I just finished watching Mike Novogratz's keynote address at the GMP Securities Blockchain Technology Conference, billed as Canada’s premier blockchain event.
For those who missed it, I took some rough notes as I watched. Here they are in their entirety:
- Missed the dot-com boom, wasn’t going to miss the Chinese internet
- Didn’t bet big on the latter, however, so when bitcoin came around he really wasn’t going to miss it this time
- Bought BTC at $100
- Bought ETH at $1 on recommendation of Joseph Lubin, founder of Consensys and co-founder of Ethereum
- Was going to invest in Consensys, but when ETH started to take off, they didn’t need his money anymore
- Decentralized revolution goes after “rent takers” - e.g., cloud computing, Uber, etc.
- His go-to simple example re: tokens — likes picking on Uber — almost fastest growing company in history
- They pair a driver up with a rider and provide a billing service — that’s all they do
- They’ve created the supply and demand on both sides
- They provide a reputational score for drivers and passengers
- Decentralized Uber — launch it on Ethereum (or whatever) — pay for ride in some percentage of token (based on trading $ equivalent)
- Ownership of the company gets decentralized; becomes a community
- Why aren’t we seeing decentralized Uber yet?
- We're still early, in the speculative phase
- People buying with a fervor because of the idea that the technology will in 15 years be ubiquitous
- The herd is coming — it’s gone from VC to family offices, to more and more institutional investors — e.g., big pension funds are coming
- With most commodities, when there is demand, you have a supply response, resulting in price going back down. With bitcoin, there is no possibility of a supply response.
- We're no where close to the end of the speculative phase of this story
- Market cap of entire ecosystem today around half a trillion; dot-com hit 6 trillion and was centralized to the US; this is a global phenomenon
- We’re still in "Phase 1: Speculation" — people buying into the story, sensing things are going to change as a result of mass adoption of this technology
- With this brings innovation
- Then there will be a sell-off at some point — where we’ll find out which of these ecosystems has built a withstanding community
- Bitcoin is creating community around store of value
- The rest of the tokens, you need to be careful — need to see a community
- Ethereum is one of these (i.e., has huge community)
- Need to look at the size of the economy targeted by a token versus the token value — e.g., cloud computing is a huge economy
- Highly speculative right now — he suggests putting 2-3% of your net worth in
- He thinks overall market cap could easily go to $2.5 trillion or higher next year
- He personally has over 25% of net worth in it, but takes profit sometimes to re-invest in other things
- This is an insiders game — there are no public disclosure requirements — so be careful
- Regulation is coming — this is a good thing — credentializes this as a real asset class; protects people who need protecting; weeds out bad actors
- What’s unique about this system, though, is you do well by doing good
- He sees his role in the community as a bridge between the institutional world and the crypto world
- Overall, this is going to be an asset class that will grow
- If you don't invest, in 15 years you’re going to look back and say how did I miss this
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Question Period
- Communities get built around ideas
- Immutability/permanence is key
- Ethereum will be public utility that a lot of these projects are built on
- Could be another to displace it, but right now it’s ethereum
- Custody will be the next thing that drives adoption
- Ethereum’s use case has been ICOs as a method of starting your community
- CryptoKitties reminds him of Beanie Babies — will be a fad, fun game, price will go up and then collapse — but the amount of traffic has slowed down the ethereum blockchain — testament to the fact the infrastructure is not yet there — but it will be there soon
- Utility coin vs. security coin — latter represents ongoing interest in underlying assets, whereas utility coins are access to an ecosystem
- In long run, there will be a ton of security coins and may even replace equities, but the process of launching and building a community around it will be more difficult
- Vulnerability is in the use cases on top of the protocols — e.g., wallets — not in the protocols themselves (e.g., Bitcoin, Ethereum)
- As innovation happens, there will be more and more people focused on security
- Mentioned DAO
- Exchange of goods with coins is happening in places where currencies don’t work; can’t have a currency without stability
- He doesn’t see bitcoin or ether being a currency right away — can imagine a future world where it stabilizes, but not in Phase 1 (Speculation), which is still ongoing
- Banks will take a long while to get into the crypto advisory business; but people who build the best advisory businesses will eventually get bought by Goldman, etc.
- There are lots of protocols that are conscious of energy consumption, and they may take off
- But there is another argument that there should be some cost to validation; he’d undecided on where he comes down on this
- Smart miners moving to cold locations where electricity is cheap
- Will the flippening (i.e., Ethereum market cap eclipsing Bitcoin's) happen?
- He doesn’t think so in the speculative phase
- After that, it’s certainly a possibility