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
  • 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