“Bitcoin Can Empower the Poor”

An interview with Diego Gutiérrez Zaldívar, co-founder and CEO of IOV Labs, the company behind Rootstock.

HYPERBITCOINIZER: How did you get into Bitcoin?

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 nine with my mom, who was a social activist. I became one myself with thirteen 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 in Argentina.

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 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.

Giving a talk the C20 Conference, Buenos Aires

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 was where I met Rodolfo Andragnes and Franco Amati, with whom I founded the Argentinian Bitcoin Foundation and the Latin American Bitcoin Conference.

“Mr. Bitcoin”, the mascot of Labitconf, in Buenos Aires

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 and Charlie Shrem, and we made a good profit on it.

People in Latin American seem to be much more open to adopt Bitcoin than in Europe or the US, is that correct?

Yes, absolutely. Here in Argentina many people remember the hyperinflation of the 1980s 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 devalued, 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, Rootstock. What is it all about?

The idea is to build Smart Contracts on the Bitcoin network. So far, Ethereum has been the standard for Smart Contracts, but Bitcoin 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.

Rootstock has similar qualities as Ethereum, it even uses the same virtual machine and the same programming language. That means that everything you can create with Ethereum, like smart contracts, tokens or decentralised apps, you can also do with Rootstock – but with the security provided by the Bitcoin network and for a much lower cost. Everything that has been developed for Ethereum can easily be made to run on the Rootstock network.

Sounds great – but where is the catch?

The miners have to agree to the Merged Mining process. Fortunately, we convinced many of the big Chinese mining pools to support Rootstock, at a time when Chinese miners still dominated the market.

How did you achieve that?

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

Karaoke at UNCHAIN Hamburg

What are your future plans?

We have many plans with Rootstock which have not been realised yet. One of them is our solution to make more transactions per second 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 offchain payment channels, Lumino is an onchain solution, and therefore closer to the original vision of Bitcoin as decentralized peer-to-peer cash.

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.
This needs to change and Bitcoin is an important tool for it.

Thank you very much for this interview, Diego!

Diego will be the special guest of my talk at the Bitcoin Embassy Bar on October 20th

Interview by Aaron Koenig