“Bitcoin Will Empower the Poor”

Interview with Diego Gutiérrez Zaldívar, co-founder of RSK, Bitcoin Argentina and the Iberoamerican Blockchain Alliance. Diego has been inducted to the Crypto Hall of Fame on June 5th.

Portrait of Diego Gutiérrez Zaldívar by Max Cryptohead for the Crypto Hall of Fame

Smart Bitcoin Investor: How did you get into Bitcoin?

Diego Gutiérrez Zaldívar: Let me start a bit earlier. In my life there have always been two separate lanes: one of social activism and one of technology. I started to go into the slums of Buenos Aires from the age of 9 with my mom, who was a social activist. I became one myself with 13 and tried to help people in various aspects, like getting them jobs and organising community events. I even offered meditation classes for teenagers. And I helped to start the Green Party.

The other lane is my fascination for technology. I learned how to programme as a teenager. When I was 20, I was hired by Clarin, one of Argentinas biggest newspapers, to create their website. That was in 1996. Then I started several software companies. For one we did an initial public offering at Nasdaq in 1999.

And with Bitcoin these two lanes met?

At a later stage, yes. But first I stopped doing any social activity, because I was quite disillusioned. I observed many times that those social organisations also had power structures which corrupted people. It was a bit shocking for me to see that people with the best motivations became more interested in power than in following their original ideals. In general, there is nothing wrong with delegating power. In any organisation some people will have more to decide than others. The problem is that once they are in power they tend to change the rules for their own benefit.

And Bitcoin and Blockchain technology can change that?

Yes, because it is impossible to change the rules without the consent of the other participants. That is the great thing about crypto technology: you don‘t need to trust people, as it makes more sense for everyone to play by the rules than to cheat. This can solve one of the biggest problems of human society, the abuse of power.

Rodolfo Andragnes inducts Diego into the Crypto Hall of Fame, pictures by Juan Lamarca

Is that why you got involved into building up the Latin American Bitcoin community?

Well, when I first discovered Bitcoin, around 2011, I didn‘t get it. It was my friend Wences Casares, the founder of Xapo, who made me aware of Bitcoin again about a year later. At that time there were strict capital controls in Argentina and I had big problems in getting paid by clients from Europe or the US. It would cost around 10% of the amount and take three weeks or longer. Wences was in California then and he sent me 5000 Bitcoins just to test how it works. I sent them all back to him except of one which he told me to keep. All this happened in a few minutes and for a very low fee.

That was an “Aha moment” for me. It was obvious that this could solve my problems and those of many others. Wences, who was already a well-known and successful entrepreneur then, organised the first Bitcoin meetup in Buenos Aires. As he was living in the US, I took over and organised the second meetup in February 2013. That is where I met Rodolfo Andragnes and Franco Amati, with whom I founded the Argentinian Bitcoin Foundation and the Latin American Bitcoin Conference.

Which took place in the same year for the first time, right?

Yes, it was a bit crazy, but we made it. We hardly knew each other and immediately started to organise this big event with participants from all over Latin America, and also the USA and Europe. We didn’t have an office, so we held our meetings at a McDonalds. We were very lucky, as the Bitcoin price went up from 100 to more than 1000 dollars while we were organising the conference. The first sponsoring and ticket revenues we received became much more valuable, so we could afford more than we initially thought. Our first conference had an all-star line up with speakers like Andreas Antonopoulos, Erik Voorhees, Roger Ver, Charlie Shrem, and we made a good profit on it.

Did you already plan it as a travelling conference which would take place in a different Latin American country every year?

Yes, we were very ambitious right from the start. We always wanted to reach all of Latin America and to help build up Bitcoin communities everywhere. In 2014 the conference took place in Rio de Janeiro, in 2015 in Mexico City, then Buenos Aires again, Bogotá, Santiago de Chile and Montevideo. Of course, it would have been much easier to always organise it in our home town Buenos Aires, but we want to bring people from all Latin America together, and the conference is a great tool for that.

Latin America is such a fertile ground for Bitcoin, because of all the big social problems that we have here: the huge differences between the rich and the poor, hyperinflation, corruption, currency devaluation, you name it.

Diego singing “Garota de Ipanema” with the author at the UNCHAIN conference in Hamburg, June 2018

Do you think this is why people here are much more open to adopt Bitcoin than in Europe or the US?

Yes, absolutely. Here in Argentina many people remember the hyperinflation of the 80s very well, and also the Coralito of 2001, when all bank accounts were frozen for nearly a year. When people could access their money again, the peso was heavily devaluated, so many people lost a lot of money. It was a very dramatic and sad moment in our history. That is why nobody trusts the banks and the government here.

In other Latin American countries, like Brazil, the situation is similar. And I don‘t need to mention Venezuela, which used to be the richest and most advanced country in South America and is in big trouble now because of socialist politics, with inflation rates of a few thousand percent per year.

Let’s talk about your main commercial project, RSK. What is it all about?

The idea is to bring Smart Contracts to Bitcoin. So far, Ethereum has been the standard for Smart Contracts, but the Bitcoin network is much more advanced and therefore more secure. That is why we have developed a sidechain which is pegged to the Bitcoin blockchain by a process called Merged Mining. For every Bitcoin, miners create a so called Smart Bitcoin at the same time.

RSK has similar qualities as Ethereum, it even uses the same programming language Solidity. That means that everything you can create with Ethereum, like Smart Contracts, Tokens or Decentralised Apps, you can also do on our sidechain – but with the security provided by the Bitcoin network and for a much lower cost. Everything that has been developed for Ethereum can also run on the RSK network.

Sounds great – but where is the catch?

Firstly, the miners have to agree to the Merged Mining process. Fortunately, we were able to convince many of the big Chinese mining pools to support RSK.

How did you achieve that?

I was in China many times and I know most of the important people in the Chinese mining industry personally. It helps that I speak Mandarin quite well.

Diego in his favourite Chinese outfit, picture by Juan Lamarca

And else?

In order to fully unfold the potential of our technology, some changes have to be made to the Bitcoin protocol. As you know, due to the decentralised nature of Bitcoin, it is not easy to reach a consensus for any major change, but we are working on that.

What do you mean by “fully unfold the potential”?

Well, we have many plans with RSK which have not been realised yet. One of them is our solution to make more transactions per second possible, which we call Lumino. Scaling Bitcoin is very important for mass adoption. So far the network can handle a maximum number of only seven transactions per second, which is not enough if many people start using it. With Lumino, we can process about 2000 transactions per second. In contrast to the Lightning Network, which works with off-chain payment channels, Lumino is an onchain solution, and therefore closer to the original vision of Bitcoin as a decentralised peer-to-peer cash system.

Do you see your activity with Bitcoin as a continuation of your social activism of your teenage years?

Absolutely. I am convinced that Bitcoin and Blockchain technology can empower the poorest members of our society. Currently we work on a project which is funded by the Interamerican Development Bank. The idea is to provide people in the slums with a digital proof of their identity, which is what many people lack. Therefore they would never get a bank loan to start their own business, so the poor are doomed to stay poor. We intend to change that.

We will also create a local digital currency which can only be used inside those communities. The money will circulate in the neighbourhood, which benefits local merchants and consumers. So finally my goal to help poor people in the slums and my fascination for digital technology are coming together.

The interview was conducted by Aaron Koenig