At this point, the ship has sailed. People commenting on our blog about how crypto won’t work are simply behind the times. The networks are growing fast and it is practically impossible to keep up with each sub-segment of the market. If you look at coinmarketcap they have already been forced to talk about different ecosystems, NFTs, DeFi etc. Meanwhile the people who do not “get it” are busy still trying to understand if Bitcoin is going to zero (Hint it isn’t). This post is not meant for the majority. Even intelligent people will unlikely understand the ramifications of what is in here (not because we are geniuses but because many simply haven’t looked into these items yet). So with that we can take a serious look at the big picture.
Fear, Love and Insecurity: A good way to sell a product is through fear. Fear instills great motivation, much more than love (for better or worse). The joke is as follows “would you rather jump off a burning coal pit of flames, or eat a free ice cream”. Clearly, jumping off of a disaster of pain and suffering is more motivational. So for the majority of products/industries fear is the primary motivator. The beautiful part here is that both insecurity and fear will drive digital ownership adoption.
What, What, Why? Well if someone has missed the run-up in BTC they certainly feel a lot of “FOMO” (fear of missing out) and over time the people who own the most *valuable* digital assets will be able to prove it. This is immensely powerful. If you look at the convergence of art and crypto you’ll be forced to jump down a deep rabbit hole. Why do people buy expensive art? Why do people buy Lambos? Why do people buy Richard Millie watches? Why do people buy $10M homes? The answer is to prove and show off their value. No one buys a Lambo to drive to the super market, they buy it to be seen and feel powerful.
How this relates to digital ownership and art is beyond clear. It is so clear that there was a book/movie that should open the eyes of anyone who has doubts: Ready Player One. In this movie (summarized), a new virtual world is created through VR and you can own land, skins (different outfits), weapons etc. In the virtual world, since it is larger and more connective, the world network moves online. This is extremely clear.
So why are people buying digital art and other scarce assets online? In the long term, proof of ownership will go online. You cannot simply re-create the Mona Lisa with an AI robot and command the same price (even if it an exact replica). You cannot simply recreate a Richard Millie without proof of its authenticity. In fact, digital ownership is *better* than physical ownership. If you walk into a club with your Richard Millie, most will believe it is fake (yes many haters live life like this). In the digital realm, you’ve created verifiable undeniable proof of ownership. People can take screen caps of your NFTs, they can try to recreate your NBA moment (top shots) and they can try to make the exact same item. The problem? The hash won’t match. In a single click everyone will know that you don’t really own it. You’re a liar and a fake with zero ability to prove that it is the original. It is time stamped and engraved.
Note: for those interested in NFTs check out Gmoney on Twitter
Hit the Ole’ Fast Forward: What does this mean for you, what does this mean for your future? It means everything will become authenticated long-term using decentralized protocols. We’re not going into the technical jargon for now as most people have not even bothered to read the Sovereign Individual or Ready Player One. Instead we’ll jump straight to the conclusion which is that your real estate will no longer sit in a dusty cabinet full of other paper deeds, it will be a token on the decentralized web (which is why they call it Web 3.0).
Why would you do this? It is faster, cheaper and more secure. Last we checked, technology usually wins when it is faster and more secure. While the infrastructure right now is “expensive” this is the exact same meaningless argument made by early critics of the internet. The argument was that the internet could not scale and that didn’t turn out to be correct at all. Similarly, while we can use ETH gas fees as an example, this will be solved long-term. Expensive transactions will slowly come down and become seamless. We didn’t go from cable connectivity to 5G wifi in a week, so don’t expect decentralized blockchains to scale within a week either. The message is that it will be solved and you will either participate in the future (very bright future) of decentralized protocols and blockchains… or you won’t. (Which funny enough goes back to the same circular argument of this being a fear and insecurity based industry as individuals panic about missing the boat… even if the boat has already left the dock and is slowly but surely going further away).
Therefore if we click on fast forward we can imagine how disruptive this will be to the legacy banking system. You’ll be forced to compete with decentralized systems that are faster and more secure without needing an intermediary to confirm transactions. An interesting/amazing set up for the future. Over time? Governments begin to compete for the best citizens and you’ve seen an extremely miniature version of this with Miami being the first really crypto forward city (outside the USA, Asia is certainly far ahead of the curve).
The Institutions Are Here: At current levels, we’re now playing an institutional game. Bitcoin is valued at nearly a trillion dollars (more or less) and moving the needle will no longer come from a typical millionaire with $2-3M in total value. It will be moved by people with $1B+ in assets under management. Take Blackrock as a fun example. They manage $8.8 trillion in economic value. This is an absurd amount of money as 1% would represent $88B USD. The firm has already stated that they are “dabbling in Bitcoin” and if any major firm of this scale commits to crypto, the rest will be forced to follow (or lose clients that want at least a minuscule amount of exposure to the growing industry).
Now we also have to look at fixed income. While people use gold as the most obvious example for a store of value, you really want to look at Fixed Income. There are trillions of dollars in *negative* yielding bonds. Meaning people are willing to hold large amounts of money somewhere in return for a slight cost. This is insanity. In no world would we ever put money into anything that locks in a loss long-term. However, this is the world we live in.
So now you have to look at the bigger picture, as more and more institutions move in, this de-risks the asset class. If Elon Musk bought $1.5B in bitcoin and he’s seen as a visionary will anyone bat an eye if an institution with $2T+ in AUM buys $10B? No one will care. It will be a drop in the bucket and be seen as yet another selling point for the asset being “institutional grade”
To wrap it up we can then look at corporate treasuries. While we don’t think people will go down the MSTR move of being all in on BTC with a 0% coupon convert, it is fascinating to see that the exact same strategy was used back when gold was seen as the store of value. At a period of time, people/companies would borrow money to simply buy gold. That is exactly what he is doing. Instead, we would not be surprised to see more private companies adopt Bitcoin as its treasury reserve asset (for some amount of value) and would not be surprised to see ancillary companies like Twitter adopt it as a reserve asset (After all Jack is in charge of Twitter and Square … Square already owns it).
A Real Life Example of Virtual Economy for Your Boomer Parents: If none of the above made sense, the following will. As VR video games become mainstream, the individuals will need to earn rewards. Well what is a reward… perhaps digital currency (hint hint). You enter the VR world and instead of trading digital token value, you could be chasing real store of value tokens such as earning Satoshis for being the #1 player in the VR system. This has profound implications as you can not only earn real tangible value but the video game creators can also earn significantly more money (the games would cost more if they drive real economic value). If this sounds sci-fi to you, we’d recommend talking to developers of video games (high-end) and report back… You can guess what you’ll hear…
Conclusion: While short and sweet, the bright people who follow our blog will understand this post. That is fantastic as you’ll be wealthy and part of the next generation of forward thinking individuals.
