This week, we cover these ideas:
That absurd Paul Krugman article about Bitcoin. Also Jim Cramer has things to say about financial regulation.
If all the prices are down, which they are, does that mean that everything is bad and wrong?
How timing is a personal financial planning problem, not a market value problem
In this conversation, we talk with Michael Sena of uPort, 3Box Labs, and The Ceramic Network about web3.0, decentralized identity, and the various standards that he has been implicit in creating. Additionally, we explore the nuances around data ownership and identity, the journey from founding uPort to now 3Box and the Ceramic network and how the practical implementation of these ideas has changed as the decentralized web has changed from Web2.0 to Web3.0, and conclude on how the metaverse will be composed of decentralized identity and the protocols on which it travels.
Read MoreCrypto isn’t magic. It’s math. Two trillion dollars worth of math.
We are still, often, asked incorrect questions about the crypto currency markets. Questions like — “but what is the fundamental value?”
You have to unpack the word “fundamental”. That word signals a Warren Buffet view of the world: there are companies out there, they have equity shares well specified by corporate law in a particular jurisdiction, some are expensive while some are cheap, and that bargain shopping can be determined by a spreadsheet analysis of their cashflows relative to others. It’s so fundamental!
The story of such fundamental truth is anchored in our cultural and social history. We can point to the intellectual tradition of rationalism and classical economics, and talk about the theory of the firm, and its production function. We can point to how these things grew out of governance by religion, and natural rights as granted by a deity, and all sorts of other non-empirical hand waving.
Read MoreThis week, we look at:
Pipe’s $150 million raise at a $2 billion valuation to turn annualized revenue run-rate into a new peer-to-peer asset class
BitClout’s $200 million of Bitcoin contributions and its mechanisms to turn social media profiles into digital assets
How both projects trade future performance for current monetization
In this conversation, we talk with Camila Russo of The Defiant and author of The Infinite Machine, about her journey as a successful financial journalist was derailed by the Crypto boom and subsequent winter of 2017. Additionally, we explore the success behind her first book, the nuances of the NFT craze, and how The Defiant became one of the most popular crypto media brands to date.
Read MoreIn this exciting conversation, we talk with none other than Joe Lubin of ConsenSys and Ethereum, about his journey from being exposed to advances in artificial intelligence at Princeton to becoming the household name in programmable blockchain. Additionally, we get an insider look into his founding of Ethereum and ConsenSys, and how the technology and individuals behind these two companies are transforming the very fabric of financial institutions that exist today and how new products/services are started for the betterment of humanity.
Read MoreLet’s do some math homework. It’s good for you:
The Federal Reserve money movement system broke for several hours. We look deeply into its volumes and transactions, and value it like a Fintech unicorn.
The Ethereum ecosystem is throwing around as much volume in settlement as the Fed check processing system. We explore scalability barriers and solutions.
Can eCommerce fit into our emerging infrastructure? We anchor to the market numbers in China and the United States.
Things break.
Sometimes the things that break are the US Federal Reserve ACH service, Check 21, FedCash, Fedwire, and the national settlement service. They were down for a few hours — discovered at 11AM on Feb 24th and still in trouble at 3PM that day. Everything is now up and running again.
Read MoreIn this conversation, we talk with Patrick Berarducci of ConsenSys, about the valuations and multiples of capital markets protocols in Decentralized Finance on Ethereum, now making up over $60B in token value. Additionally, we explore the nuances of scaling Ethereum and its solutions, such as Metamask and the emerging Layer 2 protocols.
We also discuss law and regulation, including a fascinating story about Bernie Madoff from when Pat was a practicing attorney. This leads into a conversation about the embedded compliance nature of blockchain and crypto technology, the early days of ConsenSys, the path of crypto brokerages like Coinbase, and Metamask exhibiting emerging qualities of a neobank.
Read Morehis week, we look at:
There are two very large revenue pools in the crypto asset class — (1) mining, and (2) trading. There are some large revenue pools in crypto-as-a-software, too, but those tend to be less sensational.
This analysis will establish a 2021 baseline for the most regulated of crypto exchanges, Coinbase, including a detailed financial model building a $100B+ valuation case
We then consider the valuations and multiples of capital markets protocols in Decentralized Finance of Ethereum, now making up over $60B in token value
Lastly, we look at Binance’s $1B in profits, its $35B BNB token, and the activities on Binance Smart Chain
This week, we look at:
How banks and financial advisors have failed to deliver on $1 trillion in capital appreciation for their clients over the last 12 years
The role of bank regulators in the United States, and the tensions between state and federal agencies
How the OCC is laying the groundwork for national banks to custody crypto assets, bank stablecoin reserves, run blockchain nodes, and use crypto payment networks
And instead of financial advisors or other CFAs guiding the retail market in good decision making, a newsfeed of *what’s popular* has driven Apple, Google, Tesla and the other John Galt hallucinations to the stratosphere. Don’t get us wrong. We love the robot as much as the next Fintech commentator. But it is clear to us that “the masses” are not being “advised”. And that the capital appreciation that matters — cementing the next trillion dollar networks for global future generations in work yet to emerge — is misunderstood and misrepresented by most financial professionals to their clients.
Read MoreThis week, we look at:
The spectacular price increase in crypto assets, hitting new records for Bitcoin, as well as the comparable statistical situation around Covid cases
An explanation of the $1.5 trilion income effect in 2020, and how it has led to both capital acumulation and inequity (thanks NY Times!)
A discussion of all-time-highs and all-time-lows, why we need them, and their connections to the macro-economy, computer code, music, and the universe itself
One wonderful takeaway from Watts, which of course is not his, but beautifully plagiarized into the English language, is the duality of experience. The need for polar opposites, in a clock-like cycle. To have black, you must have white. To have the top of the wave, you need the bottom of the wave. To have a melody, you need equally the presence of the notes, and their absence in silence. To breathe in, you need to breath out. It is meaningless to have a data point without the context in which it exists.
Read MoreThis week, we look at:
Proposed US regulation from FinCEN, legislation from the House of Representatives, and UK FCA registration requirements that would impact the crypto industry
The difference between competition for share within an established market, and competition between market paradigms (think MSFT vs. open source, finance vs. DeFi)
The crypto custodian moves from BBVA, Standard Charters, and Northern Trust
The bank license moves from Paxos and BitPay, as well as the planned launch of a new chain by Compound, in the context of the framework above
Permissionless finance is a paradigm breach. It pays no regard for the very nature of the incumbent financial market. Without banking, it creates its own banks. Without a sovereign, it bestows law on mathematics and consensus. Without broker/dealers, it creates decentralized robots. And so on. It tilts the world in such a way as to render the economic power of the incumbent financial market less important. Not powerless -- the allure of institutional capital is a constant glimmer of greedy, opportunistic hope. But the hierarchy of traditional finance does not extend to DeFi, and thus has to be re-battled for the incumbent. This is cost, and annoying.
Read MoreSometimes more is more, and sometimes less is more.
In that spirit, we strongly urge you to check out Messari’s Crypto Theses for 2021. It is a mammoth work of 134 pages, covering each and every development in the ecosystem.
If you don’t want to fuss around with the email gate, the direct link is here.
We are going to pick out five things that are interesting to us substantively and provide a view below. By pick out, we mean screenshot and respond.
Read MoreThis week, we look at:
M&A in decentralized finance, focusing on the Yearn protocol and its targets Pickle, Cream, Akropolis
The motivations behind such M&A, and where economic value collects
The importance of community and security, creating increasing returns to scale
In this conversation, we talk with Jamie Burke of Outlier Ventures. This is a fascinating and educational conversation that covers frontier technology companies and protocols in blockchain, IoT, and artificial intelligence, and the convergence of these themes in the future. Jamie walks us through the core investment thesis, as well as the commercial model behind shifting from incubation to acceleration of 30+ companies. We pick up on wisdom about marketing timing and fund structure along the way.
Read MoreThis week, we look at:
The Bitcoin money supply being worth as much as the M1 of several countries
The Visa/Plaid deal DOJ anti-trust filing and the PayPal integration of Bitcoin
Understanding Central Bank Digital Currencies in the context of card networks, payment processors, and digital economies
Chinese CBDC and how it could relate to stopping the $34B Ant Financial IPO
How a CBDC ecosystem is like an operating system, rather than a payment rail
In this conversation, we talk with Paul Rowady, who is the Director of Research for Alphacution Research Conservatory. Paul has a deep background in capital markets, derivatives, and the macro structure of the industry. He has been uncovering the transformation of that structure with data driven analyses, making visible the economics of market makers like Citadel and retail order flow aggregators like Robinhood. This is a rich discussion of what trading stocks is really like. And make sure to check out Alphacution.
Read MoreI presented earlier this week at the Ally Invest virtual conference, and the prompt asked for a description of what happens to finance from Fintech to Crypto / Blockchain to Augmented Reality / Virtual Worlds and finally to Artificial Intelligence.
Read MoreIn this conversation, Will and I break down a few important pieces of recent news. MetaMask, the crypto wallet, hit 1 million month active users in yet another sign of the acceleration of retail adoption.
Square’s market cap is now equal to that of American Express, and the former also announced it has purchased $50 million of Bitcoin with its balance sheet. What do these pieces of news mean?
Greenwood Financial launched, a neobank led by Andrew J. Young, a civil rights legend, Killer Mike, a rapper and activist, and Ryan Glover, founder of Bounce TV network. How much scope is there for financial services for affinity groups instead of traditional geographical or product coverage areas?
Read MoreAt $13 billion of revenue and 800 million users in 2016, Office 365 roughly generated $20 per user. That's like Monzo, but with the user foot print of Ant Financial.
You might think the comparison is daft. But let's dig a bit deeper. Excel, and spreadsheets more generally, are the default behavior for managing personal finances. Even for financial advisors, who are supposed to be the precise niche leveraging financial planning software, Excel is the default "do nothing" option. If you are not paying for digital wealth software as an advisor, you are doing it in Excel.
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