EB39 – Bastian Brand: The Intelligent Cryptoinvestor, Bitcoin Investment Whitepaper

Transcript

[Music] Hello and welcome to Epson Bitcoin, the show which talks about the technologies, projects, and startups driving decentralization and the global cryptocurrency revolution. My name is Sebastian Cuchio. Today is September 15th, 2014, and thanks so much for joining us on episode 39. So today's episode features an interview that Brian did earlier this week with Bastian Brun, who is the an investment manager at Pathfinder Capital. Bastian recently wrote a comprehensive paper surveying the investment landscape in cryptocurrencies. It's sort of a Bitcoin investment white paper, very comprehensive and very interesting. Um, now they'll discuss that paper in uh much detail during the interview as well

as different aspects of the Bitcoin and cryptocurrency industry. Now, the white paper isn't out yet. it will be out in the next few days. And as soon as it will be uh when it does come out, we'll post the link to the white paper on our Twitter uh page as well as on our SoundCloud page and on our website. So, we'll update the show notes so you can find that white paper. So, uh look forward to the white paper and also enjoy the [Music] interview. Our guest today is Bosan Blunt. He's a venture capitalist at Pathfinder Capital and previously as was he was a consultant at McKenzie and he's also done a PhD in business. He's been interested in Bitcoin since 2011 and he

also recently started the Bitcoin startups Munich meetup which is kind of a similar meetup to the one I've been doing in Berlin. And uh he's written an almost 100page uh report exploring Bitcoin and investing in Bitcoin. and we're here today to talk about that report and about his views on uh kind of the investment opportunities in Bitcoin. So, thanks for joining us today, Vasian. Yeah. Hi, Brian. It's great to be with you. Thanks a lot for having me. Yeah. Um so, can you tell us a bit about Pathfinder Capital?

Uh sure. Uh Pathfinder Capital is a fund uh management company uh from the from the UK. Uh the focus of it is actually frontier market investments uh that uh which is which is also very exciting uh investment opportunity and uh which is also for for the risk tolerant investors similar to to Bitcoin investors. Uh I got in touch with uh Pathfinder Capital two years ago uh the beginning of of last year uh when I went myself to a conference in Cambodia to investor conference in Cambodia and I I met uh

Kevin Virtual who's the founder of Pathfinder Capital. So uh he saw that uh there are no investment vehicles uh in this area. So to create a new fund management company and uh just to to get uh to the Bitcoin topic uh I I told told them about Bitcoin and got them excited about it. And now you're uh looking or you're trying to raise a separate fund just for investing in Bitcoin companies. Is that correct? Exactly. That's true. uh we have uh we have a hedge fund um which is incorporated in the bermutas

uh and uh all the regulatory uh stuff is already done uh is it's investment advisory are regulated and we also have the go ahead from the bermuters uh and now we we are seeking out uh we are seeking for for funding to invest in Bitcoin startup s primarily in emerging markets. Okay. So I guess that that would be a way for you guys to combine your expertise in emerging markets with Bitcoin.

Exactly. That's that's the idea behind that. Uh so uh for opportunistic reasons it's that obvious pick uh for Pathfinder Capital because we have on the one side this uh frontier market expertise uh uh from uh Pathfinder Capital as said uh and on the other side we have uh we have uh yeah my expertise basically and my network in the in the Bitcoin space. Um but just if you're curious about it uh just some words on on the frontier market investment uh side uh the idea here is that uh yeah we we all know about China about the pricks countries uh pricks which is for Brazil,

Russia, China, South Africa and this has been basically the dominant investment story 10 years ago and uh driven by a couple of of factors uh like uh young population uh uh a lot of consumer demand uh high uh needs for investment in infrastructure uh and basically this story uh is is still valid for some of the for some of the other countries like Vietnam, Philippines which uh we expect to be the next in line to develop.

So, it's interesting that you guys are interested in um investing in Bitcoin companies in frontier markets, right? Because it it seems like investing in Bitcoin company is so much at the beginning. Um I guess in the US is a bit further advanced, but even in Europe there's been very very little activity. Um, so do you think that in the near term you would also invest in in European Bitcoin companies or in American and the idea is more to in the long term switch to investing in Bitcoin startups in the frontier market or do you think we're already at a stage where this kind of thing makes sense? Uh,

yeah, I think you really mentioned a couple of important points here. Uh, it's it's true. Uh well, what you're saying is true enough for a number of reasons. It's first uh the Bitcoin market is still very young in emerging markets. So you um you it's it's probably it's it's not so easy to find companies big enough to invest serious amounts of money. Uh also there are lots of interesting opportunities still in in in developed countries. So uh it's it's going to be uh a mix uh uh we are going to be pragmatic about uh also about uh

investing in for example European companies. Main thing here is I would say is uh really first to to leverage our knowledge on frontier markets and emerging markets. So that's something that's an opportunity you want to to jump on. And the second opportunity is uh you want to jump on is uh really European companies for example which are still underserved by by us which and there's some a lot of potential in Europe which isn't served well enough I think. Yeah absolutely. I think we'll get back to this topic later but I agree it's it's an interesting it's an interesting topic. Well, before we kind of dive into the, you know, sort

of meat of discussion about in investing in general, I'm I'm curious about your thoughts on the structure of VC funds and how well they work in the Bitcoin space. I know I had this conversation uh a few months ago at the inside Bitcoin's conference with Palmier Gillian. Um and and the basic issue I think is this, right? So we're starting to have like different types of companies or companies that work with issuing their own currencies and the normal mandate of venture capital firm if if I'm correct about this kind of precludes a venture capitalist from investing in in that kind of thing. So,

um I'm curious like so are you guys are you going to have a a sort of a standard uh agreement that uh precludes you or would you like to have also the flexibility to invest for example in in a currency like let's say someone let's say a project like Ethereum that you that one could come as a VC firm and say hey we're going to give you guys a million dollars and we will actually try to do similar work to a venture capitalist traditionally al kind of support of the team.

Uh yeah, it's I think what you're um talking about it touches on a couple of dimensions. Uh first is how how do you get your money and there are a couple of models. So uh there's for example the model that you that we've seen with Bitcoin uh which uh who who went to to have investments uh to fund themselves uh uh and uh well there are traditional VCs uh on the opposite side of the spectrum uh and then uh of course then if if you have your funding done and uh well you also need to think about where to invest and Um, it's true what you're saying. It's not that easy to to invest in

cryptocurrencies. uh honestly I am not the expert on on uh regulation and uh I was not in the lead in our team to uh to draft the uh investment uh prospectors but but yeah we have a practice uh which we which is basically standard for all our LPs and uh we have refrained from from investing in in cryptocurrencies as such. uh it's for a number of reasons. There are regulatory reasons and uh also it's the banking relationship. So if it's it's difficult enough to get a banking

relationship uh if you have something to do in any case but if you also want to invest in in uh bitcoin currencies as such uh cryptocurrencies as such then uh yeah I mean I I was in Toronto recently and we did an episode there with the guys from the central and you know they are also So in the process of starting an incubator and uh and raising a fund to invest in the companies that come through and I think they said that the one thing that's holding them back is the whole regulatory side because they do want to be able to uh invest in in currencies for example because they

special specifically want to focus on these kind of Bitcoin 2.0 zero projects. But then it's very hard to figure out how to do that and how to do that if you try to kind of attract traditional investors that perhaps on their side are restricted to giving you in with regards to the kind of entities that they're allowed to give and the kind of uh activities they're allowed to invest in. Yeah, absolutely. Well, it's um I uh it's it's not that easy and that's an issue many people have to face. for example, uh there was in in the UK there was a Bitcoin super fund or something and um it's uh which was been announced half a year ago. Uh and uh I haven't heard

anything about that since uh so I don't want to uh make any um conclusions but uh it just seems there seems to be tendency that things uh to implement something like that just takes longer. Yeah. No, absolutely. Well, I think we we touched on something important and that is, you know, I guess one point is from your perspective, right? As a fund, would you like to be able to invest in currency or not? But also, of course, from an investor's perspective, assuming you have no restrictions and you can invest in anything you want. the question of whether it makes sense to invest just just buy Bitcoin to invest in Bitcoin companies, you know, to do a

bit of both is is interesting, right? And um I'm I'm curious what what your point of view is with that regard. Do you think it's better to invest to purchase bitcoins or do you think it's it's better to try to invest in companies that build uh bitcoin businesses or cryptocurrency businesses? Well, a short answer it's just a different risk profile, but um just to to uh start from the beginning is it was exactly that question that uh was at uh was that it really was the starting point of of the report to start a a fund. uh if you you want to be an investment manager and if you have talks

with other people, if you if you really want to have a solid I just feel better to have a solid understanding of of investment strategy which makes sense and and if you look at the Bitcoin base you just have so many different uh possibilities. You have so many different investment options. Uh there is bitcoin uh there are alternative cryptocurrencies uh there are all these bitcoin 2.0 uh or 2.0 projects you have uh physical bitcoins you can invest in uh you can invest in a mining company uh and finally you can also invest in all sorts of bitcoin startups. So uh yeah, if

you really want to optimize, if you really want to have the best returns for investors at the lowest uh risk, then you should really ask yourself and uh uh what I do is in the report uh or what we do uh because there have been some guest contributors uh as well uh it's uh we just look at all these options uh one by one to your your question. Uh if you I I I see I see more potential in Bitcoin startups for a number of reasons, but if you want to if if you don't have access

to VC then probably to uh to invest in in in just in Bitcoin is the easier. So why do you see more potential in Bitcoin startups? Um well to to answer that uh let me just look at uh bitcoin first. It's um you invest in something you should do something like evaluation and uh just to look at the fair price or look at the perspective and um I if I look at bitcoin I see basically three different time horizons and three different risks. So the first time horizon it would be the the speculation. So in the

in the in the short term speculation and uh by uh by news and regulation and all these sort of things. So in in the short term you have a lot of volatility. So if you look that you don't have that uh obviously with a venture capital investment because you don't have that liquidity medium term you have uh you have adoption. So what drives Bitcoin prices in the medium term is really to have success a solid success in uh in becoming making Bitcoin a popular means of payment uh and a popular um uh so that's the things there has been

recently the Dell announcement to accept Bitcoin as a payment option but I think we have to see much more And some people like Tim Swanson are correct to that. U we we really high time to to uh shift gears and to to to get Bitcoin adopted more widely. Um and then the third third point and um that's something that too many people don't think about is is really the technology and uh that's something that people discuss in in uh in forums like Ethereum uh

players there's this notion that proof of stake is just a superior technology and that um that there are good reasons to to shift in the long term to another cryptocurrency. So that would of course be uh bad for Bitcoin, but if you have a startup uh that can flexibly shift between cryptocurrencies, it's not so much of a problem. Yeah. So yeah, that's interesting. So I mean my my point of view in this is kind of that, right? So I I often look at Bitcoin as as a type of like an ETF a bit. So like an exchangeraded fund which sort of tracks the value of the all

that's being created in the Bitcoin ecosystem. So I I actually think that it's le much it seems to me much less risky in many ways to just buy bitcoins then invest in specific companies and potentially even more profitable because um it's still a little bit unclear to me how much profit companies can actually make in this sort of peer-to-peer world, decentralized peer-to-peer world. Maybe the time of just massive companies with huge profits. uh maybe that's going to be harder in that world. But I agree uh one aspect where this may go wrong is exactly what you mentioned right so when you start having

uh you know if for some reason bitcoin doesn't doesn't remain the leading cryptocurrency and if there were or if that kind of value gets transferred to other currencies if perhaps uh some proof of stake turns to be out turns out to be better in the long term because just uh I don't know mining is too expensive or it's not secure enough or something then I agree of course then could could turn out to be better if you invested in some company that can just switch to a different currency. Uh yeah, exactly. It's uh I think the ETF notion is um actually makes a lot of sense. It's uh yeah, it's a bit the difference between passive investing and active investing. If you're a good stock picker, it makes sense to to pick

individual stocks or in this case startups. If you don't have a deep uh industry knowledge then it's probably easier to uh to switch to uh just to buy bitcoin and uh to follow technology so that if there is some move to to another currency that you are basically um that that you uh you have the time to to make that move as well. I I sort of have this arrogant uh preconception uh which may be uh uh unwarranted that if if that actually happens, if actually Bitcoin is not going to succeed in the long term

because of some structural weakness and and it's going to be different currency or it's going to be switched to something else. You know, I actually believe that if you're really involved in the Bitcoin world, you will see that coming like long before. Mhm. you know, I mean, I think we were still kind of unclear on on, you know, the mining incentives and and you mentioned Tim Swanson and I know he's done some some nice work like thinking about that and other people have as well and think about like is it really going to work in the long term, but I think we will see that coming, you know. I think people there will be a sense of clarity like long before that happens. Um, yeah, so maybe I'm wrong, of course. Who knows?

I I tend to agree. I uh that's also so so my idea. Uh it's do you you you should see it uh unless you are just sleeping and not heeding the warning signals which actually happened to a lot of people in the case of Mount Gok. So let's just let's not be too uh self-confident because uh there have been a lot of smart people who just didn't care. they they didn't have the the they didn't really um they weren't able to to manage things professionally let's say that's that's an interesting point I think the difference there maybe um you know being inside or outside because when I got into Bitcoin

uh it was already everybody was already saying that Mount Cox is terrible there's something fishy going on and that was uh in more like a year and a half ago about. So for me, I never had the idea of like why would I use Mount Gox? It made no sense to me. But then, you know, people who' been around for longer, they knew Mount Gaus and you know, maybe traded there or they already had money there. They were too lazy to take it out or perhaps they'd seen similar crisis before, but Mount Gog survived. Um and so I guess many of those were kind of caught off guard and of course um that may turn out to be different in the future, right? perhaps then I then then I would be the one who's sort of in

and is not see is not seeing it coming right it's actually an interesting it's uh it's if you if you start to fall in love with a certain technology or certain coin uh because you have spend like looking at it and uh to conference and talking with people uh then you also get a bias that especially as an investor you have to be very careful uh about uh I when I to conferences I everybody is very enthusiastic and everybody is uh uh there there's not critical voices and uh so actually for that reason you just mentioned Tim Swenson before I really like to have um

also these dissenting voices uh because uh they they basically force you to to um really to give very good to back up your opinions Yeah. No, that's very true. And there aren't that many of them in the Bitcoin space, right? There's very few people who actually understand what's going on and are skeptical. Yeah, absolutely. Well, let's talk a little bit about so you made a distinction in in your paper about four different segments. Uh so those were infrastructure uh in which you counted uh wallets, exchanges um and

mining. Then merchants. So e-commerce and gambling you had under that category. Payments which were payment processor, microp payments and remittances. And then the last one financial services like peerto-peer lending, derivatives, insurance. Um can you talk a little bit about that distinction and perhaps about which area you find the most interesting? Yeah, absolutely. Uh well first of all why to have a distinction I think uh it's necessary because the business models are just uh very different and uh uh so you have to you have to look at uh different things for different

subsegments uh and what is more when you when you look at a specific company it's always some some benchmark uh so which is basically something that I have done a lot at Mckenzie when I was analyzing companies there. Uh you can only do benchmarking if if you have comparable companies. Uh so you really need these segments. Uh there are a couple of um attempts to to segment the Bitcoin industry. Um the logic that I've that you see here in in in my sectation is that infrastructure basically encompasses everything that you need to to get Bitcoin running in a certain country. It could be in emerging market for instance

merchants that's bitcoin u at the end customer side uh payments that includes uh some companies like uh bit pay or bit pisa and financial services that's all the all the stuff uh that uh yeah I would say the advanced stuff that doesn't niches exactly true as well it's well I mean I thought it was interesting because CoinDesk has done a similar thing in their state of Bitcoin report. They had these different categories and you know some of them made sense and they had like I think they had the financial services category as well and they just threw in everything else in there. There were things that had absolutely nothing in common. Um I think

even they had like things like coin desk and and totally different things in there. Um but I I think your distinction is um you know is a sensible one and it's a useful one and I guess what's interesting here is if we look at the the VC investment that has mostly happened in the infrastructure space is that correct? Do you see that as well? Yeah infrastructure and payments. Yeah that's that's true. There there's actually fifth category that is not mentioned here which has been introduced by CoinDesk uh which they call universals. Universals are basically companies which are doing a couple of things at the same time. Uh I think the I guess the the the name comes from

universal bank which also does all kind of financial things at the same time. Uh so companies like Coinbase or uh yeah Coinbase would blockchain yeah blockchain info they they they are wallet and they are a news company or or they are a wallet and data provider. Exactly. Exactly. And um these uh this is a kind of different model if uh if you really want to dominate a market then things at the same time of course you need a lot of financial backing for that.

Um yeah, if you like I can talk about the different different categories uh a bit in more detail. Let's talk a little bit about where you would put uh your focus on as a VC. Yeah. Uh well obviously uh if you go to if you look at Bitcoin and emerging markets, you have to look at infrastructure first because it's uh you first need to build up the infrastructure in a country like say Vietnam Philippines. So exchanges. Exactly. And that that's mainly exchanges. The thing about exchanges is uh of course there are troubles. Uh you need to get get regulation right. You need to get the security right. But uh in terms of monetization it's one of the one of the

things that are more solid than others. Um, if you compare that for example to payment prov excuse me that for example to payment providers like Bit Pay uh Bitay who uh recently said they don't charge fees anymore. Uh yeah then exchanges really look attractive. Yeah, absolutely. I I talked about this before I think on the podcast and I also talked about it with Mo Leven at um at the conference last weekend. uh no yesterday uh who's the you know he was the guy organizing the BTC Miami conference and he's doing the European business

development for them and and uh funnily enough apparently they went through the exact same reasoning that I had about Bit Pay which was that you don't have network effects really with payment processing and the marginal cost is like zero hence the prices are going to go to zero anyway so so they they were like well, let's just put them to zero now. It gives us an edge in the market and because we will have to figure out other ways to make money anyway. Um, so they sort of preempted that development which of course also makes it more difficult for new entrance in the market. So, uh, I think it's it's an interesting space in that way because it's just going to be very it's it's not clear how they're

going to make money. And then of course you're right with exchanges that may be different. Although we also had a panel at um at the Bitcoin conference in Colin yesterday uh on exchanges which which I was moderating and I asked about that and they also felt that exchanges were going to go to zero fees. I think all of them agreed. Um yeah let's start with the payment providers first. I think that um yeah there's uh there's big economies of scale. So, uh there's actually no reason why there should be more than three, four, five, uh payment provider.

Well, you can you can just plug into an exchange, you know, and then I don't think you have such economies of scale, do you? Uh well, economies of scale means basically there you have margin costs of zero. What you just basically what you just said. So if you're bigger then you have uh smaller costs but I mean smaller overhead costs. Um yeah true. In any case I think it's a payment provider to to to to be a payment provider. It's more of an enabler.

Yeah. uh if you want to build up an ecosystem in a in a country, then it's good to to be able to go to merchants to say, "Yeah, we have this exchange. We also have this this tool to plug into our exchange." Uh so, it's very easy for you. It's it's really something that enables you to promote your exchange, for example, sense. But the standalone business, I think it doesn't make so much sense.

Yeah. So, so you think um you would particularly focus on the infrastructure space in in emerging frontier market. So then that would be exchanges I I guess also wallets, things like that, right? Perhaps that are specifically suited to the local situation. Yeah. Yeah, that's right. It's uh it's if you look at uh the the fees in emerging markets, they are still higher than uh the ones in very big countries. Of course, long term it's a different sitation. Uh it's a challenge.

Uh you're right with that. Uh but um just um the thing is if you are if you are investor uh especially in the the uh venture capital space and you look at a lot of these uh young companies uh most of them they really make um losses. uh most of them they don't become market leaders and uh it's often times also very profitable profitable strategy to to buy smaller companies or by by the bigger players. So I can I can imagine a scenario in two or 3 years time um down

the road that uh CoinDesk or CoinDesk sorry a Coinbase will be really interesting in interested to buy up exchanges in emerging market and uh because it's just easier to to to buy into existing uh customer base than to build things from scratch and Um well also from this perspective I I think that emerging markets are um are the most attractive um in uh in in Bitcoin.

So would you guys uh what about the financial services category? That seems to be a category that has both gotten a lot of attention in terms of uh development in terms of new projects like Ethereum, but uh that hasn't seen so much investment. Do you think that's going to change soon? I I I think Ethereum that's in a way a different animal because it's well it's very technologic. If you look at financial services, you can split that up again into a couple of categories. Of course, Ethereum and these really really advanced uh Bitcoin 2.0 projects and on the other hand, it's more simple things like insurance, like uh data

analysis. Uh so if I look at the second category, there's there's a interest in that. Uh there have been a couple of uh people writing on that. Uh, and these can be interesting niches. Yeah, I guess with insurance it depends what you're talking about, right? If you if you're talking about insuring Bitcoin wallets, then I guess that's something just regular insurance companies will do. But then if you talk about actually competing with insurance company using uh decentralized markets and the blockchain, you know, then that's something super interesting also very complex of course, but but I guess we are just at the very beginning there.

and and you know it it makes sense to me that those will take a longer time. Yeah, it it's it's an interesting topic and I um I have regular conversations on that with Bastian Spielman who's who's basically like you one of the contributors to to the report uh we have we have put together uh he's an expert on these Bitcoin 2.0 projects and uh he's very enthusiastic about it. Um my he he specializes on on to look at which of the projects are basically the most interesting. Um my my own opinion is I'm a bit cautious uh um on investing in Bitcoin 2.0 projects.

Uh if you look at mastercoin how master look at counterparty and how counterparty has performed um if you just look at the the price development of the coin uh it has been sobering. Yeah true there was a lot of excitement. I remember mastercoin was like insanely high in the price at some point and it's kind of like all flattened out. I think people also just un really underestimated the complexity of this and how long it's going to take. Uh absolutely it's there's a nice parallel uh for anybody who is uh who is familiar with uh investing in mines uh uh so like gold mines or something like that uh there's also a similar pattern

in the in the development of the of the of the price of the stock price there is uh when if there is some new deposit found there is always a huge hype and uh of course the the share price skyrockets Uh but then uh everything just takes longer than expected and there are always problems and there is really this this valley of tears and then only after a couple of years when the first production goes online then uh and everything turns out well. price uh goes up again and uh my theory is that actually you have the same thing that we will see or we are

basically seeing right now uh the same thing with Bitcoin 2.0 projects. So uh there is of potential but it's not very wise to be one of the first investors because typically things become cheaper and it's if you if you have done your research and you really know the technology and things have become undervalued then it's the right time to invest. Yeah, of course. Yeah. know I I mean I'm certainly of the view like let's let's say if you if you talk of something like Ethereum I think it's going to take years for like especially the more

complex things to work on there now we may have like gambling things soon or things like that but then if you talk about like insurance things yeah it was going to take a really I think it's going to take a long time just there's so much complexity it and the whole another big thing that we'll just have to totally figure out from scratch uh is the whole user interfaces, user experience, and I think that's really complex to get that right. I think we're already seeing that with Bitcoin, just how how difficult it is to do that and do it in a way that people can use and sort of normal people can use and feel comfortable with. And then of course when you talk about these more complex applications even even something like

multisig which we think of as a pretty simple thing generally in the bitcoin space like conceptually it's very simple uh but even there the the user experience is is a big challenge and then and you talk about those those other thing complex projects like counterparty and all that um I think it's going to take a long time. Yeah. Yeah. Absolutely. It's uh well things are getting better. So uh people Bitcoin is well the the the the prototypical Bitcoin enthusiast is a is a is an IT um an IT guy who really rather thinks about substance than than form than than

appearance. Uh so that's basically probably part of the reason why user experience wasn't so good over the over the last years. But uh this is improve. Um but yeah, but uh there's actually even there's all the regulation and all these other things on top of it. It's it will be an uphill battle for for companies like Swarm and uh and some of the other uh yeah sophisticated uh crypto um blockchain applications because of regulation you think yeah absolutely yeah uh yeah it's anybody who who has read uh the latest news on on

the bit license on the EBA um yeah has um unfortunately had to had to recognize how just how traditional regulators are. And reason because the regulators are basically appointed by politicians and politicians are uh have to report um yeah to communicate with with the with the mainstream population which is rather risk averse for for good or bad.

Yeah, absolutely. And when it comes to right right now, we are seeing all these regulatory statements on Bitcoin, but just thinking of it as money, right? No, nobody yet is thinking uh of Bitcoin in in these other ways it can be used or the blockchain can be used. And I think it's not going to take that long until they catch on to Yeah. things like Swarm. And I do think they're going to have regulatory issues. I I absolutely agree with that. I think that's going to be it. The whole crypto equity thing is super interesting, super revolutionary but also I think they're going to have huge difficulties with regulation. Yes. If if things turn turn

if if if things turn out well, we would see something like a lightweight regulation which uh which creates a playing ground for these technologies where basically you have to give your you know about the risks that you um that you know what you're doing and that you're then in that case allowed to uh to to use these technologies. uh similar to basically the accredit accredited investor clauses that you have uh when investing in sophisticated financial products. Um there you see as well people are accredited invest sorry accredited investors are supposed to be

more sophisticated so consumer protection is lower. uh if if you could see something similar for for Bitcoin that would be would be great but uh I haven't heard anything I haven't heard anybody talking about that idea. Yeah. uh I'm I'm not so optimistic there that I maybe in some places we see that lightweight approach but I think especially when it comes to the issuance of securities uh which is super regulated then I'm I'm quite you know I think they will basically try to impose the same rules that exist and that just is going to basically kill the whole blockchain thing. So you really have to

then be kind of underground uh a black market type setting and that of course makes it difficult when it comes to companies raising money because whereas it may be easy for individuals to stay anonymous and online uh in hiding so to say and use services and I think that's the case with money rights are going to have a hard time coming after every single Bitcoin user But it's not so absurd for governments to go after every single company that tries to issue shares on a crypto equity platform. Um yeah, that's that's true.

So I think it's it will be a challenging but so to to summarize the Bitcoin Bitcoin 2.0 Z projects are aren't the aren't going to be the primary focus of uh Pathfinder, but you'll focus more infrastructure and emerging markets or frontier markets. Yeah, absolutely. Yeah. Well, let's talk a little bit about, you know, a topic that I think both both of us have been thinking about sort of being located in Europe and involved in the Bitcoin scene, which is the sort of state of the Bitcoin ecosystem in in Europe versus the US.

Um, what's your view on that? Uh yeah, it's just just fair to admit that uh in in the US or in in big capitals like London, I think things are more advanced than in continental Europe at least. And uh I think that's that's just for I've seen that in a couple on a couple of occasions. First, if you go to to conferences, you see rather few Germans uh like us. uh only it's only a couple of them who really uh move around. If you uh if you look at the uh the news space actually uh analyze in quite some some depth it you just have

much more podcast much more news websites uh which uh which originate from the US uh and uh yeah and also meetings. If you go to meetups, you have really huge meetups in countries like the UK, uh in Canada, in Argentina, all for different reasons, uh or New York or Silicon Valley. And uh the meet the meetup groups in continental Europe, they aren't that big. Um if if I think about the reason for that um it's difficult to say one one aspect of course is that s just some countries

are more innovative innovative than others. So if you look at Israel it's just a startup. There is even a book with that title. uh or if you go to London, there's a huge financial community there. When it comes to to financing, yeah, it's it also makes a lot of big difference that uh most financial uh VC companies are based in uh in Silicon Valley or in New York. uh you can see that if you look at the at the big uh fundings at the big uh

big deals which have been made it's companies like bit pay and coin base uh that got really uh large funings. Yeah, I I I don't I don't know if I totally agree with you that continental Europe is lacking that much behind uh the UK or the US. I I mean I think in terms of the state of startups, yeah, quite obviously, right, Silicon Valley in particular is way ahead and there's just so much going on. there's so much money and people I guess also people just have more experience right there a lot of people getting starting Bitcoin

companies that have experience starting other startups and then they raise money very fast they scale very fast whereas in Europe it all takes much much longer but I don't know if this is due to lack of interest or if it's more due to well lack of funding and perhaps a little bit of lack of a startup culture yeah it's uh a lack of interest. I wouldn't say a lack of interest. It's I think there's just places like I don't know like Israel where people are particularly innovative or Silicon Valley and of course that's a different uh level but uh uh it's uh if you if you compare uh continental Europe to all the other

places in the it's probably more for the reasons that you have just stated and if yeah it's if it's if you look at the the big um the big seating rounds and and uh why people got money. I mean obviously I I I can only guess but uh it's no coincidence that uh Jeremy Aair and also the the founder of Hapo or Shapo that they are Zapo I think. No yeah exactly. Thank you. I think so.

example that uh that that they are that they are serial entrepreneurs. They have very very connections uh close connections to Silicon Valley. Uh that definitely helps. Yeah, there's no question. I mean I I just hope this is going to change soon in Europe. You know, I really uh one thing I don't know if I I don't think I've mentioned this on this podcast. Maybe I have. Well, if I have, I mention it again. But I've been uh in talks in in Germany with people from Oxish Springer. Oxish Springer is uh one of the biggest media companies in Europe and they have an accelerator in Berlin together with Plugand Play.

Now, Plug and Play, of course, is is known by many uh for their accelerator in Silicon Valley, which also happened to be perhaps the first or at least one of the first Bitcoin uh accelerators. For example, 37 coins was there and some some other companies. I think purio and and now they are seeking uh Bitcoin startups for their Berlin the Berlin Oxish Springer plug-andplay accelerator. uh and there's already been uh at least two Bitcoin startups applying there and I think they're both uh very solid and have a good chance of getting in. So um so hopefully you know that's kind of the beginning of some change there but

it it's really important I think that we will that will develop soon and I guess also in Berlin we've had now one of the first investment rounds in in big bond you know has been on the podcast a few weeks ago actually he knew about that it was happening then but it hadn't been announced so we couldn't talk about it but he has now received I think €200,000 from venture capitalist in Berlin. So, I guess there's starting to be some things, but there still very very few. Yeah, now that you mentioned that there actually quite a quite a couple of exciting companies uh Bitcoin related companies coming from Germany. Yeah, it's Bitbond 37 coins. Um yeah, these

are very interesting companies. Yeah, of course 37 coins still had to go to the US for their accelerator and you know they they spent a lot of time over there. Um but yeah, well so to finish off I would be interested in kind of hearing your perspective and your advice now having done all this research and also as a as an investor on starting a Bitcoin business. you know, I mean, I'm sure some of our listeners are thinking about that. I think about that often.

Uh is what's, you know, what kind of Bitcoin business should one start if one started one today? Uh, where should that be what are your perspective on the right business models? Can you talk a little bit about that and give some advice to to the budding Bitcoin entrepreneurs? Uh, yeah, sure. Sure. Uh I I can only speak for myself and I can just explain what what I like to see in Bitcoin startups um and um having looked through desks and presentation having met with a couple with a lot of people uh I always do their market research first. So they really show what is um what is already out there and how their business really

creates value uh creates something new. uh that if I see that really that tells me that people really have uh have thought about what they are doing and uh yeah there is for example just to give an example there is uh one startup company coming from Berlin uh I don't want to mention the name because I don't know if they have announced already uh but they want to create some tax and accounting software for which which I see as a really interesting thing because of all the regulation there is really a big need for that uh and they have actually done uh their uh market research

and have looked at competitors so that's something that I like a lot and I think that makes a lot of sense to do um from more practical perspective uh of course it makes sense to to create a to create a a big and uh diverse team. It's uh uh in these days you always need a developer. Uh you always need uh some guy who's good with graphics because important and uh user interface uh is important and um and yeah well it's becoming more and more important to have also somebody on the team who who is knowledgeable about errors because um

yeah if we like it or not uh it's coin is becoming more and more regulated. Uh so these are actually the two most important uh points I would say and uh uh I think you can you can find niches everywhere. It's it's of course it takes a lot of time to identify one but uh opportunities and um it it doesn't need to be confined to a certain segment. So I think um uh there might even be a good business case for a new mining manufacturer if they are

uh um as uh that's that's um that's what what some I heard an announcement on that just uh very recently. Uh uh yeah uh so so um I think that's you know that's solid advice you know I agree with that I think do your market research that's that's really important think about the positioning what you're actually trying to do and then get a diverse team of course that can be very challenging right but super essential uh I know I agree with those uh but I' I'd like to ask again about uh so you know let's say you had to start a Bitcoin business today and you say like hey I'm I don't want to be an investor I'm I'm going to start a business myself. What

would you do? Uh what do you mean? What kind of sector or what kind of business? Yeah. What kind of sector would you try to look at? Would would you try to do something in emerging markets perhaps? Uh I don't know, build an exchange there or is there something else you would look into? Uh well, I I I don't uh I don't speak Chinese or any of these other languages, so I could try. Maybe there would be some people who who would be better at doing that. Um I I really like this legal regulatory uh idea uh really to build something that actually and of regulation and taxes and legal. So uh as said to create a uh uh to build a software that uh that

really takes care of that uh that takes care of all the accounting needed for for the reporting to the authorities. It's I find a great idea because uh it's it's something all the all the companies they will need. Yeah, I totally agree. I mean we we've been uh running this very small uh co-working space right the bitcoin center in Berlin and uh you know we've been like setting up some accounting there etc and uh of course we are also you know some people pay with bitcoin we pay our rent with bitcoin um and and you know just figuring out how to do that you know it would be nice to have sort of a plug-and-play system

and we haven't totally set it up you but you know some funds I hold on a wallet I have some funds one of the my my partners and it's it's a bit of a mess. Now, this is fine because it's such a small scale and you know we can sit together and like set it up more properly and it all works. But of course, when you start having a much you know operating a business on a different scale, you you can't do that anymore. You need some automated systems that just take care of it and that also help you uh be compliant. So, I I agree. I think it's it's essential that services like that exist.

Yeah, it's it's this uh it's this uh um I don't know the saying that you shouldn't dig for gold yourself, but you should sell shovels to the uh I think it's a bit of that. Yeah. So, so you get you'd get in into the shovels uh selling business. Yeah, I would like to get into that. Yeah. As well. Yeah. Okay. Um, is there something else you want to touch on before we Um, yeah, I would I would like to announce as well. I I'm also creating my own blog uh which there's not so much there yet. Um but uh I will um add content

uh as time goes by and uh the the uh the Earl uh the address is uh wictor.com and uh this I crypto investor is also stands for uh intelligent crypto investor which is the title of the of the report And uh this is basically uh an illusion to investor which is a famous book of Benjamin Kraham on on how to do value investing on how to uh uh do some stock picking if that makes sense.

Yeah, absolutely. So also we're going to put a link in the show notes to uh your paper and I guess people will also be able to find it on your website. So, icryptoinvestor.com. Oh. Oh, it's uh we will publish we'll publish that uh there will probably be a link at at my website as well, but uh we publish it at Pathfinder Capital. Oh, at Pathfinder Capital. Okay. So, hopefully it will be out by the time this gets out. Uh otherwise, you know, we'll update the show notes and and you can definitely find the link then. and and I do highly recommend people check it out cuz I think it's a it's a really nice comprehensive introduction and I think it's especially

also a good, you know, if somebody is new to Bitcoin and they're like, "Oh, what is this thing? Why is it interesting?" I think it's a it's a really good introduction. I think it's it's one of the most solid comprehensive introductions I've seen. So I, you know, I'd encourage people to check it out and and especially perhaps send it to people who are kind of new to Bitcoin and and want to learn like what is this thing and what is its potential. Yeah, I would also like to to to use the chance just to say thank you to all the people who have contributed. Uh because um even I was the person who wrote the main text.

There were there are a lot spotlights. uh we invited or I invited a lot of uh experts to to contribute on on their specific uh area of expertise and including myself. Yeah. To give full disclosure. Exactly. So uh it's uh if you look at the uh report you also see their texts and you about the I would say thought leaders in in these fields. Okay. Well, thanks so much uh for joining me today and um thanks so much for listening to this episode. If you want to support the show, one great thing you can do is leave us a review on iTunes. Um and you can also follow us on Twitter at Epicenter

BTC. And uh finally um you can donate to us which of course we very much appreciate since we still do not have any advertising although we were sort of in talks with a few people and you can do that at epsenterbitcoin.com/tips. So, thanks so much and we'll see you next week. [Music]