A Conversation with a Bitcoin Quasi-Maximalist
“Bitcoin exists in a fully permissionless environment, but with Ethereum or Ripple you need to do things in compliance with someone else’s changeable rules,” said Thom Thompson, a self-proclaimed Bitcoin Quasi-Maximalist. “Bitcoin is very robust and has all these incentives built in to secure the network.“
Thom is a fellow writer and former Commodity Futures Trading Commission (CFTC) researcher. He cut his teeth under CFTC Chairman Phillip Johnson’s administration, later created new products for financial futures at the Chicago Board of Trade (CBOT) and established clearing policies at various global exchanges before landing at a Swap Execution Facility (SEF). We sat down with Thom to talk the gamut from his background in exchange regulation, to why he believes SEFs may have more fun and the difference between blockchain and Distributed Ledger Technology (DLT).
After graduating with a degree in German from Columbia University and a M.S. in Agricultural Economics from the University of Minnesota, Thom took a job in the research department of the economics division at the CFTC in Washington. He worked on the Options Pilot Program, specifically the regulations for options on futures.
From options regulation to soybeans, Thom’s career took him to the CBOT where at first he was an agricultural economist.
“I worked on soybean options, soybean oil and soybean meal rules as they related to market structure,” he said.
He was in the agriculture department for about a year and a half before he moved into financial instruments, where he stayed for 9 years. He was new product manager for the 5- and 2-year notes, Fed funds, Mortgage Backed Securities and Japanese Government Bonds.
From the CBOT, Thom spent much of the next 20 years working on U.S. market development in Frankfurt at Germany’s derivatives exchange DTB (which later became Eurex). He also spent some time at the Board of Trade Clearing Corporation (BOTCC) before the CBOT moved its business to the Chicago Mercantile Exchange. In 2002, Thom re-joined the Eurex family in Chicago this time and worked on strategy and business development for the Swiss Exchange, one or Eurex’s parent companies. With passage of the Dodd-Frank Act and EMIR in Europe, Thom moved over to Eurex Clearing full time and helped them get licensed in the U.S.
Clearing to Crypto
In 2015 Thom was offered the role of Chief Compliance Officer at a SEF, an organized marketplace for swaps. A swap, compared to a future, does not require clearing and is privately negotiated between two parties.
“Swap execution facilities are a great way for the industry to experiment. As a SEF you have to be aware that counterparty risk still exists for your members but you can focus on the transactions, figure out the standards for trading, and see if there is enough speculative interest ultimately to support a futures market and a clearing house,” he said.
Due to his experience with clearing projects, crypto companies frequently approach Thom as well.
“I think I am becoming a Bitcoin maximalist,” he said.
Someone who thinks everything will fall away but Bitcoin, Thom doesn’t see himself there yet. “But I am not far away.”
Thom’s view is that Bitcoin has the most potential because of its permissionless environment.
“Also, it has the ability to be a good form of a payment system. It can be used for cross-border transactions and transactions with unknown parties. It already is useful for large size transactions and if something like the Lightning Network works for small transactions, so much the better.”
He also believes blockchain’s value in 20 years will be tied more to cryptocurrencies and explained the difference between blockchain and DLT.
“Blockchain is a subset of DLT and it’s more about how you secure your network, like proof of work. For example, what happens with Bitcoin is that the entire history of its blockchain is ratified every 10 minutes when a new block is formed.,” he said. “DLT doesn’t require a blockchain. It is like Google Docs, when everyone agrees to having a comma edited into a google doc, that comma appears on everyone’s screen. That is Distributed Ledger Technology.”
While there is plenty of excitement around the possibilities of blockchain, bitcoin and cryptocurrencies, Thom thinks time is of the essence and left us with a thought provoking conclusion.
“While Bitcoin has the potential truly to revolutionize our payment systems, it doesn’t have a huge time horizon,” he said. “You have to think it will be disrupted by some new technology in the next few years. That’s how new technologies work.”
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