchain “experts” seem barely old enough to buy a beer.

This is what makes David Birch so refreshing. He calls himself the “Irascible Old Man of Blockchain,” and his LinkedIn bio lists his time at Hyperion Consulting, which he co-founded, at an unthinkable “32 years and nine months.” For decades he has written books, advised companies, and given speeches on things like financial security and digital money.

He’s also what Socrates would call a “gadfly,” asking the pesky questions that others like to avoid. “People say that the crypto space is like the Wild Wild West,” he tells me in his British accent. (He’s based in the UK.) “But the Wild Wild West was terrible! People were shooting each other!” This kind of contrarianism is why Wired named him one of the Top 15 sources of global business information, and why he sits on countless boards and wins awards like “Contributor of the Year” at London’s Emerging Payments Awards. (This is a black-tie fintech awards gala. Your move, Oscars.)

Translation? He’s something of a Big Ideas person, who has plenty of thoughts—sometimes unpopular, always fascinating—on where money and the future is headed. (Hint: It’s not bitcoin.)

You once wrote a piece called “It’s time to take a stand against all the blockchain crap out there.” What bugs you about “blockchain crap,” exactly?
Someone sent me this thing of how “the blockchain is going to transform insurance.” So I’m like, “Wow, that’s great, that’s fantastic news. Could you be a little more specific? How is it going to transform insurance?”

So he says, you know, blah blah blah.

And I have a stock response. When somebody sends me something on Twitter or LinkedIn about an amazing use of the blockchain, I’ll say, “Listen, I’m not going to read any further until you tell me what is in the blocks, and how are they chained together, and who takes part in the consensus-forming mechanism.”

You actually do this? What do they say?
The conversation will typically be along the lines of, “Well we don’t really have blocks. We just have records. And they’re not really chained together. And the consensus is formed by us; we manage the supply chain.” At which point I try and break the news to them, as gently as I possibly can, that what they’ve just described is, in fact, a database.

The title of your book is Before Babylon, Beyond Bitcoin: From Money That We Understand To Money That Understands Us. What does that mean exactly?
I was interested in bitcoin when it came along. I remember going to the first European bitcoin conference, in Prague, in 2011. I was fascinated, but something bothered me. People kept saying, “This is the future of money!” The more I thought about it, I thought, this doesn’t feel like the future of money.

So then what is the future of money? I know the short answer is “buy my book,” but what’s the longer answer?
I think that far from heading towards a single money—like the world dollar run on bitcoin, or the “galactic credit” from Star Wars—that the opposite vision is the correct one. The technology allows for massive decentralization, and it allows anybody to create money. The [blockchain] technology means that we’re going to have lots of different kinds of money. The money of the future is going to look more like the money of the past.

What does that mean?
In the past, every community had its own money. And then we went through a period of industrial revolution and globalization, and it became more economically efficient to have fewer kinds of money, because trying to mess around with 20 different types of money in your pocket is friction. Then we moved into the era of electronic money. And now we have the technology to turn all kinds of assets into money-like instruments.

The internet makes it possible for us to have lots of different communities. In the past, they tended to be geographic. But now we all belong to overlapping communities and virtual communities. The idea is that communities will construct money that works best for them.

What’s an example?
If you read a lot of the economics stuff—like at the World Economic Forum—they very much focus on the role of cities in the future. Their argument—and I agree with this, by the way—is that there aren’t really national economies. There isn’t an English economy, there’s an economy of London and its hinterland. There isn’t a US economy, there’s New York City and its hinterland, or Los Angeles and its hinterland, or Chicago and its hinterland. The idea that all of these cities have the same monetary policies, and the same money, doesn’t really seem right. There’s no obvious reason why England should have the same money as Scotland, for example.

But what about the Euro?
People argue, quite strongly, that the Euro doesn’t make any sense, because you can’t have the same monetary policy in Germany and Greece, because Germany and Greece have vastly different economies. Well, so do parts of America. Why England should have the same monetary policy as Scotland is not at all clear.

You’re bullish on the tokenization of assets. Why is that so important?
The tokenizations of assets—rather than the underlying cryptocurrencies—is the thing that changes finance. Instead of storing money in your pension scheme, which you might use to buy electricity when you’re old, why don’t you just store electricity in your pension scheme? Why not take out one layer of indirection?

Is the idea that this is more efficient?
A lot of the finance guys aren’t interested in any kind of libertarian, or political, or smash-the-institutions [principles]. It’s just cheaper. If I tell you that I have stock to put in your pension plan, then we have to have brokers and custody and all sorts of other things. But if I give you IBM Money to put in your pension scheme, it’s just like me sending you a bitcoin—it was mine, and now it’s yours. End of story. You can see why it becomes more appealing as a viable financial structure. Simply because it’s more efficient, not because it’s “censorship resistant” or a “fight against the Man.”

Along those lines, you’ve spoken before about how everyone calls the crypto space the “Wild Wild West,” but when you think about it, the Wild Wild West…was terrible?
[Laughs.] If the Wild Wild West was all that, we’d still be in it. I don’t want to be mean, but if you’re 19 years old, and a computer science undergraduate, the whole smash-the-State, every-man-for-himself, AynRand.com future all sounds fantastic…because you’re part of a privileged minority, of course. But when your grandma presses the wrong button on an email, and sends her life savings to [a scammer], then suddenly it doesn’t seem quite so appealing. Then you begin to realize, maybe there’s a reason why we have rules.

Right. There’s even a reason why we have banks. [Oops, I just used the “b-word.”] But what do you see as the future of banks? Are banks still around?
I argued about this years ago. Somebody said, you can be your own bank. I’m like, you really can’t! Because if bitcoin was the only money in the world, I’d still need to borrow some from the bank to buy a house. What do you think banks do? Banks perform a number of different functions, almost all of which have absolutely nothing to do with payments.

What’s a big idea out there in this space that not enough people are talking about?
This is a very technical answer, but authentication is a really big deal. It’s sort of boring to go into, but we really do need to get authentication sorted out. We need to move away from SMS and one-time passwords. We need to start having real cryptographic authentication for things.

Yeah, I wouldn’t have guessed that. What else?
I think you’re going to see a resurgence of digital wallets. They became a little moribund, but that was because they were basically only being used for payments, which is a very uninteresting thing to do with wallets.

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How so?
I have a contact-less card in my back pocket, and that works absolutely fine. Now we’re starting to see other things go into digital wallets. Your metro card, your sports tickets, your driver’s license, things like that. I think digital wallets will have a resurgence.

Other things that excite you?
Digital identity infrastructure has to be extended to cover things. It’s not good enough to have identities just for people. Because things need identities. And bots, and basically everything you’re going to interact with, which is what my new book [Will Robots Need Passports?] is about. We need to do something about getting the security of the Internet of Things under control.

What do you say to the people who want a bitcoin-only solution, where money is completely divorced from governments? Where the government no longer has the ability to influence monetary policy?
As a citizen of a democracy, I ultimately want money that’s under democratic control. I might not agree with those controls, but that’s part of living in a society, isn’t it? There are other laws I don’t necessarily agree with, but I still obey them, because we live in a society. Money has to be under democratic control. Whether that means the money has to be provided by the government or not is not clear at all. That’s a different line of thinking.

I think I follow, but can you clarify that distinction?
There’s a thing that economists call the Big Problem of Small Change. Which is basically, if you’re going to start making pennies—because people need pennies for commerce—it’s impossible to make a profit on pennies. In fact, the U.S. government makes quite a loss on pennies. The private sector is never going to step in and provide pennies. The private sector will print hundred dollar bills, but it won’t provide pennies. So the government ends up having to do that. Whether that’s true in this new technological era is up for debate. You might have the government setting some overall policies—and the government would certainly want to maintain democratic control over things—but it might no longer, necessarily, mean the government has to make the money.

Any other predictions for the future, anything that’s really out there? Give us something we might see in, say, 40 years?
Forty years from now? [Laughs.] Well, I’d say that because of the advent of digital identity, we’ll have given up talking about Voter ID laws, finally, and we can start talking about Voter IQ laws, which might be more appropriate for the modern age. People will still be arguing about autonomous self-driving cars. I think the free city of London will be the richest city of the world, and one of the most important traded assets will be a residence permit for the city of London. Is that out there enough?

And how about bitcoin? What role do you see for bitcoin in the future?
I said this in the book, and I use this analogy repeatedly: Bitcoin reminds me of the first steam engine. The first commercial steam engine was used to pump water out of mines in Cornwall, in England. It was incredibly inefficient. But it could do one thing that you couldn’t do any other way, right?

Right.
And then, 100 years later, you had steam engines that could drive trains around at 100 miles per hour, and power great ships. But they weren’t the same steam engines. And I sort of see blockchain in that mold. It’s a hopelessly inefficient way of doing something we can’t do any other way—which is forming consensus in the presence of untrusted third parties—but in the future, somebody will come up with more efficient ways of doing this. And then the government of Catalonia might use it to issue Catalonian money, and IBM might use it to issue IBM Money, and Jay-Z might use it to issue Jay-Z Money. It’s very unlikely to be on a one megabyte proof-of-work blockchain.

Photo courtesy David Birch.