Electric Capital’s Avichal Garg on Programmable Money & the Future of FinanceMay 24, 2021
"Over the next 20 to 30 years, [decentralization] will eat up everything that has to do with money and moving value around," said Avichal Garg, managing partner at Electric Capital, a VC firm that focuses on early-stage blockchain, cryptocurrency, and fintech startups. He was speaking to Derek Silva, the host of Orchid's Priv8 podcast, which focuses on the intersection of Internet privacy, technology, and human rights.
Indeed, within a few decades, "there aren't really going to be 'crypto VCs'...all VCs will need to be [involved in crypto.]"
Avichal has spent years as a serial entrepreneur and technology executive. His current focus is investing "in the crypto and blockchain space--in tokens and companies up and down the stack," he said. "Our worldview is that this set of technology--cryptography, zero-knowledge proofs, distributed systems, distributed consensus, digital scarcity, and NFTs--all of these things are only at the infancy stage of what they will eventually become."
Avichal's core investment thesis revolves around the concept of "programmable money."
What is programmable money?
To an extent, "programmable money" already exists outside of the blockchain and cryptocurrency worlds. "In our opinion, when you look at the hundreds of trillions of dollars that exist in the world," there are rules around that money, he said. For example, mortgages, derivatives, escrow, and other financial contracts determine who can access money, how, and when.
However, "instead of just programming it in legal code," blockchain makes it possible to "program [money] in computer code."
The history of the term "programmable money" comes from "the insight that everyone in the crypto ecosystem said [at some point] that, 'I am willing to take fiat money...and exchange it for 1s and 0s'"--exchanging their dollars, euros, and yen for lines of code.
"It's a pretty phenomenal thing," Avichal said. But what does it look like on a practical level? "How do you own those 1s and 0s?" Avichal asked, and how can they be used in a practical way?
Essentially, "You own a private key, and the [platform's] cryptography lets you assert that you're the only one who can modify, manipulate, or move [your cryptocurrency]," he said. But when you take into consideration that "your private key was generated by a piece of code," another implication arises: the piece of code "could just keep the password," Avichal continued--after all, "it knows the password, and I don't." Therefore, "doesn't that mean that the software owns the money?" he asked.
"The really unique property about software is that you can program it ... And because money and code are the same thing, you can program money; you can put rules around it."
"We get to start from scratch."
This digitization and decentralization of finance promises a paradigm shift in the ways that financial systems operate. "One of the things that I think is so powerful and interesting about this new world is that we get to start from scratch," Avichal said. "We'll slowly reinvent all of these building blocks."
This also has major implications for the ways that governments design global and national financial systems. On a national level, "the ability to move money around quickly is a strategic asset," he said. "Rather than trying to build it on top of 1970s infrastructure...let's just rebuild it from the ground up."