‘Most financial institutions are not going to use bitcoin’

2018 was an ugly year for cryptocurrency value. Bitcoin fell 74%; ether fell 84%; XRP fell 88%.

Nonetheless, believers hold on. Talk to crypto enthusiasts who have been in the space for years, and you’ll hear the same refrains about 2018: the price of the assets isn’t what matters most; crypto startups are building tools for the future; it’s still the early days of crypto, just like the first era of the internet, and so on.

Price of Bitcoin and ether in 2018, through Dec. 30


One such evangelist is Jed McCaleb, a cofounder of the early and infamous Bitcoin exchange Mt. Gox; blockchain-for-banks startup Ripple; and tokenization protocol Stellar, which is associated with the cryptocurrency stellar lumens (XLM). This year, Stellar’s commercial arm Lightyear acquired enterprise blockchain startup Chain.

Jed McCaleb spoke with Yahoo Finance by phone about the year in cryptocurrency, and why he refuses to call the price pullback in 2018 a bear market. What follows is an edited transcript.

Yahoo Finance: Let’s start with Stellar’s acquisition of Chain. How is the integration going, and how does it fit amid the popular Wall Street narrative of “blockchain without Bitcoin” — banks and financial institutions creating closed, private blockchains for their own use. Is that hype fading?

Jed McCaleb: One of the big motivations for Chain in the first place was that these private, permissioned chains only get you so far. You need to have a public network.

I think it’s true that most financial institutions are not going to use Bitcoin. But in my mind, what blockchain gives you is a public record that everyone can see, but they can’t change it. So parties can transact even if they don’t know each other. So you still need a public chain. It doesn’t need to be the Bitcoin blockchain, but if it’s not a public chain, then you’re missing the point.

Everybody kind of lumps this whole industry into one big bucket. But really they’re all different protocols and they’re all tailored for different use cases. There are some things Bitcoin is good at, some things Ethereum is good at, and some things Stellar is good at. And none of them can do all the things well. That’s just not how software works.

Stellar is really good at cross border payments and tokenizing value of any type. So if you want a universal payment network, you should probably use Stellar.

In the rest of the cryptocurrency world now, there’s this big push for tokenizing different things, and now there’s the stablecoin hype, and Stellar has sort of been doing this all along, we just weren’t calling it that.

Cryptocurrencies are way down in 2018. How does the bear market affect business for Stellar?

It’s funny when people say crypto is down. In my view, it’s still way way up. It’s down from the peak, but on the whole, it’s way way up. We don’t focus on the price that much, it doesn’t matter to us too much.

But when prices are up it does mean more people are interested, and you have the cash to do more things.

What do you see as the general temperature in the crypto industry right now, beyond just the price? You’ve been in this space since 2009. If you take a step back, what do you take away from the past few years?

It’s been super interesting. It has grown way more than I think we originally anticipated, or at least quicker. It’s amazing to me how hype-driven it is now.

The allocation of capital and resources is wild to watch, when these projects that have zero technical merit get millions of dollars. It seems like a big shame. Hopefully that will start to change. One of the nice things that comes with the market calming down—I still say it’s not a bear market—it means there’s less of that.

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