The Rise of Cryptoassets - Jack Tatar on The Blockchain and Us

Transcript

hello and welcome to the blockchain and us we're pioneers and thought leaders talked about their journey in blockchain technology crypto assets and a token economy and I'm your host manuel staggers if you enjoyed this podcast please give it a top rating and review on iTunes and feel free to follow me on twitter at Manuel's dagger this episode has support from shift crypto security the maker of fit box a minimalist Hardware wallet for crypto currencies big box is rock-solid compact portable easy to use and designed and manufactured in Switzerland to learn more and get your wallet today visit www.cminds.com it coin and beyond

he is Managing Partner of Doyle Capital Management an investment firm that invests in and advises early-stage companies in the crypto asset and blockchain technology space jack has over two decades of experience in financial services and he is the chair of the crypto assets working group for The Wall Street blockchain Alliance he is also the co-author of one of the earliest books on Bitcoin called what's the deal with bitcoins and has written numerous books on retirement and finance Jack is also a contributor to Forbes and has written for market watch CNBC and about.com and now to the interview hello jack and thanks a lot for making time

today man well thank you very much for having me I really appreciate it recently I had a conversation with an investment professional here in Switzerland and he was convinced that the value of Bitcoin will go to zero eventually I mean it was a very adamant about that and I tried to come up with good counter arguments but stumbled a little bit and I'm sure that you have a whole bunch of very good counter arguments well the first thing I would the first thing I would say is when you mentioned the person's an investment professional you you've got to wonder where he's getting his paycheck from and the reason I say that is because obviously the financial status quo is not that keen on seeing

something like Bitcoin succeed so I think the intent is to to hit Bitcoin with a lot of fear uncertainty deception and stories about it being a Ponzi scheme and all of those types of things and and with the intent that at some point maybe they'll do some damage to it for but it's really an underage uneducated and view and I think it does a disservice to investors you could potentially see Bitcoin go to zero and not so much for the reasons that probably your friend had had thought well his whole point was that everything that has no intrinsic value everything

that you cannot use to build something or make something out of or eat will eventually go to zero you know fiat money will and so will cryptocurrency that was his whole point it's it's an it's it's an interesting point because I think that that so many people have to change their thinking here one of the things that that I like to go back to is as a study that joel monegros did about fad protocols and many people know that and as having this discussion last night with a with a couple of investors where you've got to kind of get your arms around how this is different from the dot-com era and the internet with the internet what we had with the internet

is you had that the layer of the Internet was out there but the value that was created was within the applications Facebook and all those applications that's where the value was that were that's where people made money but it didn't help it didn't help the ecosystem of the internet what we have right now I mean it's sorry to interrupt it's always this point that where people say well you know just to be on the Internet you don't have to pay anything right right so that's that whole point but you can invest in Amazon and that's how you money but you cannot invest in the Internet right and that's fair and that's a very very fair point I think what's I think what's what's different and what ends up happening

with that is then the applications end up having more of the value and there's there's no value or there's less value that's given to the ecosystem that's running it so the community and and all of that so the internet suffers and we get all of this this garbage that's on the Internet slow speeds we kind of hand it off to to phone companies and and internet providers to handle that whereas I think with what we're seeing now with with the world that Bitcoin has created is that we see more value in the protocol the underlying infrastructure that's there and that's where the value

can be created and the reason that the value can be created there is is because it's open source there are more people engaged in preserving that ecosystem making that ecosystem work I mean that's what bitcoin is bitcoin is a reward system for people running the ecosystem so there's a real interest in ensuring that the community and the ecosystem works and then the applications that are built on on that potentially have less value and I think this is where we've got to get our arms around understanding that the thinking that we have right now with Bitcoin and blockchain and crypto is different even from the thinking of

the internet because the underlying value becomes in the protocol layer and there are issues around governance there are issues around in inclusiveness there are issues around making it open source to let people really make that underlying ecosystem as good as it possibly can be it's not about just being a platform for applications where we we can create billionaires this is a different type of thinking and and and from the perspective of even just investors getting your arms around that is is a real transfer formative as a transformative thing it's it's it's a whole sea change of how

people think and I think we're starting to see that with investors who are looking at this platform to come back to your point about about Bitcoin as you know going to zero it is all gonna be about that protocol which one of those protocol layers will be the best for the community we'll put something out there that benefits as many people as possible potentially it could be Bitcoin potentially it could be something else maybe something we don't even know yet right you know when I mean if you made this argument in your book crypto assets where you had this nice graphic and I think you you quoted that study as well but I'm wondering what are examples of such applications because

I've read somewhere that pretty much the only profitable business on the blockchain currently is trading cryptocurrencies but what are other applications well when you when you talk about when you talk about profitable profitable investments it's it's an interesting point because you start to wonder all right our thinking right now is to have a company and that company should make profits it should make revenues and and and that's where that's where people make money but I think what we see with the internet is we see that if a protocol is properly built and people use the protocol and people see value in the protocol then in essence

the value of that token that is that is running that protocol should increase in value that's what you're seeing with Bitcoin so Bitcoin isn't a company Bitcoin is really that that protocol there that that layer that's there and was seeing it rise in value because of the usage that it has but also they reach that it has the fact that this can be used cross borders the fact that this can be used and applications can be built on it applications can be built on the side chains of this so but no one is there saying you know in the Bitcoin office saying okay well you've got it a to use this you've got to do this you've got to you there's not a company

there so that so so what ends up happening is there's no equity in Bitcoin but there's a token value there and that's where we see the investments rising so there is a little bit of change in thinking here around what we've always viewed as equity earning money by a central authority to now a distributed protocol that gains value for everyone involved through the value of its token and I think bitcoin is an example of that right but it takes it takes a little bit to get your your head around it and in fact when you reference back to the book you know even our thinking has evolved from the book because in the book we're looking for ok where we're investment options for

people and I think they do exist and they and they still exist on the equity and the token side but it's also interesting to see where this technology is moving and where it can potentially be 50 200 years from now yeah absolutely and I'll come back to that and ask you where where you see this whole space going of course as well is that argument that you just made with everybody gets a chance to invest in the underlying protocol in the Block in the Bitcoin block chain or the etherion block chain for the first time that wasn't possible before with the internet but this time it is it's that the most convincing argument that you usually make to to mainstream investors who want to also invest in crypto assets well I

think yeah that's that's a bit where my thinking has evolved but I do think that when I do talk to investors and they say to me what is the real value of Bitcoin and and why you know why would people invest in Bitcoin and see a raisin and the value of it I think it goes back to exploring the way we currently do things for instance we have the financial systems that are out there there are centralized systems so they have to go through through somebody somebody is basically giving you the ability to get to your money and use your money and if somebody wants to send money across borders there are fees and charges for it you want to use a credit card

you know a business person has to pay 3% for the ability to use their credit card what happens with Bitcoin is Bitcoin creates a whole new world now where there's no one essentially in charged from a centralized position there's no bankers out there there's no status quo there's no there's no entity out there that's controlling this but it is now decentralized and it now allows for people to transmit money let's remember that when Satoshi did the white paper he basically see the title of it is a money transfer system I mean and it's created and it was created I believe in Chris and I when we wrote the book we believed

it had a lot to do with the financial crisis of 2008 so it is a shot across the bow of the status quo there is no denying that but what you now have is you have a system that transcends borders and allows people of any any income level any any wealth level to send money back and forth at a lower price the ability to send money to other countries and not get hit with 10% from Western Union or for businesses to take money and not have to take a 3% hit of very powerful things that that translate into an improvement for business and improvement for for the livelihood of

people and and hopefully it changes for society so and it works and it works when people say to me that you know bitcoin is nothing and and there's nothing to hold on to Bitcoin is working today throughout countries it has created a whole layer for people to do this type of thing where we're what it's not doing is it hasn't put money into the pockets of the status quo and and it's very interesting when I come from I come to the space as somebody who worked in financial services for almost three decades and potentially once once the investors and Finance ears and banks start to realize how to make money off

this system it may or may not be a good thing for for Bitcoin and I think that's a real reason why they why they dissing and they complain about it because they haven't figured out how to make money in it but the intent here was not to make money for a single entity the intent was to provide an ability for people of all levels to improve improve themselves improve their financial situations in a very decentralized manner and that's threatening too many people but as you and I know this is working today it's providing value to many people out there and we just were just only beginning to see the impact that can be created with this and you just mentioned banks before

who don't see how they prof how do how they are able to profit yet from all of this but still I mean you know Goldman just announced that they start trading bitcoins and I mean many of the big banks have their own permission block chains so I think we're past that already I mean that was maybe an argument you know that was very fresh I mean maybe last year or two years ago even but I think already it has proven it's worth not just Bitcoin the whole the whole crypto asset space I believe well it's it I agree with you that that the companies are jumping in I don't know if they're jumping and they're kind of dipping their feet in the water I think what's interesting here is also is

if you remember when we had to run up to 19,000 with Bitcoin recently and then obviously the drop down to where we are now and we've had some stability on this price level here but you could actually you can actually find and there's been some recent articles that have popped up there that indicate that that run-up had a lot to do with the fact that the financial service industry was now getting involved from the introduction of futures yeah exactly so the introduction of futures there is a lot of data that we're now able to look back on and this is one of the problems we could throw acid since we don't have a lot of data which is also one of the criticisms of people in the financial service area that that for them to

recommend assets to clients they need more data and it's a valid point but I know there's been a lot that's been done about the data that has been created since the futures market came in and the crash and there seems to be some correlation so like to my point earlier now that we've got the financial service industry in is it a good thing or is it not a good thing and and my feeling is I think we're gonna start to see more of the individual investors getting involved in crypto but what's missing right now is an education and and information to them you mentioned before how some of these firms are jumping into this space but there are many investment

firms wealth management firms who are handling trillions and trillions of individual investors money and they are not letting their advisers even mention Bitcoin to their clients they're telling you cannot discuss Bitcoin that does a disservice to them and it also creates an information gap that I think is detrimental to investors who want to get involved in this space because we have a lot of expertise and knowledge in the financial service area but if they're told not to discuss this with their clients then the clients make investment decisions with less information which is which is never a good thing so I think that's a gap where that has to be filled in and a big part of it has

to be filled in by the investment firms who have to come to terms with with understanding Bitcoin understand blockchain understanding crypto assets and educating clients on it or else we're going to have situations like we saw where something goes up to 19,000 everybody jumps in they don't have a lot of information and then it drops down and whether their intent there would maybe they're you know I don't want to be a conspiracy guy but whether that was their intent to do that the point was that people didn't have enough information to make those decisions and just jumped on a moving bandwagon that ultimately had to stop so yeah it's it's been a bit it's a big thing that the firms have to do is to

raise the education level not only for the investor but for them for these firms as well mm-hmm yeah I think it's it's a very good point how many people do you think are really investing in crypto assets at the moment well you know I don't know the numbers but you know a couple of things qualitatively I can I can say to you I mean obviously we see the quantitatively we see the increase in wallets and you know when coin base is the you know number one app on on the Apple store we know that people are opening this so you know the numbers are out there and they're increasing that people are doing this but what kind of what percentage is

it roughly maybe of people in America oh I don't you know that's a good question man well I don't I don't know I would say that it's I I just recently saw something and I'm sorry I don't have that information at my at my fingertips but it is definitely a number that's that's increasing but let me but let me let me put it this way let's put it this way those people who are doing it how are they doing it right now potentially they're going to coin base and they're and they're probably buying Bitcoin etherium potentially litecoin they how much they're doing with the other crypto assets we have fifteen hundred crypto assets out there how much they're doing

there I don't know and let's let's face the reality I believe that and I you know I get involved in this space a lot it's not an easy space to navigate if you're not that knowledgeable I it's really not the user experience across different exchanges is not good the storage of the storage in custody of these assets is not easy so so for those people who want adventure and and get involved in this you know there there's a lot of education they need to know but let's let's let's let's think about a situation potentially in an in a few months where investors don't have to worry about custody they don't have to

worry about opening account on coin base but they could buy from from either their online brokerage or from their advisor and ETF we're an investment fund that invests in these crypto assets I think once you see that happen then you will have a large number of people involved investing in this so yes numbers are increasing for who have who owns Bitcoin and who has Bitcoin but at certain points in time people gonna realize the user experiences and great yeah but and when we get to the point and we're almost there where we're gonna have regular investment vehicles that are easy for people to invest in that with no concerns about custody no concerns

about having to go online and do this themselves but to put it in a package problem packaged product like an ETF then we'll I think we really see a growth in people getting involved in it and then I think a lot of the things that we cover in the book will come into play how do you classify this in terms of asset allocation and those types of things yeah good point with with the ETF absolutely um I mean I've been waiting for this for the longest time and hope it happens soon what is in your view who who do you think crypto assets are for you know from an investment perspective should everybody have a small percentage of crypto assets at our portfolio or is it just for more qualified investors

what do you think well that it's this is this is something I'm gonna put my I'll put very quickly put my financial adviser hat on okay as I've gone through all of the licensing and everything else I still don't practice it anymore but the reality is every investor is unique every investor has their own risk profile that they have every investor has their goals and objectives those things all have to come and play before you say this this type of investor should have this this type of investor shouldn't have it so I'm not I'm not one to say that everyone should have it that being said I do think that it plays a role and I'm talking about bit coin and

crypto assets it does play a role for people in terms of asset allocation typically asset allocation models that we see with investors are made up of stocks and bonds and the reason there is because typically they move differently from each other you're always going to get more growth from stocks a little more risk and typically bonds will move in an opposite way from the what we saw in 2008 is that both of them dropped at the same time so there was a real interest in saying is there another category of investments there that are not correlated to stocks and bonds that I can put my portfolio to protect myself and that's alternative assets right so now alternative assets depending on your

age where you are your goals all those types of things can be anywhere from five to twenty percent of your portfolio obviously a younger investor should have most of their investments in stocks and potentially a larger allocation in in alternative assets because they're they have a longer time frame to take risk somewhat such as myself who's a little closer to retirement I want to be a little more conservative so I may have more bonds in there and a little less allocation to alternative assets so so that's what I'm saying it's different it's different for everyone but I do believe that Bitcoin encrypt and crypto assets because of their ability to not be correlated because of their ability

specifically Bitcoin its ability to to have a high shop ratio which is essentially the amount of return you're gonna get for the risk you're taking it it's far far beyond what what you would get with equities or other types of investments so to put those things in your portfolio can really be growth machines for your portfolio however we know that they're risky that's why you're getting paid a high reward so their risky we've seen the volatility so they shouldn't be a big part of your portfolio and that's why I think people should view them in this alternative asset sleeves that that you know five to twenty percent the other thing that I'm seeing is well with young investors is young investors have kind of grown up

seeing that the stock market is either rigged or a little bit of a casino they're not all that comfortable and I often refer to crypto as kind of a gateway drug for the Millennial investor but I think the reality is is it's correct because a lot of millennial investors are investing in crypto and they're learning how to invest because of their experience in crypto so I mean I'm encouraged by that but I also think that potentially these people are probably putting more money than they should into crypto but the reality is they're learning about investing and to learn at an early age and potentially lose some money or make some gains at an early age it's good but it's it's my hope that

they also learn how to invest and that's why I come back that's why we come back here as well as in the book to a lot of those financial analysis tools and those you know time-tested tools of Modern Portfolio theory and financial tools that are out there that I think work for any asset whether it's equity or crypto I just wanted to ask you about that because I often hear the argument where people say oh you know using a Sharpe ratio is ridiculous for crypto assets or Modern Portfolio theory doesn't apply that so you know 1960s or whenever a Markovitz came up with it I mean but you're saying it does apply and we should use those tools to also with

these investments well I think you have to have you have to have some tools out there to to manage your investments and manage your portfolio's I mean you know I yeah Harry Markowitz came up with this years ago but I spent time with Harry Marcos writing the book the man is still doing a lot of work on risk reward now granted are some of his some of his beliefs in some of his work a bit outdated should it be changed obviously I mean that that all happens that's gonna happen with the work in our book but it becomes a foundation to build upon so you have to have some tools and some methodologies out there it's interesting you mentioned about the

Sharpe ratio I I had this discussion last night with an investor over dinner the same point was that the Sharpe ratio doesn't matter for crypto assets because there's not enough data and and and that's probably correct that's probably correct however I do think that there's enough data for Bitcoin which has been around now for 10 years there's enough data out there regarding Bitcoin price and everything else to potentially not validate whether or not the shop ratio should be applied to it but I think you can apply it to it and continue to evaluate it to see if in fact it works overtime this is one of them this is one of the problems that

it's an inherent problem with with what we were doing with the book to try and tie back to a lot of these financial beliefs is because there's not a lot of data out there and and it's our hope that we put in kind of a foundation for thought and and at least some semblance of that people could build upon and we're gonna see more analysts come into this space we're gonna see more data being gathered we're gonna have a longer history history with aetherium and then I have a longer history with other Kryptos and we can apply that data using the same tools that we've been evaluating stocks with in the past and I think that's a good thing for people to

evaluate this and come up with it because I think we will see analysts in the major firms who will start to evaluate this I think this is also a reason why many of the financial firms haven't haven't embraced this because the reality is there is not a lot of data out there so when you make a recommendation to someone about go and buy this asset you need to do it based on past data so we don't have a lot of past data but what what I think will we wanted to do is create that platform for people to evaluate things going forward and I think you'll start to see that and we may be proved wrong on some of these things but to us what was more important was to put a stake in the ground and say

let's at least use this for evaluation purposes and build upon it I would be thrilled if 10 20 years from now someone comes back and looks at something in the book and proves us wrong but at least they used the analysis and the approach that we took in the book to at least get them to that point of proving us wrong you know what I'm saying I know absolutely what you're saying and I just wanted to add I think it was important that this whole passage was in the book about how how to do technical analyst analysis how to do fundamental analysis with crypto assets I think I think it's very important that people understand that is this a serious asset class that you can

use tools with yeah and and Manuel every every day every day there's a new article that's written out there from somebody who's putting some chart that's that's comparing maybe the the amount of money that's coming in to crypto versus things with the dot-com but it it it's very it's very interesting to me to see the wealth of research that's going on in the community I mean the really open spec open-source research is going on by people in the community that are exploring things that are either in the book or in the any areas of finance and it's and it's and I think it's very interesting but I do I you know I do

want to caution people we've had Bitcoin for 10 years probably and I started writing about this in 2013 of Bitcoin as an investment so that's five years ago and for probably two of those years I was belittled as as a maniac standing on the corner saying you know avoid this guy because he doesn't know what the hell he's talking about but now we probably have three years of where people are starting to evaluate this more and more as an investment so this is still very young it's still very new and and obviously we don't know all the answers but I think you can put a lot of the tools and a lot of the

resources we've learned from finance to these assets to even validate them as as good investments for people or appropriate investments or some way to evaluate whether or not people you know should be getting involved in these types of things as an investment yeah I think it's very good points and definitely that's that's always good advice right just apply tools to analysis and then invest just make sure you understand the risks what what do you see let's call them professional investors or institutional investors how do you see them approach this asset class well I think we're seeing more institutional investors come into the space I I will just III as a as a venture capitalist and and running a

venture firm myself I we're encountering a lot of institutional money coming into this space and and wanting to take advantage of this and and the good news there is that we've got people looking at it we've got analysis going on there one of the one of the potentially bad things is that though these opportunities will only go to accredited investors people with substantial amounts of money and and so therefore the regular investor may not have the access to a lot of the products and investments that we're seeing there in the hedge fund adventure side of things and even with a lot of the icos that are coming out but the I'll go back to my point earlier about ETFs coming out I do

some work for a I'm an advisor to a company up in Canada 3iq and we actually presented to the OSC which is the Canadian version of the SEC and they just read and they just got approval to be the first multi crypto fund to be offered out there to to investors it's it will be sold by financial advisors to investors accredited investors but they also got approval to be for a Bitcoin ETF and an aetherium ETF so so you're you you will see ETFs coming in the in the Canadian market and I think once you see that you're gonna slay that happen

it will happen that's probably gonna happen within the next six months oh cool with six months now I don't know what's involved with with it now coming down to the US or being set up in the US as well as how it will be embraced by the financial firms will the financial firms even make their investors aware of these products hmm so that's so that's a challenge there as well but I guess the point is is is that institutional money and is now taking a look at how do we create investment vehicles out of Bitcoin out of these crypto assets and put them into packages and products that can work for investors

and that I I think we're going to be seeing that once that happens I think you know we'll hopefully the firm's will start recognizing they need to educate their investors better and but I also think III look forward to a future where potentially we could start to see some portfolios of various crypto assets you know if anyone familiar with the book knows that one of the reasons we call the crypto assets was to be very clear on the taxonomy around this you have Bitcoin which is a crypto currency you have a theory in which we believe is a crypto commodity and then you have crypto tokens that are a lot of the applications a lot of the icy O's that

you've seen out there one of the reasons that we wanted to be very clear that these are not all crypto currencies and and and have their own properties is because you can't compare Bitcoin to etherium they do different things one is not going to replace the other bitcoin is a crypto currency theorem is a platform to develop upon all these different apps do different things so I see down the road almost like what we have with segmentation on some of these quality Kryptos come along and there are many quality companies and quality crypto assets out there you can potentially see portfolios that are made up of let's say 30% small smart

contracts 20% privacy coins 40% some other segments so you can see segmentation just within crypto assets intending and you'll see portfolios actively managed and you know potentially passively managed that will have different segmentations in these in these investments and and I think that's a little further down the road and that obviously is going to consist of having more data more analysis or whatnot but it will provide diversification for investors within the crypto asset space if people are going into the crypto asset space and they say I'm in Bitcoin that's all I need well we know this 1500 1500 crypto assets out there so you may

not be getting the full potential from the whole crypto asset market by just investing in Bitcoin so that ability to have a diversified portfolio in those different segments I think is gonna make for very interesting very interesting products that will be created by the institutional and financial service firms down the road and I think you know probably three years three to four years as we have some more data and some more courage on the side of these financial firms to get involved in this I think we'll start to see some of those multi crypto multi-asset segmentation types of portfolio start to appear for people to invest in let's take a quick break for a message from our sponsors shift crypto

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types of portfolio start to appear for people to invest in mmm interesting you mentioned before quality assets need to be in these portfolios and you have also section in the crypto assets book where you describe how to do analysis of crypto assets um what are the metrics that you look at there well we we go into you know you talked about we talked about an evolving space and the evolving one of the most evolving spaces here with crypto assets is valuation and my co-author Chris pernitskiy has done a lot of great work in terms of valuation groundbreaking work in terms of trying to evaluate these assets and and how you

would value them and taking a look at you know velocity how many wallets have been open how many transactions have been done all of these types of things a bit we're a bit hamstrung because of the lack of data for some of these smaller cryptos so so it's it's an evolving space I know Chris has done a lot of work out there the good news is that he's also encouraged and created a platform and a foundation for people to build upon and we're now seeing more people kind of get their arms around valuation and take different approaches to it and as as we get more and more data we can start to recognize really where valuation fits in I don't think there's any cut and dry way for doing it

right now and I'm encouraged by this by the work that's being done there but one thing I do think can be done with these icos that are coming out is there are ways to evaluate these icos just from the simple fact of is it something I should be investing in or avoiding and in the book we spend some time about valuating icos and I think this is very very important for the investors of today we know what's going on over the last year with icos I mean six to eight months ago you could have closed your eye closed your eyes and you would have doubled your money with an IC anybody anybody tells me that they you

know that they're an amazing trader because they made all this money on I cos you know get in line I mean you know there wasn't much to know that being said it is it is tougher now but there are some really good projects out there now how do you evaluate these projects we feel we feel in the in the book there are some ways to evaluate them you evaluate them on things like the user community because if an asset is gonna grow you've got to have a strong user community and there are numerous sources out there one of the one of the websites that I love is crypto compare.com crypto compare provides information such detailed information on on all of these

assets to the point of you can actually go out there and you can take a look at an asset of any any crypto and know how many how many social media posts they made today hmm right I was just just wanted to ask what are the metrics did you look at when you try to evaluate how big is the adoption and the network well you know there there's there's there's that type of data how many how many people have how many people are now using that the tool how many how many people are using the product we even we even think and remember remember these applications are open source and and they should be open source if you're investing in something within this space having it open source and decentralized

is should be a base to the criteria for how you're investing in this as well as who's the team that's involved with this and I'm not just talking about the development team who the advisors that are on board and if you look at the space you can know if so-and-so is involved with the product with a project probably a good project you can also take a look at a project and say if so-and-so is involved with them I'd be skeptical I'd be skeptical how much time are they actually providing to this so I mean these are things that obviously people have to know but so there's those types of things there's also you can actually find with crypto compare you can actually go in and take a look at

the the developer activity this is a very important aspect of in Valley evaluating an ICO you put the ICO out there okay it's really the only way that you reward the developers okay the developers get a piece of the ICO that's another thing you want to take a look at distribution how much distribution is going to the developers to the advisors to the public there are those types of things we discussed that in the book but in terms of developers a project only works if you have a robust active developer community so if you put an ICO out there the developers get their coins and within six months you're starting to see

less activity from the developers there's a good chance that maybe those developers are jumping ship and they cashed out and they took their money and that project could become a very stagnant and ultimately a dead project but if there's a distribution model that says we're gonna pay our developers we're gonna give our developers coins now coins in six months coins in twelve months and and it's spread out to keep the developers working and you can actually on crypto compare you can actually go in and take a look at the lines of code how many lines of code are they doing how much work is being done by the developers it's all out there so to have a rich robust developer group working on a project is very very important and there

are projects when you look at this data you can really identify some projects out there that are active that are making an impact just from looking at a lot of this data and also you know tracking things are how active are they aren't social a social media who's following them on social media there are a lot of ways to evaluate these assets so it's it's not something to say oh somewhat you know somebody around the corner said I should buy a OS and I don't know anything about it so I'm gonna buy into it there is information out there for you to evaluate this and get into this and and this is not just new ICS but existing existing assets out

there as well because there are some on valued assets out there and if you look at their data that's that's that the underlying date a lot of it we we talked about in the book if you evaluate them you can really find some diamonds in the rough I believe with with you're invited to ask a little bit more about your own investment fund so um you said before you said since 2013 you've been writing about Bitcoin and advocating investments in crypto assets and in your own investment funds how do you approach your investments there I mean how do you obviously use all the tools that you described in the book but are there may be other things that you look at as well right well we do a very very thorough due diligence evaluation of assets and

we have my team is small but we have Fortune 1000 CEO who has was been with a company for 30 years and he can look at a financial report not just from a from an existing business from an ICO and and really find the what's right and what's wrong and that is a key part for what we try and do here we when we look at investments we don't really differentiate them by saying this is a crypto investment versus an investment we would have made on an equity standpoint we try and go in and evaluate them similarly now they may work differently they may work differently but there are still things that you you want to evaluate look at that aren't

different between you know the way we used to make investments years ago in in equity investments but your investing it's a venture fund right right right right so we do so in in in in all honesty we do a lot of early stage investors so we have worked with we've worked with everything from two kids in their college dorm to companies that have come to us and said we're gonna do an IC o---- and we say don't tell us about your IC o---- tell us about your business and they tell us about their business and many of these companies recently we've said let's step back from the IC o---- and let's fund you to get your product created and then

we'll take a look at the ICO because there's a lot of issues with icos this security versus utility there's also aspects of we're down the road are you going to get the most value are you gonna get the most value out of the equity portion of an investment or are you gonna get it from the token value of the investment and this is something that this is something that's probably that is much different from our old thinking but it's been evolving over time for us to take a look at because we want to take a look at long term growth while also being able to fund a business I mean I think what we've seen is we've seen too many people come in advise companies and say do an i co will take

our money and we'll go and and to us if a company is is a good company is an investment you want to be in it for the long term so for us going in and doing an IC o---- it could be the right thing to do but if it's if it's just if it's just a money grab and something where let's make our most money here and and if that's where most of the money can be made versus down the road we'll potentially step back from that we would rather see a business provide value over time and it's not an easy thing to do in this space but it's something that we feel like we found businesses that are

those diamonds in the rough and and the other thing we'll do to Manuel is is we'll actually invest in existing Kryptos where we feel there's value so so we do everything from early stage investing and when I say we do early stage investing we get involved as advisors we get involved with with the businesses from you know everything from setting up their HR to setting up their financial records to their marketing and all those things we really try and get involved there but then we also we also in our fund we believe that there are certain crypto assets out there that may be undervalued so we do our own analysis there and we've identified some kryptos that we feel you know may be a little

bit out of favor here they still have Aled business case long-term case but the market doesn't recognize it so there are opportunities in there where we will go in and buy Kryptos but we don't we're not a crypto trading fund we don't get in and out we we like to find the value over the long term and and that's what we invest in and we do we do try and seek back to the discussion earlier we do try and seek those companies that are trying to build value in the protocol mm-hmm versus just just strictly an application out there for their own benefit I I think that long term in this space that's where we're seeing a lot of venture people starting to look at this because long term that's where you're gonna get the most value it's not those

people who go out there and they say we do i SEOs come and work with us we'll do an IC o---- you know they're looking for them to make their money quick move on and do another one and is that really what a business wants to do we'd rather work with entrepreneurs and and people who are looking to really with a vision to create it for the long term rather than just a quick hit on the IC o---- front so good point take a look at things absolutely it's definitely more sustainable Jack you said before that you have been in in the investment profession for thirty years how did you or what what moved you originally to to to to get into that line of work well I'm from I'm from New York I have a degree in economics and always always

interested in in finance and actually spent some time with some of the big banks and then actually spend some time actually spend some time in the technology sector during the dot-com era and then I became a financial advisor really during the whole calm era because of my knowledge with with tech companies and things like that but I I worked with clients you know the writer sitting across the dining room table from individual clients understanding what their goals and objectives were and what they were looking to accomplish and what investments fit right for them and then I worked for a number of years in a more c-suite manner with financial service companies and also doing research for

these companies and in fact it was out of one of the research project that we were doing where we were kind of tasked with trying to find what's out there two or three years down the road and we came across Bitcoin back in 2012-2013 I had some associates on my team take a look at this and out of that grew a book which I contend is if if not it's the firt if not the first book on Bitcoin one of the first books on Bitcoin which was something called what's the deal with Bitcoin and it's actually still out there we actually we actually provided to people as a PDF for free if you go to the Bitcoin Escom you can download it

for free but it was one of the first books out there but additionally I had written books on finance and retirement and it was through my writing in that area where I started to take a look after writing the Bitcoin book could Bitcoin be an investment mm-hmm and that was on that grew out a series of articles that I wrote from MarketWatch and ultimately grew into the book positioning and looking at Bitcoin as an investment through the financial through the you know the lens of Finance and portfolio analysis and all those things that are in the book so but I have been involved in in the industry for a while I'm still with a lot of organizations in the financial sector I speak to a lot of financial groups I I do everything from

debates pro-am I'm usually the pro versus a con from somebody who's a skeptic on Bitcoin and we have those discussions but I do think I do I come at this from a very respectful point to the investor and to the advisor and I think that the financial firms and financial advisors provide a lot of value and expertise to their clients and it I it's upsetting to me that they're not allowed to discuss this with their clients and I think they do a disservice to the client who is who is looking at high returns that can be transformative in their portfolio maybe get them closer to their retirement needs but they don't

have the ability to tap into the expertise of the financial advisor to discuss this with them and I think that's a real disservice and it's something that I speak on regularly and and and I you know I'm hoping that the financial industry embraces this more than they then they have but a big part of this is education and as I mentioned the need for more data and more analysis to be done mmm yeah absolutely understand and I think it's a good point I wonder how how important for you today in your work is the ideology of decentralization well I think the sexualization is very important from

from the perspective of the future because let's let's think back and I'll I'll draw this back to the finance community and then we can see political terms of it and and and all of these other things when you have centralization you you are inherently tied to things like political matters things of power governmental types of things because centralized means that you have somebody in power and somebody who has to protect their authority and their position of power and and because

of that we have really seen financial systems that haven't been that that have not been beneficial to the regular person and have only benefited those in power I mean 2008 we don't to look much beyond 2008 to recognize what's wrong with centralization what's wrong with the status quo financial system that controls things and says this is the way things get done and and and ultimately bring in political means to create regulations that protect the status quo and I think that's detrimental to a global society and a society where where we want to basically provide more

equality out there to people and more of an ability for people to succeed on their own when you look at countries when you look at at places like Africa and and the countries in Africa who and in Latin America where they don't have access to funds or banking because they don't have enough money they're unbanked and and and their way of life is ruined because of that and you have something with that's decentralized and something that can benefit them you've got to wonder why don't they have access to this so you know I don't want this to get into a philosophical type of thing but I think if you have something that's decentralized that that benefits more of humanity than our centralized systems I

think that's a good thing now that being said there are some benefits that we can see with regulation and and as long as it's regulation that's focused on the good of the most rather than the benefit of the few and so but I think this is the type of thinking I'm encouraged that this is the type of thinking of the young people and the young generation who have grown up with seeing things differently they now see the benefits of decentralization they now see the benefits of globalization they see the ability for them in their hometown to benefit somebody in a far-off land that they may never see may never know but

they can benefit them versus the the the view that we can only help people in our own silo in our own country so I'm encouraged by what they're doing and I think the centralization is a way for them to expand their thinking and and also expand the ability for us to help more people throughout the world than we've done in the past and and and it's also a way to transcend some political views which i think is very important given what's going on in the world these days yeah it's a good point I mean I usually like these discussions a lot I like to get philosophical on these topics because I think that's exactly what's missing it's very technical often what people say it's very news driven

and and I like to also see that there's more to it right that people do something out of a conviction and they do it because they think it makes the world a better place what's what what do you think is next for crypto assets in the coming months or maybe even years well I do believe we will see more investment products come along to people as I mentioned before everything from ETFs to these multi crypto investment funds and and and those types of opportunities but but what I what I think is what I I think we're we're it's gonna be very interesting for for me I mean one of the places that I like looking at and I you know I think all of these things I've

talked about investments and investment products those will come along and and those will be I think the natural progression but let's really think about and I know the work you've done with blockchain and your your documentary you really kind of explored the larger picture what blockchain can do and this is where it gets interesting to me and it'll probably be things that I won't see that'll be past my time but I think we could potentially live in a world where governments start to compete against each other for government services I mean can you imagine a world that's using the blockchain for a person in the United States to say you know I've grown tired of getting my health insurance from my health insurance

provider when there's a guy out in Sweden who does it better more efficiently and I can get health insurance from that entity out and sweet more the person that says that says look I my the insurance provider that I have in the US is inferior to the this insurance company in Iceland so I want to use their services it could be everything from governmental services such as land transfers titles and things like that could could government's become more efficient more streamlined in the way they do things in the way they provide services and government services that

they could transcend boundaries and have people from other countries use them for use their systems for their purposes so that in the u.s. we're tied to public services coming from the US how do we know if how do we know if they're the best organization you can take a look at a lot of the a lot of the organizations and public service providers in the US and know that they are not efficient they're our waste of money why can't someone else do it better what happens if someone else is doing it better in Switzerland why can't I use them why can't I use them and I think I mean it's it's this is a this is a discussion

that's wrought with you know a lot of details and a lot of points cross-border political all those types of things but could the blockchain flatten the world to that point where we now see governments competing with each other to provide services to their to their people I mean I'm I one of the areas I love watching is what's going on with Estonia Estonia has created this a residency program where you can become an e resident of Estonia and you can actually get government services from Estonia now you you know it's not gonna be easy to have somebody come pick up your garbage if you live in if you live in New York but there are some other

services that could be done and if it's nothing but record-keeping and hang someone for the service well why does it have to be within the country why couldn't someone else do it someone else is more efficient at handling health expenses and they just are able to send to the health provider their payment and they do better than a then it then a provider with Medicare or Medicaid in the u.s. why can't people do that and I think that's that to me is very exciting what's going on with the blockchain and and and this whole ability for public services now that's totally beyond what I think a lot of people uh viewing kryptos blockchain and Bitcoin for but I

still think it can be an outgrowth of this innovation that blockchain has brought to us mm-hmm absolutely I think we already see companies you know offer insurance on on the blockchain we see companies offer identity services so I think it's not that far-fetched to say well why do we even need all these government services and then why do we maybe even need a government yeah I mean we'll always will always need a government but I mean in the u.s. everyone you know everyone talks about how bad the government is in less government less government ok well let's have less government you know there's gonna be a point where they're

gonna say oh no no that's not what we meant you know well why not why not I mean if government is about just keeping us safe and protected and putting the bad guys in jail and if everything else can be done by someone else okay you know what wouldn't be for that yeah who wouldn't be that yes so so that's something when you know when you say down the road that's the thinking that that I'd be encouraged to see more movement on and like I say it would probably be something I may never see but it's it just shows the reach of the blockchain technology yeah cool in the shorter term when do you think banks will exchange bitcoins for US dollars if I had to predict which it sounds like

you want me to do I think you probably see that within the next three years hmm and and I think it'll be I think it three to five years and it's not sooner I and I think you know I think it'll grow out of it'll grow out of a coin base now let's let's not you lose sight of the fact and I think about this from the US okay so I mean this may bit provincial on my part so it may be different out in in Switzerland where you are where obviously there's a little more progressive thinking but I look at her in the US and I say okay there are there are a number of financial firms and the stock exchange who have invested in coin base and when you see a

conference like consensus which is going on over the over these few days here in New York and you're seeing all the suits and all the people from the financial services you know they're looking at this so I I think there will be some point time where some bank will be will step up and say we want to offer this servus because remember banks are competing against each other and they're going to provide the service but what will have to happen is they'll have to provide it through a service like coinbase which does all the KYC the AML and all those regulations to ensure that people don't just have a public address but they have a public address

associated with their name and and if you do that then I think you will start to see banks embrace it more and potentially even set up custodial situations where you could have banks holding Bitcoin for people in their accounts over the next in the next three to five years I you know I fingers trust well yes yes and no yes and no there there are some people who say that that would be good there are other people that say that would be bad because once again you're now putting the banks back in control of this and you are putting a centralized entity there so it may happen it may not happen but it if it does happen it won't happen with a lot

of controversy because of those two sites I think that's a very good point that you're making there Jack thanks a lot for taking time today man well thank you so much and thank you for your documentary and all the work you've done I really appreciate it I'm glad that you and I had an opportunity to speak thank you so much thanks so much for joining us today more info on our guests and our sponsors is in the show notes of this episode and on the podcast website the blockchain and us comm to help people find this podcast it's important that you download subscribe and give it a top rating and review on iTunes or on the podcast platform of your choice I'm Manuel staggers and I thank you very much for listening

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