New Post Strategies: Crypto

I’m not much for self-promotion. Anything I used to publish on the internet was pretty subversive (and over time, quite embarrassing). Also, there’s a lot of virtue signaling and posturing on self-publishing platforms that turns me off. However, writing and sharing is something I need to start doing so I can delve into a new industry by sharing more thoughts and perspectives on relevant subjects.

I applied for a position at Pantera Capital yesterday. Therefore, I need to lay out some thoughts on the crypto space and what the future holds for it.

First, allow me to establish my credibility. I have been investing in BTC since 2012. I know a lot of people play the “I saw/heard them first” game with crypto as they did with bands back in junior high/high school. Here’s a tweet I published in July 2012 about Coinbase. I believe it was still in private beta at the time.

I actually introduced my friend Owen to Brian Armstrong when Coinbase had ( I believe) 0 employees. Owen did not end up working at Coinbase. Whoops.

Here is a tweet of mine getting stoked on BTC hitting $133.

In 2012–13, I had daily, recurring buys running. I was purchasing 10–20 BTC a day for many months. Unfortunately, in 2014/15 I went through a handful of disasters (bad investments, separation, etc) and slowly but surely eroded my bag down to an embarrassingly low level.

I believe I did myself a huge disservice by being so early to the party. You see, I too took part in the “I knew them before they were big” mindset, so once BTC returned with ETH and the ICO craze in 2017- I dismissed it. Mostly due to the people I knew trying to Ponzi the ICO boom. But I started my return to the space in 2018 by designing an on-chain futures market for advanced materials in the pre-commodity stage (graphene, carbon fiber).

But today is a new day and is as good a time as any to be buying and holding the future of everything.

When it comes to this “blog”, I will not be focusing on long, structured essays (though there will surely be some). These will be random, stream-of-consciousness musings on whatever pops into my head after I have my first cup of coffee (similar to Fred Wilson’s blog on AVC.com).

So, here are a few thoughts…

Ethereum is enabling the largest wave of industrial automation in human history.

Many people think of automation and its impact on jobs through the lens of a robot in a car factory. The fact of the matter is that the US (and the developed western world) is no longer a manufacturing economy- it is a services economy. What Ethereum introduces is the total elimination of major portions of the service economy supply chain. Take finance for example. My brother-in-law works in legal and compliance at a large multinational bank. His job basically involves investigating human error and reporting it to oversight committees. This job is already being eliminated by Ethereum and DeFi.

On Ethereum, there is only one point of failure- poor codification and security of the rules established within a smart contract. Other than that, the whole supply chain of the financial service offered by the smart contract is automated. There is no need for middlemen, stamps of approval, or compliance. All of it is baked into the technology. From this primitive, we can presume that this codification can extend beyond banking and into any other industry with a white-collar supply chain. This is where automation really starts impacting jobs and the economy. We should not be concerned with autoworkers as if Tommy Boy was the 1984 of its time, but be focused on the disruption of the labor force segment that believes their position in the economy is rightfully theirs because they work at a desk and not in a factory.

I’m not going to get into the data but here’s a chart. This is why Ethereum is disruptive and will be a $20T+ economy very quickly.

Distribution of gross domestic product (GDP) across economic sectors in the United States from 2000 to 2017

Wall Street is where Ivy Leaguers go to collude (no offense)

Wall Street is built upon relationships. Prior to technology, that’s all there was. It is an information and relationships industry. But now, with DeFi and decentralized, permissionless systems, relationships are eliminated while achieving the same end (or better). This is huge. At no time before could we imagine an economy run without relationships or trust- but here we are. This is another reason total disruption is on the horizon for industries built upon gated communities (law, science, government, academia).

Incentives and alignments for innovation have never been stronger than with Ethereum

As an entrepreneur, I look for the biggest and most interesting categories I can/cannot find and measure the opportunity based on the scale of problems waiting to be solved. Ethereum is where this entire framework intersects. Here’s why.

  1. The total addressable market has never been bigger. There are no boundaries. No regulation on where decentralized financial services running on Ethereum can and cannot be accessed.
  2. Operations have never been leaner. We’re talking open source communities developing autonomous protocols. The analogy I often reference is the time and scale of adjacent startups over time. Back in the early 2000s E-Trade was the leading online broker. I read somewhere that there were around 6400 employees at the company (today there are 4100). Robinhood is the leading mobile broker appealing to the Gen Z/Millenial segment. Today there are 1271 employees (ref: Google) but there were fewer when they were at an earlier stage and more the David to E-Trade’s Goliath. Finally, there is Uniswap- an automated market-making protocol that allows for the disintermediated exchange of Ethereum-based crypto assets. Uniswap was founded by 1 developer (Hayden Adams) and I believe has a team of under 15 people at the moment. However, Uniswap is processing more trade volume ($1B/day) and generating more fees/revenue than Robinhood- with 1% of the human capital and organizational scale. To me, this is the perfect example of how disruptive this new era of the web will be.
  3. Capital has never been more accessible or efficient. We can create ERC-20 tokens and sell them as abstract rights to some future form of value and list them on a DEX in less than a day. This is a whole new physics for starting businesses.
  4. The path to liquidity has never been shorter. Again, in less than 1 day I can issue an investible asset that represents the value of my company and it can be freely traded. This speeds up what was usually a 7–10 year process of bringing a company public to less than a day. What’s happening is that the permissioned world of accredited/institutional investing has been made permissionless. The boundaries between pre-seed, angel, series XYZ, and IPO have been erased. They are all happening at once, 24/7, 365.
  5. Autonomous protocols and on-chain governance is an incredible way to keep a company alive and growing. I will get deeper into that at some other time.

I need to get on a call. ‘Til next time.

-Geoff

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