Thoughts On Crypto: The FTX End Is Just The Beginning
Thoughts On Crypto: The FTX End Is Just The Beginning
Crypto Winter... Will be the liftoff for phase 2 of NFTs.
Telephone & Newspaper - Web 1
Internet & Aggregation theory- Web 2
Crypto, Blockchain & Virtual/Augmented Reality - Web 3
Each technology improves on the next in terms of its ability to facilitate fraud AND business.
Fraud is getting ALL the attention right now...
The opportunity is really difficult to see right now. But when you lay it out in these simple steps of web 1, web 2, and web 3; it's almost impossible to see the path forward and our bias for technophobia.
Since most investors succumb to their biases, it's almost a certainty that they will increase their skepticism of crypto after this MASSIVE fraud.
But those who cut through the noise will find that there are interesting projects and applications to consider as the space trudges forward.
Crypto enables certain business practices that would not have been possible in the future:
On a podcast with Jim O'Shaughnessy, Alex Danco explained to listeners that the most immediate application for crypto and NFTs is as an extension of the Band T-Shirt into the digital realm. This technology allows us to take real-world art into a more digital one.
The internet and its creators once could not build for its digital fan base. In some cases, these people had aggregated millions of people in one place and FB, Google and Instagram were the only people who could monetize those eyeballs.
Before NFTs, the internet had no way of combining scarcity and legitimacy with large digital groups.
But now we have artists like Beeple, Taylor Swift, Gary Vaynerchuk and Tim Dillon who can make millions serving their fans.
I really resonated with this. I want to support creators who need an outlet and a way to monetize their brands online.
INSERT NFTs and OPENsea.
Now... Where are the larger markets this can extend to?
Pershing Squares Bill Ackman had a wonderful tweet thread that I parsed through and made more digestible for people like me: see below
THE KEY TAKEAWAY FROM HIS THREAD WAS SCALING INCENTIVES
The ability to issue a token to incentivize participants in a venture is a powerful lever in accessing a global workforce to advance a project... This is undeniable after watching the last 3 years.
The problem with crypto incentives is that unethical promoters can create tokens simply to facilitate pump-and-dump schemes. Despite crypto’s ability to facilitate fraud, with the benefit of sensible regulation and oversight, crypto technology’s potential for beneficent societal impact may eventually compare with the impact of the telephone and internet on the economy and society. (MAYBE)
Initially, I and many others assumed that there is no intrinsic value to any of these fake tokens and therefore they simply represent a modern-day version of tulip mania. (Ouuuu pretty flower, number go up.)
But after listening to this funny podcast attached and reading at length about the many projects that aren't failing in the wake of the FTX scandal a few things to consider came to mind. (We're probably still 5-15 years out of anything really hitting home on a mass adoption scale.)
Access to global Wi-Fi networks. (helium created a global Wi-Fi network used by Lime Bike) Helium’s global network of 974k hotspots was crowd created by individuals who purchased and deployed Helium hotspots to mine HNT, its native token. Customers who wish to use the network must purchase HNT and burn it, ie, remove the ‘consumed’ HNT from its total supply of tokens. As a result, over time, a two-sided market for HNT develops in which miners buy hotspots and deploy them around the globe to earn tokens. Users, in turn, purchase HNT tokens in order to use the network. The more demand for the network, the more demand for HNT. Given HNT’s ultimately finite supply, the balance between supply and demand yields a market price that increases or decreases over time along with the success of the Helium Wi-Fi network. As such, HNT becomes a valued commodity whose price is determined by supply and demand.
DIMO collects valuable auto data from data ports in cars. It does so by allowing car owners to mint tokens by capturing data from their own cars. The data are valuable for the car owner as well as for auto manufacturers, suppliers, insurers, municipalities, etc. One can envision a two-sided market for DIMO tokens developing over time where data users buy and burn tokens that are minted by car owners with DIMO data collection devices.
To understand the benefit of crypto-based business models, imagine how difficult it would be to create Helium’s million-node network of global hot spots where each node is placed in a location to optimize the coverage of the network. Helium miners earn more tokens for siting their nodes where they are most needed as miners earn more tokens the more their node’s signal is demanded by users.
Consider the capital investment and time required for Verizon or AT&T to create the same network.
Consider the regulatory hurdles and international coordination that would have to be overcome compared with the Helium model. While Tesla can build DIMO’s dataset for its own cars, how can any other automobile company create a similar dataset for their own vehicles that were manufactured before connectivity and data collection became feasible?
Furthermore, how can any company create a dataset of all cars on the road today?
I think crypto is here to stay and with proper oversight and regulation, it has the potential to greatly benefit society and grow the global economy. All legitimate participants in the crypto ecosystem should therefore be highly incentivized to expose and eliminate fraudulent actors as they greatly increase the risk of regulatory intervention that will set back the positive potential impact of crypto for generations.
While I'm unwilling to say when this all might play out, I also think that anyone calling this the end is ignoring how all historical technological advancements happen. This is how progress is made.
The future of Web 3.0 has never been more uncertain and interesting.
More reading:
Taking A Long-Term View Of Web3 - Fred Wilson
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