Navigating Investments from Cryptocurrencies to Blockchain



super fun panels super fun topic everybody seems to be interested in this lately it was mentioned at least three times yesterday Tyler and Cameron talked about it last night for dinner and did an amazing job at covering crypto currencies why they're important and why institutional money ought to come into the space the importance for regulation and also covered the volatility and since we covered a lot of those topics already yesterday and I had a conversation with Mike Milken two days ago and he said please make sure that you help everybody understand the distinction between Bitcoin and crypto currencies and blockchain can you differentiate between Bitcoin and blockchain and I'm gonna turn this to Bill since you've been doing it for longer than anybody else I guess the easiest way to explain it all of you probably use the Internet of course and you probably use email as an application on top of the Internet which is basically a layer of software protocol err called tcp/ip transmission control protocol actually Internet Protocol so you can think of that as a tracking system that knows that if you know Tyler sends an email the Sunnah it knows that that's the content it knows it goes into the stream and those were pops out and it records all that so the block the blockchain is sort of like that transport layer and you could think of Bitcoin or anything else that rides on top of it as the container that contains something in that case not words like an email but a piece of value mm-hmm Tyler and Cameron can you elaborate on exactly what mining is so Bitcoin mining is basically I guess computers solve these mathematical problems and in doing so they basically archive and validate existing transactions and archive them to the the blockchain so I sort of joked that if you think of Charlie and Chocolate Factory that movie where Charlie is opening up these wrappers and looking for that golden ticket if for example while he's doing that he's actually simultaneously auditing the books of the Chocolate Factory and verifying them in search for that golden get in that golden ticket is sort of the reward that kind of incentivizes him to open up all those chocolate bars that's kind of like mining they basically audit and secure the Bitcoin network and then get it hade in Bitcoin they sort of make sure that the there's a double spend problem so if I hand you a twenty dollar bill I can't turn around and hand it to Cameron because it's gone but in the land of ones and zeros how do I know I don't send the same Bitcoin to two different people and that's called the double spend problem so how do you create a finite amount of Bitcoin a fixed amount of 21 million Bitcoin ever when we know ones and zeros are plentiful they're cheap it's like cheap like oxygen so mining creates a digital scarcity it creates gives Bitcoin its finite amount of like gold light quality and so they archive and they're sort of like the referees of the network and they create this digital scarcity which is a crazy concept to do but they ensure that bitcoin is like gold it's it's actually better than gold it's not scarce but it's actually fixed at 21 million bitcoins since you're mentioning gold and yesterday in tech conference you were saying that you see it see Bitcoin as a rival to gold with its volatility some people are saying that it can't be a store of value like gold what are your thoughts on that I think the volatility is a function of just a not a very sophisticated ecosystem yet we created the world's first Bitcoin futures with the SIBO which allows people to actually short Bitcoin for the first time so there's a now a two-sided market so increases price discovery and liquidity so the more you know institutional money that comes into this space the more liquidity the larger it gets the the more stable it's going to be right now it's a it's a young tech stock and I think that it we're just seeing you know what you'd expect to see if there is no ability to short a you know a public tech stock you know you'd see that kind of volatility but I think it's going to level out once the futures contract picks up steam once options are not and then there's other products like ETFs and whatnot I think you're just gonna start to sort of see it like level out and look a little bit boring but the interesting thing is like the opportunities now when it's volatile when it's small when it's risky that's your opportunity to make money you know when there's a high risk there's a high reward when it gets boring and stable and kind of caps out at a couple of trillion dollar about market cap there's really not much more room to go and less Bitcoin evolves into being much more than just a sort of value or a goal do point out gold has a you know three four thousand year head start in the spot market there's gold ETFs there's a few cool features there's all these you know sophisticated financial products that presumably bring a lot of investors into the asset and also reduce volatility and increase price discovery and bitcoins simply not there yet I don't think anybody on this stage would argue that but I think the properties and the characteristics it could be you know gold in the future for sure since you guys were mentioning products and different instruments that are built on top of crypto currencies and since Charlie's really involved with investing in icos can you comment on the ICO market and why some people say that you know some of these I SEOs are completely fraudulent and some of them are just a complete revolution in terms of making funding companies much more efficient sure so I think that probably 95 to 99 percent of icos are fundamentally worthless and are essentially non diluted financing and venture capitalists have figured that out the ICO market the way that it looks right now is mostly a function of the fact that it's highly speculative and speculation drives innovation and I think that out of it you will see a handful of very high-quality extremely disruptive products come out one of the examples that I frequently give is this project called Algar it's a decentralized futures market the cost of contract creation is going to be fractions of a cent you know it's generally pitched as a way where you know you could create a futures contract on the outcome of a presidential election but beyond that you can imagine that I now can speculate on for example SpaceX create a contract on you know the valuation at their next financing round and all the sudden I have the ability to speculate on essentially anything in a decentralized way that can't be you know it's not really subject to regulatory pressures and so I think that you'll see a couple of these things end up coming out and being wildly wildly successful and you'll see a lot of stuff fade away into obscurity and nothing really happened there and so yeah it's highly speculative speculation drives innovation and the market is obviously very young mm-hmm Mike you also invest in a lot of AI SEOs and have an incredible team that I work with quite a bit and as you guys look at the IC o—- landscape what are your thoughts on it so I think what's important to get is that we're in this first stage of this blockchain decentralized revolution and I call it the storytelling stage in any speculative mania and we're in a specular mania it starts with storytelling it's the story of what the future could look like if you kind of go back to the mid 90s and the internet we were telling this wonderful story but the internet could look like as it turned out the internet way surpassed our wildest dreams right the Internet is ubiquitous in our lives today it determines elections the way our children date the way we interact with each other every business has been disrupted by the internet we we didn't dream that in 99 but we were still telling these stories and so right now the ICL market is a storytelling market why partly because none of the block chains you know think of the block chains as public utilities that process this information that's going to go on databases or fast enough for these new projects to actually run at industrial speed and so each IC o—- right now is is a story of what might get built and so you know it's because of that it's all speculative in two to three years you're gonna start seeing decentralized risk-taking decentralized file-sharing decentralized online gambling decentralized crap you know uber or Airbnb and real real threats to the established the established companies to show up but until then really we're tough work we're talking about stories and so we invest we look you know is there a great team behind it you know does the token economics make sense is there a reason that this industry should be decentralized like not every industry should be decentralized why centralization works pretty good so is there a value proposition and and you know because of it because of the frenzy right now there's lots of bad products by bad projects getting funded and I think Joey was right a lot of these things will go to I'm sorry Charles was right a lot of these things will go to to zero and some will will be revolutionary I think it'll get a lot easier in two to three years as we see real adoption so you can if it's decentralized gamble you can see how many people are logging on and gambling what's the revenue coming up you know how is the the ecosystem growing so these aren't currencies right these are these are tokens that give you access to an ecosystem and so you think about each one as a social network you know the real power of this thing is that the the social network grows virally because the users become owners and so it's a fascinating business model and it is going to I mean I was out with one of the the big pools of capital here this morning and I was like you guys need to invest something not because you'll make so much on the investment though I think you will because in two to three years the rest of your portfolio is going to rely on you know what businesses are gonna be disrupted I think you'll see something launch something big launch within the next year I would not have said this I've been involved with etherium since before the white paper was released and have been thinking about when will actually see something happen for a long time and in many ways people are trying to sprint a marathon before that before we've crawled a lot of people expect that this stuff is gonna happen very quickly but to Mike's point it's slow it's hard to code there have been lots of security bugs and generally it's it's just very very nascent but I would expect that you will see a few things release this year in 2018 that I think will start to give the market an inkling of of what kinds of things will work and how wildly successful the things that really find protocol market fit and really are able to actually be disruptive you know how successful they'll be in practice beyond from a speculative perspective and that's gonna be yeah so a lot of stuff that's out there right now is very internal so a couple of things that Mike had mentioned like gambling and things like that are things that kind of touch the outside world and you're starting to see more you're starting to see more projects that that do more than just kind of fix issues within the space but I think that at the outset of it most of the things that will launch and be successful and be widely adopted will be things that are kind of internal to the industry and don't go out and try to disrupt Airbnb yet and so examples those be Algar maker dow very interesting project by the way for finance people it's essentially collateralized debt positions to create stable crypto currencies it's fascinating stuff so algorithmic or to 0x a protocol for token exchanges you know fiat pair or currency pairs you know scale factorial e so it's kind of a decentralized protocol to try and help with token trading now that there's a couple thousand of these things already Oh me say go project in Southeast Asia that's trying to do very fast to centralized payments already partnered with a couple extremely large companies and I think that it'll be successful tell us why Joseph foon which i think is seen as favorite person in the industry so good good project and there's there's a there's a bunch more out there that's just a short list of my favorites but I think that two or three of those will launch this year and I expect and fun fair one that we didn't like a decentralized gambling project I think that a couple of those will launch this year and that's pretty exciting because as of right now there's no real active large successful project and a couple smaller things but none like you you guys might have heard of crypto kitties it's like a it's like cats you can breed on etherium that's been by far the most successful project so far so you know early days but I expect that you will see soon very soon it's the first time I've ever actually made that prediction publicly something or some things launch that really start to give people more of an understanding of what will be successful and how wildly successful it'll be what it does launch and will Bitcoin then be dethroned I don't think so I think so I make a prediction that by 2020 aetherium smart cap will be 10 times higher than bitcoins so I don't think so partly because I think we're we're still moving into this space and you know bitcoin is the standard-bearer and it has actually carved out this use case of digital gold I was talking to one of my 60 year old friends Stan Druckenmiller it was maybe the world's greatest speculator and I'm only 53 and I was like Stan you're old because he was like a Bitcoin goal like you know you can feel gold but I was talking about my daughter I said you know if I give my my mother digital flowers for Mother's Day my mother will look at me and maybe slap me and I'll hear a whole bunch of curse words coming at her and you know but if my daughter gets digital flowers from her boyfriend she's like oh he loves me you know our youth growing up in a world that's digital you go to China no one carries cash right it's all electronic payments and so as we shift into becoming more immersed in a digital world the idea of a digital store value-added deal in digital gold makes a whole lot more sense it doesn't for most of the guys in this room would bald heads I see a lot of old heads out there because we didn't grow up immersed in our phones eSports you know we talk about eSports and you know my brothers who are all being sports fans they were quitting eSports how about that the League of Legends Super Bowl which took place in The Birdcage in Beijing had 80 million people watching on TV that's more people than watch the NBA Finals in the US and so it's hard to imagine that this whole world is shifting as fast that it is but it is and so I literally think of digital gold as will be will replace gold over the next you know five ten fifteen years and gold's got an eight trillion dollar market cap and bitcoins got about two hundred billion dollar market cap and so I think of all the other cryptocurrencies Bitcoin has kind of carved out this unique space listen it could get to throned and I don't think it will be the blockchain that people buy it and build things on and so maybe aetherium gets a higher market cap because it becomes the one that people build things on but I don't think Bitcoin goes away I'm so glad you mention the generational aspect because yesterday in the FinTech roundtable you're saying it's really hard to understand the cryptocurrency and blockchain revolution unless you really understand its nascent roots and its anti-establishment nature of it and how this generation looks at things different then so Bitcoin really came out of the 2008 financial crises when people around the world looked at their their banks their governments and said oh my goodness the world's falling apart and we just don't trust these guys anymore I don't trust that the bank's gonna protect my money because it looked like the world was falling apart and so you know Satoshi man or a woman or a group of people you know came up with this white paper with this you know interesting concept of decentralized trust where you don't need to trust the one person in charge and it really resonated to lots of people you know from crypto anarchists of libertarians but certainly to the Millennials when you fast forward for 2008 until you know years 2018 and you look around the world there's a complete breakdown and trust the United States Congress has the single lowest approval rating in its history our president has the single lowest approval rating of any president in its history you know the truth you know what do they call alternative facts and truth you know so this idea of trusting the centralized authority is breaking down Wells Fargo in the United States got in trouble for for you know doing things they shouldn't have done Equifax our biggest credit agency got hacked and it's not just the United States you look at places like Venezuela where the currency became toilet paper you know or all over the world there's been this breakdown of trust and so the this decentralized revolution is touching something in people that say hey we want a different way in a lot of ways what got Trump elected in the u.s. was this group of people that felt forgotten that so we want something different and Bitcoin in the blockchain revolution is a more productive response to that same problem like people feeling left out want a different way and so one reason it's not going away is because this is a millennial gig and this is there this is their revolution and they're just not going to roll over that's really helpful and to your point around the massive disruption element one thing that I think might be relevant to this region is the aspect of the petro dollar and how that's being yes this came up like in a conversation I had because here we are in the land of the petro dollar and you know as I I because I've been involved in this space for so long and I've actually kind of been amazed at how rapidly its accelerated recently it's really made me question why why is all this hat and what you know what is behind it from a more systemic level and you know let me I'll ask all the people in the room what is more important to you if it got cut off your access to petroleum or electricity and I would argue probably that most of you if you like blacked out everything that that would be far more disruptive to your life today then if you couldn't fill your tank at the gas station okay so how does that tie the petrodollar if you think about the history of currency in the dollar in general you know after World War two you had the dollar anchored to gold and then it was a reference point for other currencies when the u.s. essentially forced people to make payments for oil with US dollars that effectively was like an IC o—- where you tokenized oil alright so that allowed all to be stored so it allowed countries to basically hoard and accumulate through through their foreign reserves capital which could be traded for oil so it was energy security if you think about the situation we're in today electricity because of the fourth Industrial Revolution you know the old industrial revolution with machinery made oil fundamental to people's lives now it's all software all those gears and machines are software electricity is the thing it is the lifeblood of all of our lives today so I think what cryptocurrency is it's essentially the tokenization of electrons as opposed to petroleum molecules and it's becoming basically a reference storage for all of the things that are useful in your life and it's it's actually kind of profound I mean it's there's there's so many things that are ahead because of the shift it's it's amazing what are some of the things that you can foresee that are ahead well so so I think it's basically changing its its redefining societal structure back to what it was for all of human history ok so there's kind of a big statement but you know Michael Milken is talking about you know human evolution over 4 million years this morning so if you google search how long if humans been around you get like 6 million years Society has been organized and civilized society for four or five thousand years it's only been for hundred and fifty that we have had the societal structures that we have today that are big corporations where humans have been turned into a cog in a wheel if you think about life as a caveman you might like you know hunt with your friends for five hours in the morning fish in the afternoon look for different lines gather with other ones in the in the day so you were a molecule on a fabric where you could reassemble your life based on what you were interested in at that moment you had a flexible life and you could drive your life through inspiration it wasn't until the Industrial Revolution and the change in the economic structure to economies of scale where the productivity model drove big corporations and the concept of a nation-state to protect that and it's only a hundred and fifty years so the other five million nine hundred ninety thousand years people have been in this flexible fabric software is taking humans and allowing them to return to that state where you could basically abstract yourself off the page connect with other people per your interest at any given moment and you think about the job market today the people of Charlie's generation they don't work like your parents or their parents where you were locked in a company you're basically working on ten different things depending on what you feel like during the day right so I think we're redefining society based on software and the currency is an expression of that because they're basically communities of interest just like you know the the dollar dominance that we've had for the last 50 years has only been 50 years and and in all other periods of history value exchange has occurred with many different flavors all over the place and they were somewhat interchangeable so I think we're just returning back to what we always work mm-hmm around the aspects of how all of this is evolving and since camera and holo you guys have really been at the forefront of this thought curve what do you see it as second and third-order systemic effects on society in particular with regard to centralized institutions such as banks and the Fed and other areas that are so intrinsic to society so much so that obviously we had have a huge bank bailout by the government and so everything so intertwined these days and like Mike Milken said yesterday during the FinTech roundtable at some point bank branches will probably be completely obsolete so to the extent that banks start becoming less obsolete and given that they're at such high valuations now how does all of that unravel and do you see it as a step function do you see it as a gradual function if at all and I know I asked George Bush the same question yesterday he did not have an answer at all so I'm not expecting you to have an answer I just think it's very interesting for us all to contemplate and think about I think there's probably a billion people in this world who are unbanked right now and I think if the current banking system could Bank them they would have and they'd be there right now so I think blockchain and Bitcoin are things like that decentralized networks there's probably the closest we're going to get to potentially solving that problem in our lifetime which i think is very exciting because all you really need is a connection to the internet and a private key address and you're instantly in the Bitcoin network or the etherium network so I think that's pretty fascinating second-order effect of this technology it's probably not going to happen in the next year or two but I think as these technologies mature in the u.s. we'll see an exporting to other parts of the world that truly need it and might be more impacted than than we are I mean I don't think anybody woke up and sort of said hey my credit cards not fast enough or this is really bothering me you know we happen to be really interested in the technology but the u.s. is arguably doesn't need it as much as a lot of other places in the world so I think that's going to happen over the next five to ten years be really exciting I think to to Bill's point the you know the internet started off as this open place and in fact the Google guys downloaded the entire Internet apparently on one computer that now sits in a computer Science Museum in San Francisco to work on their algorithms and you know see if Google would actually work today you can't download the entire internet because it's siloed in the defame company's Facebook Amazon Apple Netflix Google maybe Microsoft and so when you log on to the Internet today you're really logging on to one of five companies and so you can't really download that all of the data that twitter has siloed you can't download all of Facebook they control what they centralized it so in many ways cryptocurrencies can just centralize all this and move these companies that are siloed on the application layer down to the protocol layer so that this data is actually you know democratically open and the Internet's actually how it was supposed to be a use it was supposed to be this peer-to-peer open thing for everyone in not this centralized sort of dictatorship of five company five or six companies and so I think that it's it's kind of interesting that the the cryptocurrency you know breakthrough is allowing us to go back to what this was always supposed to be and I don't think it's a surprise that all of these companies were really late to adopt it or even speak about it because it didn't doesn't really benefit them to to disrupt themselves in a way so you know you can argue that Silicon Valley very much missed missed the boat on this but I don't think it's because they're not smart people I didn't see it coming or wasn't in the backyard they just didn't want to see it it doesn't you know it's not a good thing for them it's a fascinating point the I keep thinking what's the killer app for the blockchain and the killer app for the blockchain is identity and you know we give away our identity for free right now I used the example of my daughter who's twenty two goes to a bar she gives to the bar man her driver's license and it has her address on it so why does this man who doesn't know her now need to know where she lives it's just we do it as a function and so one you take identity back when you take privacy back which the blockchain is going to allow soon it can change everything the data that we give to Facebook for free you can charge them for it when I buy my underwear online next II know the whole world knows I like pink underwear that's not really you know their their right to know that tottering care but no because they own the company and so you know pretty soon you're gonna wear the Apple watch and your biometric data is gonna go right to the cloud and someone's gonna know hey you're 53 old male and your heart rate 62 on average and they'll know what all the you know that data is wonderfully valuable and so you you could even kind of wax all the way to universal basic income just by living because your data is worth something and so I think when we can get to an identity and there's lots of cool identity projects being built on you know in in the developed world there's 2 million people without identity and so just through attestation you know I say this is sue know all of us say this as soon and therefore she is soon and all of a sudden she's got identity in the developed world you add on your passport your driver's license and you're gonna see a real revolution in things and then you start becoming a real threat the dominant data owners Facebook Google and so again as investors I keep telling people put something in the space maybe not even for the money you make in the space but because in 2 3 4 5 years all the the landscape is going to shift and the companies that you think are infallible are gonna be at least at risk now I don't think any of these guys are just gonna go to sleep and say yeah take my business away from me right there's gonna be a fierce fight from uber to decentralized uber from Facebook I'm even more exact referred finally woke up and said hey we're gonna spend a lot more time thinking about this and so it's gonna be a fascinating you know game to participate in but it's coming I don't think it's market efficiency yeah or it's it's not it's not identity I don't think there's any one use case that will end up being the killer use case and this is mostly from the etherion perspective or people that are trying to build applications on top of this so when you say things like like there will be a fierce fight from uber yeah I think that it's more I think that you could create a much more efficient version of uber on aetherium someone already created a much more efficient version of air B&B on aetherium it doesn't have to be on a theorem specifically but on sun block chaining somewhere and I think ultimately the the killer app for all this stuff is just market efficiency it's just finding markets where there are people taking rent seeking fees where they're artificially illiquid where there exists the ability for something to come in and I mean it's kind of like regulatory arbitrage you know for a lot of these things and and really the killer app for all this stuff is that it can go and just like a serial killer find every single vertical where there exists some kind of inefficiency and frequently it's just such an obvious thing that you'll hear about and you'll be like yeah of course this is gonna be wildly successful if you're able to actually go out and build it whether its identity allowing people to take their data back creating global marketplaces where they're currently fractured cutting out rent seeking fees in any number of industries it's probably the biggest one I think all of those things pretty quickly you know like what the snowball effect will be disrupted and that when it starts to happen you know again I think I think you'll start to see the beginnings of that in practice pretty soon that it'll be very clear to people that this is real and it's actually going to come for an innumerable number of industries I mean the the problem that I'd love to solve is BAM right if you had to send a cryptocurrency token some small fraction to his server before you send an email you wouldn't be able to abuse that because it would become expensive to send out millions of emails to random people and try and see who you know took the bait if my server required you to pay me and then I could whitelist you and whatnot and create sort of a market dynamic forces to sending email which is now absolutely cheap and and no cost to the the sender all of a sudden if you put a cryptocurrency market dynamic forces on that spam email would be gone that's just one of the obvious problems that this technology can solve and there's so many more and it's just beginning a challenge people to think about it though like there's in almost every example that I hear people give and the email wants a fantastic one right because it's super annoying to open your email and just and and you know it's awful like it shouldn't exist it shouldn't exist in 2018 there's no reason for it – I would say similarly there's no reason for Airbnb to charge the fees they do in 2018 but you know it's a less immediately solvable problem but when I think about this stuff in almost every example that people give there is an obvious rent seeker or there is an or there and whether or not it's immediately obvious like with the Airbnb example or whether it's just people don't want to solve the issue like with the spam email thing people don't really want to solve the issue because there's there's an inefficiency that exists there from being able to gather more data on people essentially with the spam email issue what that was a little less clear but but almost all of these examples you can kind of find and latch on to some facet of it that is just clearly inefficient and should be solved and you're like why hasn't this been so far why is no one able to disrupt this whatever and in almost every example if you give it some thought it's it's like it starts to fit the same narrative for all these different things even when they're wildly different for the reasons that they will be disrupted there's there's like an underlying narrative that's really just like the decentralisation rebel ethos kind of for a long time you know the Cardo anarchist ethos but that all these things fit and that when you really start diving down into this stuff I think that's why you go down the rabbit hole is that you just start to see this overarching narrative that you know I I can't come up with a convincing reason why it wouldn't work you know in the end even with every hurdle that it's jumped over so far and we'll have to jump through thank you so much what I love about aspects of everything that everybody here has said is that once people start thinking about this often you know we call it going down the blockchain rabbit hole you start thinking about all these different things that can be massively disrupted and what the future can look like and so before I open up to audience questions I wanted to ask each panelist to point out one thing that everyone in the audience can do to start becoming involved in this revolution whether it's buying one Bitcoin or going on Gemini or you know buying a certain book or going on coin desk so I'll start with you yeah you can sign up to general acid exchange run by these two twin brothers and you can buy bitcoin and ether and you can custody with us so that's a good way to start I always think that getting skin in the game is a great way to sharpen your senses and encourage you to and galvanize you to actually start learning about something same advice you know I think it's like Mike was saying you know as a fund manager or an investor you just you just want to be in the game to learn and you know I think I think it's probably useful to so having started as an equity venture capitalist and then finally doing Bitcoin and passing on a theory of because I thought already Bitcoin you know the ico wave was crazy to me when it first started but I I now have actually participated and watched a couple of them and I think it would be very useful for all of you to buy one or part of a Bitcoin a little bit of aetherium and then just test the water with an IC o—- because the the mechanics of how you transact and acquire each one of those is slightly different and or they're you know they're close but the IC o—- is in many cases are different because you have to navigate sort of world of like which exchange and you know it's it's it's something to learn and you will see the problems in the system that need to get fixed by all the developers as you start to use each of those coins because all of them have some I wouldn't call flaws that that they they have things that need to be improved that the developers are working on whether it's transaction speed or or lots of like you know gaping holes in the technology in aetherium or or you know depending on the IC o—- what is the business model – I would experiment in in all of those so I spend most of most of my time down in the trenches with this stuff I don't get the opportunity to talk about it from a high level very often which I enjoy so thanks – no but I would say buy some Bitcoin buy some either try just sending it to a friend try posting on reddit or whatever and giving some away try participating in IC o—- try trading some of these tokens and if you can try and figure out who your counterparty is when you're trading those tokens the moment that it really clicked for me and a couple of my friends with the token market specifically because for a long time I was a massive you know Bitcoin fan and even though I believed in aetherium from the early days I wasn't really sure where it would find it's it's new ish but buy some tokens and give them away or trade them with someone and try and find out who your counterparty is for me it was a fort the first one was a 14 year old kid in Bangladesh the second one was I think a 70 year old woman in Japan and and you know I think that it'll start to give you an inclination of of just how different this feels from whatever you would expect or be used to and you know you can start to kind of get an inclination for for where this could go if it's successful it's a great point this is really the first global speculative mania of any of our lifetimes it's a hundred percent global as sometimes there's 30 percent of the volume that happens in Korea in Japan I got interviewed by CNBC Africa in India and so we've never had a global mania and so it's a it's a really interesting point my advice is a little different it's to go on Twitter the crypto world lives on Twitter you can follow build hi he's got a pretty good Twitter or even myself at no regrets on Twitter and why I say that is because I didn't understand I underestimate a little bit how fast the the market would grow until I went on Twitter and realized just how viral this thing is there was a few weeks ago I made some comment about one of the coins being overvalued and you know at a stupid price and by the end of the day 800,000 people around the world and read that comment and I only have 60 thousand Twitter followers and it was just how fast and viral the nature went and it got me thinking about you know this is because it's all out there and because it's there's awareness already over the world that the adoption both has users but then as users bring in you know programmers and young guys like him who dropped out of school he saw this as an opportunity I literally flew over from New York with four college dropouts on my plane all under the age of 20 all from the best universities of the United States and so you know there's something going on here and Twitter is a good way to now there's a lot of junk on Twitter too but you'll get some sense of the passion of the community thank you so any questions from the audience so I'll take three questions and I'll take them all at the same time I'll write them down and then we state them you talked a lot about the revolutionary aspect of this governments don't like revolutions and so you have governor and regulatory control that is starting to happen because of ignorance or whatever you want to call it how do you all view that both from u.s. perspective as well as a global perspective hi I asked this question yesterday to one of the twins I I'm embarrassed to say I don't know which one but around them the money laundering and within a blockchain there's a ledger that identifies the Providence and the history of the transactions how is that not a powerful tool against money laundering because you know all the authorities are this is the big criticism and you know it's a scare mongering I think type of concern but I understand there is some type of technological solution that can use that power of blockchain to combat money laundering why isn't that being out why isn't that out there in the media only the negative side is thank you so much excellent an excellent topic I guess it's it's a two-part question and one just as a follow one on a very interesting comment that was made which is the comparison between the petrol dollars and and basically the tokenization of Bitcoin my issue with this is is very simply it's at the end a what produces electricity it's natural gas it's a natural resource so so the tokenization should be for that rather than the internet itself because without we wouldn't have an Internet we wouldn't have electricity so again you go back the fundamentals of you know what people want which is you know the energy regardless about that energy comes from so I think that that for me sort of defies a bit the comment the second part is I continue to fail to understand whether we're looking at a currency or a commodity and at the end of the day it's all a function of it's a relative base when we look at currencies it's it's the dollar versus the euro it's the euro versus the yen today I think because of the fiat money system what people don't realize it's actually all of the currencies have been devalued against the gold because gold is considered not as a commodity but the ultimate form of currency if Bitcoin becomes that at the end of day I need to be able to use it to buy goods so what determines the value because whether it becomes twenty thousand dollars a hundred thousand dollars or a market cap of seven trillion that's seven trillion dollars we continue to base it in the ultimate currency form which is a dollar if you take that outside of the system then what is that relative value compared to and and I think that's the issue and if you go back to the basics it's got to be you know the basic needs of human beings which is really you know a place to live and an ability to buy essentials like food and club clothing so I still fail to understand I get the technology side of it but I don't understand it as a means of communication how will that be able to to sort of replace what we have today and how will it be actually different rather than just be a form of you digital I know I'm sorry I took too long but I'd love to hear that list thoughts on this I'll take a crack at that and we go backwards and the questions hmm listen right now you're better off to think of these as commodities aetherium as a fuel to run the etherium Network you know Bitcoin as goal which is a commodity you know the big question is the u.s. gonna lose its power as the reserve currency right wouldn't you ask people what they're worth they think in dollars they don't think in euros or yen or but in reality if bills point is right and we're seeing in small scales as these new little social networks and ecosystems trading within their own you know dollar dominance might end up falling right we've got debt-to-gdp around the world as high as it's ever been the u.s. is in a bit of a rich you know at least cyclic he in a retracement mode from from its its place as the global leader right we've got a isolationist streak going through the US right now China's on the rise it was very interesting that at Davos two years ago President Z showed up and he was quoting Abraham Lincoln and reaching out and being a globalist when Trump was pulling back and so that that drama is gonna play out on the global scale were years away from the token economy being relevant enough in the world that people will start thinking in terms of you know Bitcoin and so there's gonna be these transitions I mean what Cameron Tyler provide is a way to get money out of the tokens world and into the fiat world and back and forth those gateways are going to I think be a lot more efficient in the future and be very important and so I don't think well and be an intellectually interesting argument to think about in the next 10 to 15 years it's not as relevant and so if you think of them as commodities and access to new ecosystems and infrastructures it's a probably healthier way to think about the system Janet Yellen said once someone after like you know you'd have to move the decimal place you'd have to move the decimal like eight places for me to get for me to you know give this any amount of mental energy there is as a pragmatist right and someone who believes in this a lot I mean there's no point in really talking about is this gonna overtake or overthrow the US dollar at what point we start denominating it in Bitcoin like you don't need to this can be wildly successful and we can be on the trajectory for it to be as wildly successful as we want it to be without thinking about that for you know the foreseeable future and so it's it's kind of like you know the the point at which we start having a serious conversation about Bitcoin versus the US dollar as a global reserve currency you know I don't I'll be so happy that you know it's it's it's people have used their their what I've seen in this whole I've been trying to get people to participate in this market for four or five years now and there's this series of excuses that people give themselves this is one of them well I I can't figure out the the 20-year future or quantum computing or and there are a thousand reasons why not to invest in a speculative technology you're not going to know all the answers we don't know the future the point I'd make is listen I was a pretty practical guys but my life as an investor there's enough good stuff happening that you'd be foolish not to do a little bit of investing to put a little bit of your money and to put it a little bit intellectual capital into the thing because there's a shot that all your skepticism might be wrong it's such a great point too again going backwards with the questions terms of tech solutions for money laundering and other yeah actually that that's sexy there it's not in the press so much but there are things you know at the Necker blockchain summit we started something on the blockchain trust alliance and it's a coalition of you know Interpol Secret Service IRS people like that that actually do use tools there there's tools like block seer or a lift going where you can literally you know if Sonia and I hadn't met and she said send me some Bitcoin I could copy paste her address put it in the search box hit enter and I could see how many coins are in her wallet and I can see every transaction in or out of that address that she's ever done and then I could follow the money so there may not be a name to it but once you break that chain and you identify it's like identifying an email string you you can identify everybody along the line so it's actually it's it's it's easier to launder money with u.s. dollar bills in a suitcase than it is with Bitcoin yeah and it just makes a better media story it's a sexier story to talk about bad people using Bitcoin and for illicit reasons and and Silk Road in the dark web but you're absolutely right the question there are forensic analysis tools the people that the agents who actually busted Silk Road one of them absconded with some of the Bitcoin and was tracked down by these tools we got the email from bitstamp about that what's that at bitstamp we got the email about that like yeah I'm pretty sure this guy's stealing all and the first time in that I can remember they an agent that did a bossed of some sort you never hear about a drug bust where the money was taken and then the you know the cop was arrested because cash is actually you know untraceable anonymous whereas Bitcoin you know even bad guys and even agents who are doing bad things get busted mm-hmm and blocks here which bill pointed to they do a ton of work for the FBI the SEC the IRS and it's all actually incredibly trackable so that really ought to be one of the stories one of the problems of Bitcoin that it's too open and so there's projects like sea cash that are trying to restore privacy to move in a funds and flow of funds and I think the media just enjoys promoting this false narrative it's truly fake news but I think it's important to approach this space with a beginner's mind there's some very smart people like Warren Buffett who will tell you this is going to end badly he's an oxygen genera and he the Internet you know and he doesn't even like the internet so I think that you know he's a status quo kind of guy I think Jamie Dimon is a status quo kind of guy things are really good for them they don't get paid to look around corners they get paid to sort of monetize the here the now and arguably rent seek in a lot of ways so I think it's important to as Mike was suggesting get a little skin in the game even if you're just trying to learn if you're not even trying to look for a return because it's going to transform our lives there's no question in my mind you know people a fourteen-year-old in Bangladesh to Charles this point you know the fact that they're playing with you they would participate in the capital market for the first time yeah they could participate in a capital market for that first time litter that fourteen-year-old is not going to to get access to US equities and I'm soon and they can build on these open permission systems so we really can harness a blockchain can harness the human capital of the world and I think it's probably the first time ever you know Silicon Valley companies have access to who can who is basically sitting on that soil at that time and clearly you know that's hard to get there it needs a lot of people out so I think it's really exciting the mental capital that we will have coming that's already in the space and that's gonna be continuing to come into space mhm yeah it's so exciting is it so power to the people truly to that point about the 14 year old so then in terms of how regulator is really to Jack's question listen you know this started off and it still is some core value about not trusting the center and so it's in direct opposition to the people that are in the center often now the practical side is you're not going to have this technical revolution that we're talking about without collaborating with with the authorities you know they're throwing this they all just take over and so you know our company all of the guys up here are constantly working with the regulators you've seen different responses in different countries the SEC was just out two days ago and they were very optimistic and fourth thing as it listen there's a lot of fraud and we're gonna go after bad actors and fraud as we should write a regulator's job is to protect the little guy and the little guy was making a lot of uninformed investment decisions based on a lot of you know fraudulent propaganda and so I think you're gonna see some some severe crackdowns on some of that but they don't want to kill the innovation Golden Goose that could lay all these eggs other countries like China more more threatened by a decentralized system have been a much bigger crackdown my personal view is China is cracking down just long enough for the Chinese companies to get good at this and then they'll kind of roll out the Chinese version of a decentralized system oxymoron and so you're gonna see different responses around the world I do think the u.s. regulatory response will be the leading one and people will follow and so we're pretty optimistic you know it's good for the for the community and for the the ecosystem to actually get some clarity around the rules most regulators because as as so new have been been reticent to put any clarity out there and so I think over the next couple years you'll see you'll see you know more established rules we're going by at our company by the basic fact that you know just behave well and behave like you were behaving if you worked in Goldman Sachs and you know that's not that's not the ethos in the in the system right now but I think what about progressive regulation so Japan last April declared Bitcoin legal tender and so final point about that all that bill wrap up yeah we do have to wrap up you know I'm sure all of you who've been to Japan and dealt with Japanese businessmen and you know house like consensus or anything in our slow-moving they are and how they will never make a decision like off the cuff so just think about that because I had been involved in Bitcoin for so long and when I hit twenty bucks I was surprised and a hundred I was surprised and it was at 1300 in the Bank of Japan said it's legal gapped up to 3,000 and I I was blown away now if you think about picture yourself as a banker in the room with the group of people in suits at the Bank of Japan sitting on the third largest GDP in the world with a massive amount of debt a xenophobic culture where you have no young people anymore because it's kind of upside down and they've been doing quantitative easing for 15 years before it had the name quantitative easing with negative interest rates right so you're sitting there saying what am I going to do what do you do if you are governing that money supply on that economy and and you may or may not have noticed like anytime there's a scandal in Japan like like the Toshiba thing there was a giant hole in the balance sheet that was there for 15 years but you just didn't know because they're covering it up right so I know it's a little wacky theory but I think they they don't make decisions off-the-cuff and I think that economy people have been shorting GGBS for twenty years of losing their ass you know but I think they may be worried that to your point about you know what happens to these fiat currencies or over cycles these things end you know and if you were running that money supply and your real concern is social stability and you think the system's gonna blow what are you gonna do you know they announced in April eight weeks from now 260,000 retailers are gonna be Bitcoin enabled and this is a country that is like really slow right so so my theory you know put a little bit coin in every citizens hands and when the gasket blows that Bitcoin goes to a million a coin and everyone's good it's great point I mean the average lifespan of a currency is 27 years so the US dollar you know is an anomaly for sure and the countries that adopt these things quick or earliest are going to have a huge potential opportunity like regulatory pressure so like I'm clearly a you know ideologically fairly radical about this but day to day it's not that hard to be a functional pragmatist in the u.s. specifically you know we meet extremely frequently with the SEC CFTC etc about these issues and it's it's not hard to be participate in this market in a way that's functionally pragmatic and you know I don't think that I think it'll be an ongoing conversation with regulators and governments but one that so far we've seen zero evidence for you know sort of just bringing the hammer down type response and and indiscriminate regulation so thank you everybody for coming and good luck with all your participants a bit quick

19 thoughts on “Navigating Investments from Cryptocurrencies to Blockchain”

  1. I was writing a paper on Bitcoin vs. The banking system and my professor hit me with this question, I have no clue how to answer it, any ideas?:
    One counter-argument that I saw that you didn't address is credit.  It strikes me that you could not have a credit or loan system with bitcoin because it requires the person to have the bitcoin available.  (To solve this problem, it strikes me, would be to tie yourself up into your original criticism of banking altogether, and, yet, you need some way of issuing credit since most economies rely heavily on credit.) Could someone please explain to me Bitcoin vs Credit?

  2. Interesting parts in the video:
    17:00 – Discussing the generational aspect of crypto and how it is not going away.
    55:00 – Japanese government declaring Bitcoin legal tender and how they are so slow, what it means for their economy.
    (Will edit later)

  3. Thank you for this outstanding discussion.  FYI:  Japan allows payments in bitcoin but it is not "legal tender".  One day you may be able to pay taxes in bitcoin, but not yet.

  4. This was a very insightful talk, much better than stuff at Davos. Also good to see the mental agility of older guys like Mike Novogratz who get it

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