Bernard Lunn
What if somebody around 1995 had given you a simple way to invest in the Internet? All we had around 1995 to 2000 was the option to invest in the ventures being sold by the Wealth Intermediation business. Today, if you want to invest in the Blockchain Economy, there is one incredibly simple way to do so - you just buy some Bitcoin. I just gave you a strategy, so where do I send my invoice for x% of AUM and y% of Carry/Profit Share? “Thanks, but I don’t need you to buy Bitcoin on my behalf, so your invoice will go in the round filing tray”.
I am using “Wall Street” as short hand for the global business of Wealth Intermediation ie getting a risk free return connecting users of capital with investors of capital. Wall Street can today be located in any major city, just like Silicon Valley has gone global. Global Wall Street aka Wealth Intermediation is a massive business (for more, go to this chapter of The Bitcoin Economy digital book entitled Blockchain Bits Of Destruction Hit Wall Street.
Aha, saying “just buy some Bitcoin" must mean that I am a Bitcoin Maximalist. Guilty as charged your honor. Let me explain why I am a Bitcoin Maximalist
5 reasons Why I am an economic Bitcoin Maximalist
Not a moral Bitcoin Maximalist - just economic. I don’t say that buying Bitcoin is any better for the world than buying an Altcoin. I am just saying that Bitcoin will be better than Altcoins as an investment. I said investment, meaning over the long term (there are plenty of short term trading opportunities in Altcoins).
Here are 5 reasons Why I am an economic Bitcoin Maximalist:
• One. Brand and network effects. Step outside the cryptoverse for a moment. Do you have any trouble explaining Bitcoin to a normal person? Try Ethereum. Try hundreds of Altcoins. Building a crypto product/service? Building for Bitcoin is a no-brainer. Which Altcoin do you invest your R&D budget into?
• Two. Not making any more of it. People who are fed up with money printing tend to like investing in land, gold…and Bitcoin. A big question for the mainstream user is, but how can we believe “they” won’t make more Bitcoin? Now ask that question of every Altcoin.
• Three. Copy that. Sidechains and other technology allows entrepreneurs to copy most feature of a cool Altcoin. Like Smart Contracts? Use Rootstock/RSK. Like privacy? Use MimbleWimble/Grin. Altcoins as a sandbox for experiments are a “good thing”. As a donation to the community that experimentation is cool, as an investment thesis less so.
• Four. Lightning Network. This crushes the BCH pitch that the only way to scale Bitcoin into a currency for daily spending is to increase the block size. The "will Lightning Network work in practice?" objection is looking less credible with each passing day.
• Five. Flight to safety from both directions. Coming from Fiat, Bitcoin is an Antifragile bet against central bank money printing. Coming from Altcoins, Bitcoin is safe haven while still believing in Cryptocurrency.
Ethereum is a wonderful technology innovation. If Proof of Stake really works in Ethereum, Ethereum could become a true public alternative currency because Proof Of Work is expensive. But that is like saying that if we can easily transport solar energy we can get off fossil fuels - easier said than done. Watch this space, this is a wild card. If you are convinced of Ethereum, maybe your crypto asset allocation is 80% Bitcoin and 20% Ethereum. Well that sounds a bit more complex, so where do I send my invoice for x% of AUM and y% of Carry/Profit Share? Yep, thought so.
The Bitcoin is Bad, Blockchain is Good idiocy
People who made a fortune in Legacy Finance, tend to trash talk Bitcoin. To show that they are hip to new technology, they often spout the line that Bitcoin is bad, but Blockchain is good.
Even Warren Buffet is saying this. Another famous, super smart Legacy Finance titan (I am being polite by not naming him) was heard on CNBC trash-talking Bitcoin but lauding the underlying Bitchain technology. These Legacy Finance titans are super smart about Legacy Finance and super dumb about Blockchain Finance.
When they learn that Blockchain can be both Permissioned and Permissionless, they come down on the Permissioned side and trash-talk the Permissionless solutions. Then when Oracle proposes a distributed database version of their RDBMS that they call a Permissioned Blockchain solution, the Legacy Finance titan can sagely nod their assent in the board meeting.
The Crypto Fund Products you will be pitched soon
These Crypto Fund Products all justify an intermediation fee, but not all are worth paying for:
• Bitcoin Killers. This could be like trying to find Facebook killers in the social media era. Even if there is a Bitcoin killer out there, your chances of finding it (or finding the Fund that will find it) is statistically tiny.
• Index of all Altcoins. If you agree that finding the Bitcoin killer is too high risk, the lower risk approach could be to take a passive index approach and invest in all Altcoins. The problem is that the analogy with an S&P Index Fund is flawed. Altcoins are early stage ventures where 1 winner can make up for 99 losers. Compare that to the S&P 500 Index where all 500 companies are viable. What if the 1 winner does not do a Token but raises conventional early stage equity capital? You have 99 losers and no winner.
• Filling in the blanks for Bitcoin. Bitcoin is the protocol level and the world needs exchanges, wallets, custodians, sidechains, offchain networks and a load of application level/user facing ventures. This makes sense as an investment thesis, even if it does not sound super exciting. This strategy requires classic early stage investing skills. The problem is that backing a first time fund is high risk and the top tier funds are not open to new investors.
Watch what Family Offices do in Blockchain investing
Family Offices are like retail investors in that they make their own decisions and have no explanation risk. The difference is obviously that Family Offices invest far bigger sums than classic retail investors. Family Offices are Retail investors with clout. Watch what Family Office do in Blockchain Finance to see the future.
I am using “Wall Street” as short hand for the global business of Wealth Intermediation ie getting a risk free return connecting users of capital with investors of capital. Wall Street can today be located in any major city, just like Silicon Valley has gone global. Global Wall Street aka Wealth Intermediation is a massive business (for more, go to this chapter of The Bitcoin Economy digital book entitled Blockchain Bits Of Destruction Hit Wall Street.
Aha, saying “just buy some Bitcoin" must mean that I am a Bitcoin Maximalist. Guilty as charged your honor. Let me explain why I am a Bitcoin Maximalist
5 reasons Why I am an economic Bitcoin Maximalist
Not a moral Bitcoin Maximalist - just economic. I don’t say that buying Bitcoin is any better for the world than buying an Altcoin. I am just saying that Bitcoin will be better than Altcoins as an investment. I said investment, meaning over the long term (there are plenty of short term trading opportunities in Altcoins).
Here are 5 reasons Why I am an economic Bitcoin Maximalist:
• One. Brand and network effects. Step outside the cryptoverse for a moment. Do you have any trouble explaining Bitcoin to a normal person? Try Ethereum. Try hundreds of Altcoins. Building a crypto product/service? Building for Bitcoin is a no-brainer. Which Altcoin do you invest your R&D budget into?
• Two. Not making any more of it. People who are fed up with money printing tend to like investing in land, gold…and Bitcoin. A big question for the mainstream user is, but how can we believe “they” won’t make more Bitcoin? Now ask that question of every Altcoin.
• Three. Copy that. Sidechains and other technology allows entrepreneurs to copy most feature of a cool Altcoin. Like Smart Contracts? Use Rootstock/RSK. Like privacy? Use MimbleWimble/Grin. Altcoins as a sandbox for experiments are a “good thing”. As a donation to the community that experimentation is cool, as an investment thesis less so.
• Four. Lightning Network. This crushes the BCH pitch that the only way to scale Bitcoin into a currency for daily spending is to increase the block size. The "will Lightning Network work in practice?" objection is looking less credible with each passing day.
• Five. Flight to safety from both directions. Coming from Fiat, Bitcoin is an Antifragile bet against central bank money printing. Coming from Altcoins, Bitcoin is safe haven while still believing in Cryptocurrency.
Ethereum is a wonderful technology innovation. If Proof of Stake really works in Ethereum, Ethereum could become a true public alternative currency because Proof Of Work is expensive. But that is like saying that if we can easily transport solar energy we can get off fossil fuels - easier said than done. Watch this space, this is a wild card. If you are convinced of Ethereum, maybe your crypto asset allocation is 80% Bitcoin and 20% Ethereum. Well that sounds a bit more complex, so where do I send my invoice for x% of AUM and y% of Carry/Profit Share? Yep, thought so.
The Bitcoin is Bad, Blockchain is Good idiocy
People who made a fortune in Legacy Finance, tend to trash talk Bitcoin. To show that they are hip to new technology, they often spout the line that Bitcoin is bad, but Blockchain is good.
Even Warren Buffet is saying this. Another famous, super smart Legacy Finance titan (I am being polite by not naming him) was heard on CNBC trash-talking Bitcoin but lauding the underlying Bitchain technology. These Legacy Finance titans are super smart about Legacy Finance and super dumb about Blockchain Finance.
When they learn that Blockchain can be both Permissioned and Permissionless, they come down on the Permissioned side and trash-talk the Permissionless solutions. Then when Oracle proposes a distributed database version of their RDBMS that they call a Permissioned Blockchain solution, the Legacy Finance titan can sagely nod their assent in the board meeting.
The Crypto Fund Products you will be pitched soon
These Crypto Fund Products all justify an intermediation fee, but not all are worth paying for:
• Bitcoin Killers. This could be like trying to find Facebook killers in the social media era. Even if there is a Bitcoin killer out there, your chances of finding it (or finding the Fund that will find it) is statistically tiny.
• Index of all Altcoins. If you agree that finding the Bitcoin killer is too high risk, the lower risk approach could be to take a passive index approach and invest in all Altcoins. The problem is that the analogy with an S&P Index Fund is flawed. Altcoins are early stage ventures where 1 winner can make up for 99 losers. Compare that to the S&P 500 Index where all 500 companies are viable. What if the 1 winner does not do a Token but raises conventional early stage equity capital? You have 99 losers and no winner.
• Filling in the blanks for Bitcoin. Bitcoin is the protocol level and the world needs exchanges, wallets, custodians, sidechains, offchain networks and a load of application level/user facing ventures. This makes sense as an investment thesis, even if it does not sound super exciting. This strategy requires classic early stage investing skills. The problem is that backing a first time fund is high risk and the top tier funds are not open to new investors.
Watch what Family Offices do in Blockchain investing
Family Offices are like retail investors in that they make their own decisions and have no explanation risk. The difference is obviously that Family Offices invest far bigger sums than classic retail investors. Family Offices are Retail investors with clout. Watch what Family Office do in Blockchain Finance to see the future.
Bernard Lunn is a Fintech deal-maker, investor, entrepreneur and advisor.
He is the author of The Blockchain Economy and CEO of Daily Fintech.
http://dailyfintech.com
He is the author of The Blockchain Economy and CEO of Daily Fintech.
http://dailyfintech.com
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Chaineum - Conseil haut de bilan & stratégie blockchain
Conseil en opérations de haut de bilan : ICO STO advisory, levée de fonds, M&A.
Conseil, stratégie & accompagnement de projets en technologie blockchain.
Besançon - Paris + réseau international de partenaires.
Recevez chaque matin par mail la newsletter Finyear, une sélection quotidienne des meilleures infos et expertises en finance digitale, corporate finance & crypto finance.
Read for free The daily newspaper Finyear & its daily newsletter.
Receive the Finyear's newsletter every morning by email, a daily snapshot of the best news and expertise in digital finance, corporate finance & crypto finance.
----------------
Chaineum - Conseil haut de bilan & stratégie blockchain
Conseil en opérations de haut de bilan : ICO STO advisory, levée de fonds, M&A.
Conseil, stratégie & accompagnement de projets en technologie blockchain.
Besançon - Paris + réseau international de partenaires.