Andy interviews Joshua Scigala, founder of The Standard. The Standard is a next-generation monetary system that allows users to generate stablecoins called "Standard euros" by locking up their crypto or physical gold as collateral via smart contracts. This stablecoin protocol aims to unlock stored value and provide stability amidst global inflation and economic turmoil. Joshua Scigala discusses the importance of hard money and saving in rare assets like cryptocurrency or precious metals to combat inflation. The conversation then shifts to AI, its potential impact on society, and the need to build and save wealth as we enter an exponential age caused by rapid technological advancement.
Andy Pickering - Host
You're listening to Pod99, a podcast by Wealth99 that helps the 99% take control of their financial future. We talk to experts from across the alternative asset space, who share their insights on new wealth, how to build it, and how to keep it. Let's get on with the show.
My guest today is Joshua Scigala. Joshua is the founder of the Standard. One way of describing it is as a next-generation monetary system that enables users to generate or mint a stablecoin by locking up their crypto or even physical gold. It's pretty cool, actually. So we'll learn all about this today. Welcome to the show, Joshua.
Joshua Scigala - Guest
Hey, it's good to be here.
Andy Pickering - Host
Good to have you here, Joshua. Please fill the listeners in on who you are and your background in the lead up to founding The Standard.
Joshua Scigala - Guest
Well, I've been working in bitcoin since 2010, and I found it so early because I was actually looking for a digital currency because I was running a site where you could swap stuff. I realized pretty quickly that swapping is a terrible way of doing any transaction because if I don't like anything of yours, then the deal falls through and it's a shame. So having some sort of currency in the middle is such a beautiful thing.
So I did find what the cypherpunks were doing very interesting. I thought the double spend problem was unsolvable, like a lot of people did. And that's the problem that bitcoin really solved. I can send you a bitcoin and, you know that I definitely don't have a copy of that bitcoin anymore. So digital scarcity is what they solved.
And ever since then, it's been a journey of all sorts of trials and tribulations. Losing money on Mount Gox, the very first bitcoin exchange that then went bust, and ever since then, I've been building. I built a transparency protocol called the Glass Books Protocol for Exchanges, launched in 2015 between bitcoin and physical gold. Because I didn't like the banks. Why use the banks when we can use physical gold as a hedge? In 2019, I gave a talk about stablecoins, because being in gold, you're kind of in the stablecoin area anyway. It's like a physical asset that can be insured to however much you've got, unlike a bank account. And it's relatively stable, right?
Over 5000 years, it's gone through every war and every nightmare that the human condition has thrown at it, and it's come through the other side being pretty stable. If there's a war in a country, most Fiat currencies just collapse. Whereas gold, if anyone's holding gold in those countries, it's still fine. And now I'm working on a next gen stablecoin protocol with a bunch of people around the world and it's all about basing it on the gold standard, but a private gold standard. Like, we don't need to beg governments for a gold standard anymore. We can create a private gold standard that is done in a decentralized way, and not just gold, but bitcoin.
Andy Pickering - Host
Sure thing, Joshua. Look, it's an interesting time to have you on because you personally have a long standing interest in both gold and bitcoin, so you understand more than most the role that gold has played over the centuries as a kind of hedge against wider economic turmoil, shall we say. And certainly in recent history, as you pointed out, if a nation is in some form of crisis or war or something, then the local Fiat currency does tend to become devalued very quickly. And gold has been fantastic as a hedge this year, we're seeing this potential banking crisis starting to unfold here in the west, really, particularly in Europe and of course, in the US. And we've already seen gold hit an all time high and then pulled back earlier this year.
Bitcoin has done well to start this year, almost up from, I think 16,000 was the bottom back in November, almost double that to about 30,000 in April. I guess it's just an interesting time in the world, Joshua. So I don't know if that just kind of sets the stage a little bit. I'd love to get your thoughts on the wider macro backdrop. What's going on with the banks?
Joshua Scigala - Guest
Yeah, it's really interesting. SV Bank, Credit Suisse, Deutsche Bank all now tanking. They're trying to put lipstick on a pig. We're in a dangerous spot, and for the first time globally, we're seeing an inflation that is global. And this is very new. It's never happened before. Usually inflation happens within a country, and then it turns into hyperinflation, and then the currency collapses and they issue a new currency. But now in a global setting where the US is printing like mad, we have the Fed's balance sheet going massively up as well, and we're seeing other countries trying to keep up with the US. To not be out printed and overvalued against the US dollar.
And then on top of that, we have these massive technological bounds forward. And CBDCs, everyone's talking about them in government and nobody's talking about them on the ground as people. The normal folks are not talking about this very dangerous technology that they're wanting to put out there as an upgrade rather than an absolute downgrade to freedom. And so the whole cryptocurrency space was really a pushback against digital because everything was going digital anyway. We were going to get digital currency, and Satoshi front ran that idea by releasing Bitcoin when he did. Now that we have Bitcoin, we have this exit door, we have digital currencies, and we have this exit from CBDCs.
My personal view is, look, the government can do what they want as long as they know that there's an exit. It means that they have competition. It means that they cannot be ultimately corrupt and controlling, because if it's too controlled and too nightmarish, then people can just go, well, there's an exit over there. I'm going to take that.
Andy Pickering - Host
Absolutely. And you have this quote on your website, right, Joshua? And it's by Buckminster Fuller, and I've always been a Buckminster Fuller fan, so as soon as I saw the quote, I was like, yeah, this is great. The quote, of course, and it's a famous quote, so hopefully listeners will recognize the quote. But it is simply “you never change things by fighting the existing reality. To change something, build a new model that makes the existing model obsolete.”
And so in the context of our conversation today Joshua, obviously you couldn't ask for a better quote to describe, let's say, the potential of Bitcoin as a new system that changes reality and makes an existing model obsolete.
Joshua Scigala - Guest
We definitely saw that with the Occupy Wall Street movement trying to fight the existing reality. They were there occupying for months on end and all chanting in unison and whatever else they were doing, all useless. It's not going to do anything. It's just a big PR campaign. And usually what happens is, we saw this with Black Lives Matter, some sort of company takes over and makes a lot of money and takes the original idea of the frustrations of a grassroots movement and turns it into a profit making machine, which then is just a brand. And this is exactly what happened with Occupy Wall Street, with Black Lives Matter, with these sorts of things where you do have a small grassroots frustration and that just blows out into a big marketing machine.
So Bitcoin coming along was actually that quote was like, hey, we don't need to fight the existing system. We can build something new. We built something that is so much better that the old way is just obsolete, and everyone will just gravitate towards that and we just don't need to worry about it.
Andy Pickering - Host
Absolutely. One of the things that's important here at Wealth 99 is this idea of alternative assets. And I think with the world today, investors are more aware than ever of the importance of alternative assets. And I'm specifically thinking really of crypto assets, particularly the likes of Bitcoin and Ethereum, and also precious metals. But here at Wealth 99, we have tokenized precious metals, which is a much more effective way to get a little bit of a hedge against the potential chaos of the modern world.
Joshua, if bitcoin is an example of that new model that makes the existing model obsolete, what is the purpose of The Standard? How do you take that a step further? And what is The Standard? How is it a next-generation monetary system?
Joshua Scigala - Guest
Yeah, so if we look at Bitcoin, obviously the big things that people talk about there is in terms of a currency, it’s not really the best currency because of the volatility. For me, as someone that has both feet firmly in the bitcoin space, I don't really care about the volatility that much. But it's also because I've got in so early that I have enough profit to not worry that much about the volatility. But if we convince someone right now to sell their assets for bitcoin and then bitcoin drops by 10%, it isn't good. I’ve run an exchange since 2015 and it's bitcoin only, so we had a lot of freelancers and people working for us, and they always invoiced us in bitcoin and ethereum.
And in 2019, I noticed that invoices started coming in in stablecoins rather than bitcoin or Ethereum. And whenever I queried that, it was always, well, my accountant is going to have a fit if I give them another one of these crypto coins. And I'm seeing it now too, if I go to a conference and I want to pay for something, they're all asking for stable coins. And you’ve got to think, why is that? Well, in one way, from the user perspective, they have the same functionality as crypto, right? It's kind of a bearer based asset.
It has the instant, pretty much instant, settlement and it's programmable, right? So you can use it within DeFi. You can trade and swap between other interesting tokens. And if you invoice in that stuff, then you can trade it into the speculative asset that you want later without annoying your accountant. It's just the natural thing that people understand. When I look through the history of the German Deutsche mark being brought over to the Euro, what they had to do is value it at an easy calculation for the mainstream to even calculate it. I think it was like everything was just double or something like that. I can't remember the exact exchange rate, but it was a very simple calculation.
So people go, okay, it wasn't too bad and it wasn't too hard to sort of switch over. And I think stablecoins really make it easy for people to switch over because they know what something costs. They know how much some bread costs in their local currency, but they don't know how many satoshis that bread is, and they don't want to do those calculations and they don't want the volatility. So we need that functionality because the CBDCs are going to come in and we can talk about why they are nightmares and why they're very dangerous, if you want, but these are coming.
And so we need something that has the equivalent nature of those, but is decentralized, because we've seen experiments like Terra Luna fail, we've seen USDC now fail because of the bank, and this is something I've been warning of at pretty much every conference that I talk at. I say that stablecoins, these centralized ones, are very dangerous because they basically take crypto full circle back to Fiat fractional reserve land. And so it's really important that we build a true, decentralized cryptocurrency that is fully backed and collateralized, and transparent.
Andy Pickering - Host
Yes, indeed, sure is. In summary, then, the idea is, if the context is around the world, there's trillions of dollars worth of assets in everything from precious metals to cryptocurrencies. And these are effectively locked away in vaults or digital wallets. Not doing too much, really. So one way of thinking about the standard is it's a stablecoin protocol or a next generation monetary system that can unlock this stored value. And the way that people do that is you lock up those assets that you already own as collateral in smart contracts. And then against that collateral, you issue this stable coin, which is based on the euro to start with I think, and it’s issued via an initial bonding curve, so Joshua maybe just continue from there.
Joshua Scigala - Guest
Yeah. This is why we call it a monetary system, because it's a lending protocol at base level. This is interesting, because the monetary system that we're in currently is also based on lending. So every dollar that you have in your pocket, or every New Zealand dollar, somebody owes a dollar to the bank, to the central bank for having that. And so it's issued by debt, but it's issued by debt with interest that doesn't exist. Everything is based on debt. Now, cryptocurrency like Bitcoin or gold is not lent into existence. It's found into existence. It's mined into existence.
Now, the reason why we're going back to lending for this is because if we're going to use a currency, there's a differentiation between money and currency. Money can be currency, but currency at its true form isn't really money. This is a weird thing. I know most people sort of interchange those two, but currency is what you do if you back currency with money, you back currency with actual value.
Andy Pickering - Host
That's what people mean when they say hard money.
Joshua Scigala - Guest
Yes, exactly. And Bitcoin is a type of hard money because there is a rare number that can't be duplicated and there's a definite finite amount of these rare numbers. So The Standard is a lending protocol, but it's at 0%. So people say they've got some Bitcoin or some ethereum, and they lock those up into a smart contract they own the key. So we don't want to trust a bank like Silicon Valley Bank. We don't want to trust Celsius. You don't want to trust these parties, you want to trust yourself that you lock up something into a vault, you lock it and nobody has access to that but you.
Now when you lock it, that value that's locked, you can issue yourself up to 90% of that value as a stable cryptocurrency. Now we're starting with the Euro, we're starting with S euro, standard euro, but we're going to be issuing SUSD, S Indian rupee, S Aussie dollar, S New Zealand dollar, S British pound, all of them. So we have an FX blockchain mirror almost, and a lot of people say, well, there's already protocols in DeFi that allow you to lock up assets and borrow against them, and they're right. But really we looked at the best use cases and the worst, and we tried to find the perfect next generation version. So one of the things we found is that, okay, say you've locked up some assets, and you borrowed against them.
Now if those assets start to go down in value, they start to drop in value. You want the ability to not get liquidated as easily, right? That liquidation process happens. Let's say you got $1,000 locked up in a smart vault and you've borrowed $500 from that. If that smart vault drops to the value of $500, well, basically we need to take five hundred S dollars off the market because we always want to have calculatable more value locked up in the system, real value, than we have currency floating around. And so you liquidate those assets by people being able to buy them back with the S euro or S dollar that's floating around and burning those S dollars, and they get that collateral out. I hope that makes sense.
It's complex, but basically the system needs to always have more assets locked up than stablecoins floating around to stop that liquidation process. And so that's really one of the breakthroughs that we're doing, is to allow you to do that.
Andy Pickering - Host
Yeah, so that does make sense. You're trying to make a safer experience for people who want to perhaps use whatever they have on hand as collateral and access the liquidity there, without being liquidated. I did mention the initial bonding curve offering. Is that still how you, I guess, effectively achieve enough liquidity to launch each stablecoin and each of the fiat currencies, right?
Joshua Scigala - Guest
Yeah, exactly. So what this does is build a liquidity pool. It's almost like a shared smart vault, so people will put in a currency like ETH or Bitcoin or into that pool and they will get S euro out at a discount while it's being launched. So it's not a stable coin yet at this time it's at like $0.85 or something. And the more ETH that goes into this pool, the less that discount becomes.
So the first people that put in ETH get a good deal on the S euro and then as more and more liquidity comes in, that discount becomes less and less until it reaches a one to one peg and at that stage it becomes a stablecoin. And we'll be releasing the smart vaults on 27 April and that's when the S euro will become one to one and the bonding curve will stop.
So the cool thing is, once these all launch we can really compete with the banks because I've already had friends say man, I'm going to trade my mortgage across to The Standard because then I have a 0% mortgage and I know that the stablecoin is stable because there's more liquidity backing it. There's more actual value backing each s dollar than there is s dollars in the system. And some will say Maker has that ability because they are over collateralized. They were the original over collateralized stablecoin, but they made this weird decision to use USDC as a collateral type and we saw it depeg because well, Silicon Valley Bank went down and USDC had $3.3 billion sitting in Silicon Valley Bank that was meant to be backing the USDC.
So it's really a terrible idea and I cannot wrap my head around why any protocol would allow a centralized stablecoin to be used as collateral for the same stablecoin.
Andy Pickering - Host
It is indeed really strange. Nicely said, Joshua. Thank you for that. I guess as we finish off this part of the podcast, tell us a little bit about who the target audience is, who are you aiming at? And for people who are interested, where should they go, what should they do to get involved?
Joshua Scigala - Guest
Yeah, the first target audience are like DeFi people. People that understand decentralized finance. They want to get loans, they want to maybe take their ethereum and buy more ethereum with it, or they want to take their ethereum and buy a car without selling their ethereum. And the cool thing is that's not a taxable event. Then you don't get capital gain tax because you haven't sold your crypto, you've just borrowed against it. And so there's all sorts of reasons why you would want to use something like this. The next circle out is the game Space, because I really see that as a huge boom in the next few years where people will tokenize a lot of ingame items as NFTs and we want to be able to allow that if it's liquid enough. It's really important that the community decide that. The governance system decides if something's liquid enough. But let's say there's a fairly common, I don't know, sword or whatever,it took you a while and it's quite valuable. You could lock that up as collateral and then borrow against that.
These sorts of things are really interesting as well, but imagine that whole game space, because we use a lot of tokenized gold in The Standard, people will be able to mine in-game tokenized gold, like real gold within games, and then be able to lock that up as a collateral type. So there's this sort of stuff. And then obviously, the wider circle is building a true blockchain mirror of the FX market. Now, the FX market is the most liquid market in the world, so it's the one that's being traded the most out of everything. I think it's huge for The Standard because we will be issuing most major Fiat currencies as stablecoins to have trading pairs in between all of those on the blockchain.
Andy Pickering - Host
Yeah, well, I think it would be super fun, Joshua, if I could perhaps offer up my son's Fortnite skin collection as collateral to buy him a PlayStation Five. I think that'd be worthwhile. Well, let's finish off this part of the podcast. Joshua, The Standard, where should people go? How do they do it?
Joshua Scigala - Guest
Yeah, just head over to thestandard.io and join the discord and put your email in there if you want to stay up to date with what we're doing. We're a bunch of people from all around the world voluntarily working on this. So if you want to join, just join the Discord.
Andy Pickering - Host
I'm with Joshua Scigala. Let’s finish off with some Wealth99 wealth building questions. Joshua, can you think of one piece of financial knowledge that should be taught at school? If there was just one piece of financial wisdom, financial literacy, that should be taught at school, what is it?
Joshua Scigala - Guest
I think the importance of saving and saving in a real asset rather than one that's being deflated away. Because you're taught at school to put money in a bank and save it, but really with inflation, it's just eating away. And I'm seeing that with the elderly now with my parents and such, where their superannuation is really getting eaten away like crazy with this amount of inflation that's happening. So being taught in school early to be able to save in some sort of rare asset, whether it's cryptocurrency or precious metals, like bitcoin or ethereum or gold and silver, just so that you start to build a nest egg that is not being inflated away.
Andy Pickering - Host
Makes perfect sense to me, joshua. Okay, well, we love a contrarian here at Pod 99. What is your most contrarian view on building wealth?
Joshua Scigala - Guest
Well, I guess it's the whole thing about don't put more money into bitcoin than you're willing to lose. The contrarian argument to that is don't leave as much money in the bank as you're willing to lose. Only leave as much money in the bank as you're willing to lose. I should say.
Andy Pickering - Host
That's nicely said and you couldn't have said it better. And I guess that leads us to the next question, which is that you've probably seen Balaji’s bet around Bitcoin potentially going to a million dollars a coin in the next three months due to hyperinflation. Hyperinflation - is the threat real?
Joshua Scigala - Guest
It's absolutely real. It's absolutely real. And I say that not because I'm some sort of prophet or sort of visionary. It's literally that if you look throughout history, every single fiat currency goes into an inflationary period. Every single currency is going to go into hyperinflation or a strong inflation. It will happen because it's very unpopular to tax people for more stuff. So politicians will promise bridges and schools and hospitals and roads, and they don't want to charge people, tax people more for those. So what they do is they tax the savers by just printing that money for that stuff and issuing more government bonds. Basically, that's the secret tax, the hidden tax. That is another thing that should be taught in school.
Andy Pickering - Host
Exactly right. All right, as we start to finish off, in 30 seconds or less, if you can do it, Joshua, 30 seconds or less. What's the bull case for bitcoin?
Joshua Scigala - Guest
It's the hardest rarest number that you can find. It's ultimately rare, and no more than 21 million can be mined. I mean, you see people trying to change it and it's just not being changed. It is bitcoin.
Andy Pickering - Host
It is bitcoin. All right. And of course, here at Wealth 99, we're all about precious metals as well, particularly tokenized precious metals. Same thing, 30 seconds or less. What's the bull case for gold?
Joshua Scigala - Guest
Well, the bull case for gold is that it has 5000 years of storing and holding wealth, and it's also decentralized in how people find it. It's not one single company that finds this or one government that finds the gold. It's all around the world and independently. And bitcoin has had 14 years of scams. Gold has had 5000 years of scams. So we know the scammer's game in gold. We understand what to look out for. With bitcoin, they're always coming up with new ways to scam people. Be careful!
Andy Pickering - Host
I love it. All right. Finally, Joshua, can you share a recent book or documentary or podcast episode, piece of music, even anything recent that's come across your radar that has added value?
Joshua Scigala - Guest
Yeah. Right now we're living through the birth of AI to its proper extent, and it's going to change everything, absolutely everything. And we're looking right now at a company Open AI that could probably swallow most of everything because it doesn't matter what you build, they can just build it just as quickly because it's just a matter of changing the prompt. And so it's absolutely phenomenal what's happening. It's scary, but it's also here to stay. It's not going away. The genie's out of the bottle. So we need to figure out how to build wealth now and save wealth, because I don't know about the next generation. We're going to have to, as humanity, think of what we're going to do in terms of earning money.
Andy Pickering - Host
Yeah. And look, that's really well said, Joshua. And obviously this is a topic for another day, could certainly do a whole podcast series on what does life look like in the exponential age when we have artificial general intelligence or proper AGI. And a lot of people think that perhaps UBI, some form of UBI, is a potential solution. And I actually can see a potential world where, instead of the Fed, we have something that's perhaps like Bitcoin, some kind of decentralized limited currency, but it's run by the AI for the humans. Because I think if there's one thing we've learned from history, humans can't run the currency too well.
Joshua Scigala - Guest
It's very true. And I think the dangers of a UBI run by a government are extraordinarily large, basically a rebranding of socialism or communism.
So you need to have that separation of state and money, because if the state is the one that puts the food in your mouth every week, then you'll put on a uniform to protect that hand that feeds you, and then you end up with wars so extraordinary that it'll make your head spin. So by having the ability of something that's not corruptible, it would be a better way to go. A UBI that's run by blockchain. I did give a talk about that as well at the Economics in Hamburg, the University of Economics over there, and it was about four years ago. But I think it's a really important conversation to have. How does money work? How does earning work, I should say, in ten years time?
Andy Pickering - Host
Absolutely. All right. Fascinating. Fascinating indeed. Thank you so much for sharing your thoughts with us today, Joshua.
Joshua Scigala - Guest
Cheers.