WEBVTT - Inside The Booming World of Initial Coin Offerings 0:00:00.160 --> 0:00:02.320 But knowledge to work and grow your business with c 0:00:02.520 --> 0:00:06.680 i T. From transportation to healthcare to manufacturing. C i 0:00:06.760 --> 0:00:10.559 T offers commercial lending, leasing, and treasury management services for 0:00:10.600 --> 0:00:13.520 small and middle market businesses. Learn more at c i 0:00:13.560 --> 0:00:26.400 T dot com put Knowledge to Work. Hello, and welcome 0:00:26.480 --> 0:00:30.760 to another episode of the Odd Lots podcast. I'm Joe 0:00:30.800 --> 0:00:33.840 wisen Pal and I'm sad to say that this week 0:00:34.640 --> 0:00:38.839 my co host Tracy Alloway is uh out. She's currently traveling, 0:00:38.880 --> 0:00:41.959 so it's just going to be me this week. So 0:00:42.080 --> 0:00:44.640 this is where normally she would interject something and then 0:00:44.680 --> 0:00:47.159 we'd have like some banter, but I'm not really good 0:00:47.200 --> 0:00:49.760 at solo banter, so I'm not even gonna try to 0:00:50.400 --> 0:00:53.760 say anything funny or coy. I'm just gonna jump right 0:00:53.800 --> 0:00:57.760 to the topic. Unless you've been living under a rock, 0:00:57.960 --> 0:01:02.800 you've probably heard about the incredible frenzy that we've seen 0:01:03.040 --> 0:01:07.240 of late in a crypto assets, cryptocurrencies, whether we were 0:01:07.280 --> 0:01:11.200 talking about Bitcoin or Ethereum or I c O S 0:01:11.319 --> 0:01:15.679 or all these things just NonStop incredible moves these days. 0:01:15.760 --> 0:01:18.119 So it really is sort of, uh, you know, it's 0:01:18.200 --> 0:01:22.480 time that we talked about them here, and so today 0:01:22.600 --> 0:01:26.280 on the podcast, we have a guest who's very well 0:01:26.319 --> 0:01:29.320 positioned to talk about just what the heck is going 0:01:29.400 --> 0:01:32.839 on in this area. His name is Chris Bernisky. He's 0:01:32.880 --> 0:01:36.640 the blockchain products lead at art invest which is a 0:01:36.640 --> 0:01:39.520 asset management company that has E t f s and 0:01:39.560 --> 0:01:42.840 they actually are one of the few firms that actually 0:01:42.880 --> 0:01:47.400 has exposure to bitcoin. So he is going to help us, 0:01:47.560 --> 0:01:50.720 uh sort out just what's going on right now? What 0:01:50.880 --> 0:01:53.000 is it where we are? Is this a bubble? What's 0:01:53.000 --> 0:01:56.200 going on? Why are people so excited about this area? Chris, 0:01:56.400 --> 0:01:58.480 thank you very much for joining us, Thanks for having 0:01:58.520 --> 0:02:01.520 me so. First of all, before we get into this, 0:02:01.640 --> 0:02:05.280 what is our convest Our Convest is an investment manager. 0:02:05.880 --> 0:02:09.800 We were started in January, actually, the same month that 0:02:09.919 --> 0:02:14.560 Ethereum was announced by Vitalic. Right now we're approaching about 0:02:14.560 --> 0:02:17.720 a billion in assets. But the key to ARC is 0:02:17.760 --> 0:02:21.680 taking the open source software development paradigm and applying it 0:02:21.720 --> 0:02:25.320 to Wall Street investment management and research. So whereas most 0:02:25.639 --> 0:02:29.040 investment managers keep their trades and their research close to 0:02:29.080 --> 0:02:32.000 their chest, we actually share all of that um because 0:02:32.000 --> 0:02:35.240 it allows our THESS to evolve more quickly and it 0:02:35.440 --> 0:02:38.880 abus trust within us. Tell us about your products, you 0:02:38.919 --> 0:02:42.400 have e t F. We primarily have e ts UM 0:02:42.440 --> 0:02:45.480 and they focus solely on disruptive innovation, and as a 0:02:45.520 --> 0:02:50.160 thematic investment manager, they focus on different themes. So, for example, 0:02:50.200 --> 0:02:54.920 we have our Next Generation Internet ETF, which has themes 0:02:55.000 --> 0:03:00.280 like machine learning, cloud computing, Internet of things, and cryptoasts 0:03:00.320 --> 0:03:02.960 and so for example, in that e t F, bitcoin 0:03:03.040 --> 0:03:05.680 is actually a number one position. Uh. And then we've 0:03:05.680 --> 0:03:08.880 got other e t F like genomics or industrial innovation, 0:03:09.280 --> 0:03:12.200 so on and so forth. We do have a fintech 0:03:12.280 --> 0:03:15.680 mutual fund in Japan, and we do some separately managed accounts. 0:03:15.720 --> 0:03:20.160 So we're a broad purpose investment manager. Now what's your background? 0:03:20.560 --> 0:03:22.720 You're talking? Sorry I keep forgetting the name of your title, 0:03:22.720 --> 0:03:24.760 but that's probably because it's unusual, you know, it's not 0:03:24.880 --> 0:03:27.640 most people blockchain projects lead. You can think of me 0:03:27.680 --> 0:03:30.880 as the only by side analysts to focus on crypto 0:03:30.880 --> 0:03:34.680 assets with a flavor of business development in there. So 0:03:34.800 --> 0:03:38.960 how did you become the blockchain products lead? Where? What's 0:03:39.000 --> 0:03:42.000 your background? How did you become the person who would 0:03:42.200 --> 0:03:46.280 analyze these analyze these assets? Well, as with much of life, 0:03:46.520 --> 0:03:50.960 is a chance. Uh. But uh? In college in two 0:03:50.960 --> 0:03:54.760 thousand eleven, two thousand twelve, Uh, Bitcoin across the radar. 0:03:54.800 --> 0:03:57.280 I was a student at Stanford at the time, pretty 0:03:57.280 --> 0:04:02.560 tech focused environment and are exploring, uh, this brave new world, 0:04:03.000 --> 0:04:06.080 and that took me down a bit of a rabbit hole. 0:04:06.760 --> 0:04:11.200 I remember looking with friends at mining equipment on Craigslist 0:04:11.440 --> 0:04:15.240 and these racks of servers, and we briefly flirted with 0:04:15.240 --> 0:04:18.719 the idea of having a mining operation. But you know, 0:04:18.839 --> 0:04:22.880 at the time, I didn't dig deeply enough to dissociate 0:04:23.279 --> 0:04:25.960 bitcoin from what was the major application at the time, 0:04:26.000 --> 0:04:30.279 which was the Silk Road, and so I interpreted much 0:04:30.279 --> 0:04:34.599 of what was going on as um illegal and UH 0:04:34.800 --> 0:04:39.240 didn't necessarily have the courage at the time to leap in. 0:04:39.839 --> 0:04:43.360 UH forgot about bitcoin for a few years. Joined ARC, 0:04:45.200 --> 0:04:48.760 and at that time, our director of research had invested 0:04:48.800 --> 0:04:51.520 in bitcoin early on. It was something that we knew 0:04:51.600 --> 0:04:54.080 was going to be important, and so picked up the 0:04:54.080 --> 0:04:57.159 ball and ran with it, and UH that eventually led 0:04:57.160 --> 0:05:00.040 me here. You characterize yourself as a by side in 0:05:00.080 --> 0:05:02.800 the list, and that raises an interesting question, which is 0:05:02.839 --> 0:05:05.360 that when you hear people talk about any of these 0:05:05.600 --> 0:05:08.760 crypto assets like yeah, but you know, how how do 0:05:08.800 --> 0:05:11.599 you value them? What is the fundamental value you know, 0:05:11.640 --> 0:05:15.520 it's with most things we have, uh, you know, with stocks, obviously, 0:05:15.800 --> 0:05:18.040 people have developed all kinds of models for valuing of 0:05:18.080 --> 0:05:21.440 stock based on earnings and cash flow and growth. And 0:05:21.480 --> 0:05:25.520 with commodities the cost of mining versus the demand, and 0:05:25.800 --> 0:05:28.920 with currencies, things like purchasing power parity, and so all 0:05:28.920 --> 0:05:32.960 these established models that exist for the you know, the 0:05:33.040 --> 0:05:36.480 asset classes that we've been familiar with for a long time, 0:05:37.080 --> 0:05:40.640 and then people look at something like ethereum or bitcoin 0:05:40.800 --> 0:05:43.280 or you know, now they're you know, they're hundreds of 0:05:43.320 --> 0:05:46.240 these coins out there, and they don't have any idea 0:05:46.400 --> 0:05:48.080 how to even go about saying, oh, this is a 0:05:48.080 --> 0:05:50.720 fair price, so this is undervalued or this is overvalued. 0:05:50.800 --> 0:05:53.200 So how do you think about that question? It's it's 0:05:53.200 --> 0:05:55.560 a great question. And if we think of this as 0:05:55.600 --> 0:05:58.080 a new asset class, it follows that we will have 0:05:58.160 --> 0:06:01.120 new valuation techniques. And it's big part of actually what 0:06:01.200 --> 0:06:03.920 I spend my time focusing on. I think of it 0:06:04.320 --> 0:06:10.080 as a combination of current utility value plus discounted expected 0:06:10.160 --> 0:06:13.360 utility value UM. And to give you an example of 0:06:13.480 --> 0:06:16.640 what I mean by that, we can take bitcoin UM. 0:06:16.640 --> 0:06:21.920 A lot of people talk about people using bitcoin for remittances, 0:06:21.960 --> 0:06:25.039 and I know of a number of companies using bitcoin 0:06:25.120 --> 0:06:29.160 Fermances whose volumes are growing ten month over month, which 0:06:29.240 --> 0:06:32.680 is hyper growth. If we take the remittances market, it's 0:06:32.720 --> 0:06:36.640 a roughly five hundred billion dollar market, and assume at 0:06:36.680 --> 0:06:40.320 some future date bitcoin will take ten percent of that market. 0:06:40.839 --> 0:06:42.839 Certainly at that point the market will be a little bigger, 0:06:42.880 --> 0:06:44.960 but we'll run with this for now. So ten percent 0:06:45.320 --> 0:06:48.640 of a five billion dollar market means bitcoin would have 0:06:48.720 --> 0:06:52.320 to store fifty billion in value in that year. Now 0:06:52.640 --> 0:06:55.120 you have to also slap a velocity on it, velocity 0:06:55.120 --> 0:06:57.640 of money for how often that asset's going to turn over, 0:06:58.120 --> 0:07:01.520 So velocity of the US dollars five. So we did 0:07:02.360 --> 0:07:05.960 what what is the five? What's being measured for the velocity? 0:07:06.040 --> 0:07:09.120 It is the number of times that currency is turning 0:07:09.160 --> 0:07:13.400 over per year to facilitate the transaction cockits and services. 0:07:13.440 --> 0:07:15.760 So if we say bitcoin's going to be roughly five 0:07:15.800 --> 0:07:19.760 as well, we take that fifty billion in value transfer 0:07:19.840 --> 0:07:23.680 that bitcoin will facilitate divided by five to get ten 0:07:23.760 --> 0:07:27.880 billion in stored value that year that bitcoin will need 0:07:27.960 --> 0:07:30.920 to have in order to facilitate that use case. So, 0:07:31.560 --> 0:07:35.280 just to back up, if you wanted to do fifty 0:07:35.320 --> 0:07:38.800 billion worth of remittances based on the sort of some 0:07:38.920 --> 0:07:43.000 expectation of how many times a typical bitcoin would move 0:07:43.080 --> 0:07:46.080 in a year, you would need Bitcoin would need to 0:07:46.120 --> 0:07:49.280 be worth ten billions, would need to store facilitate that much, 0:07:49.920 --> 0:07:52.280 facilitate that much of a market, Yes, and only for 0:07:52.360 --> 0:07:55.400 the remittances use case. Right, Um, And then what we 0:07:55.440 --> 0:07:58.600 can do is we can start to stack different use cases. Right. 0:07:58.640 --> 0:08:01.760 We look at the globe a financial gold market roughly 0:08:01.800 --> 0:08:04.320 two and a half trillion. If bitcoin we're to take 0:08:04.640 --> 0:08:06.720 one percent of that, that means it would have to 0:08:06.720 --> 0:08:09.600 store twenty five billion in value for that use case. 0:08:10.000 --> 0:08:11.720 And so you can see how we can start to 0:08:11.840 --> 0:08:15.880 stack these different requirements for stored value. To get an 0:08:15.920 --> 0:08:19.880 idea of how what I call the network value of bitcoin, 0:08:19.960 --> 0:08:24.560 which is analogous to to market cap for stocks and uh. 0:08:24.680 --> 0:08:29.920 The reason I say current utility value versus discounted expected 0:08:30.000 --> 0:08:34.080 utility value is the market price of this asset is 0:08:34.120 --> 0:08:37.280 comprised of what people are currently using it for plus 0:08:37.320 --> 0:08:40.880 the expectations for its use. And so for any expectations 0:08:40.920 --> 0:08:43.320 of its use, we have to discount that back to 0:08:43.360 --> 0:08:47.280 the present. So so combining these two values. We can 0:08:47.320 --> 0:08:50.840 get the current market price of these assets interesting real quickly. 0:08:51.240 --> 0:08:53.839 You're publicly each traded e t F to do have 0:08:53.880 --> 0:08:56.680 exposure to bitcoin? How do you get that? We get 0:08:56.720 --> 0:09:00.360 it through Gray Scales Bitcoin Investment Trust UM, which is 0:09:00.559 --> 0:09:04.360 a trust that tracks to roughly one tenth the value 0:09:04.360 --> 0:09:07.719 of bitcoin. Now, with the way that the trust is 0:09:07.760 --> 0:09:11.040 set up UM, at least the publicly traded part, which 0:09:11.080 --> 0:09:14.439 is ticker GBTC trades o t c q X over 0:09:14.480 --> 0:09:19.520 the counter markets, it doesn't have a functionality to meet 0:09:19.559 --> 0:09:22.320 supply and demand, and so it tends to trade at 0:09:22.320 --> 0:09:25.120 a significant premium, which is something investors should be aware of. 0:09:25.559 --> 0:09:28.600 So that has grown to be UM a number one 0:09:28.640 --> 0:09:31.120 position in two of our A t F s are 0:09:31.760 --> 0:09:35.160 Internet e TF air kW and our overall Innovation e TF. 0:09:38.640 --> 0:09:40.800 But knowledge to work and grow your business with c 0:09:41.000 --> 0:09:45.160 I T from transportation to healthcare to manufacturing. C I 0:09:45.240 --> 0:09:49.000 T offers commercial lending, leasing, and treasury management services for 0:09:49.080 --> 0:09:52.000 small and middle market businesses. Learn more at c I 0:09:52.040 --> 0:09:59.440 T dot com Put Knowledge to work. All right, let's 0:09:59.679 --> 0:10:03.880 swim gears for a second, because you know, people are 0:10:04.080 --> 0:10:07.199 maybe heard of bitcoin for a while, and there's obviously 0:10:07.320 --> 0:10:09.319 been tons said about it, and it's the old man 0:10:09.360 --> 0:10:13.160 in the room. Yeah, exactly. The thing that everyone is 0:10:13.240 --> 0:10:16.240 talking about and curious about and asking questions about these 0:10:16.360 --> 0:10:18.440 days are these things called I c o s. And 0:10:18.480 --> 0:10:22.480 that's really what I want to talk about UM initial 0:10:22.520 --> 0:10:25.760 coin offerings. It sounds like I p o s, but 0:10:25.880 --> 0:10:29.679 it's one letter different, regrettably. What what are they? You 0:10:29.720 --> 0:10:34.880 can think of them as the combination of crowd funding, 0:10:35.160 --> 0:10:39.800 which we all learned about through Kickstarter UM plus blockchain technology. 0:10:40.400 --> 0:10:44.400 So Kickstarter coincidentally started the same year that bitcoin launched, 0:10:44.760 --> 0:10:48.160 two thousand nine, and that taught us about how we 0:10:48.200 --> 0:10:52.320 can use capital from the crowds to fund projects. And 0:10:52.360 --> 0:10:59.960 then blockchain technology basically allows the decentralized storing and transfer 0:11:00.200 --> 0:11:04.119 of value. And what we've been having at the intersection 0:11:04.160 --> 0:11:09.440 of these two is assets that are similar to bitcoin 0:11:09.679 --> 0:11:13.320 but perform different use cases. So atherorem is something that 0:11:13.360 --> 0:11:15.160 we will we will end up talking about, I'm sure. 0:11:15.400 --> 0:11:19.720 So that's a decentralized world computer UM, and it uses 0:11:19.720 --> 0:11:23.880 the blockchain in order to facilitate value transfer. In order 0:11:23.880 --> 0:11:26.360 to pay for that computer, and in order to get 0:11:26.360 --> 0:11:28.959 that project off the ground, there was a crowd sale, 0:11:29.800 --> 0:11:34.520 so because blockchains are really good at storing and transferring 0:11:34.520 --> 0:11:39.439 this value, people are natively using that functionality to bootstrap 0:11:39.480 --> 0:11:43.920 capital for their projects. So let's walk through how what 0:11:44.000 --> 0:11:46.600 kind of project it would be and how you would 0:11:46.640 --> 0:11:49.640 raise one would go about raising money through an I 0:11:49.760 --> 0:11:52.559 c O. Let's, you know, create a fictitious example or 0:11:52.600 --> 0:11:54.800 a real example. We can use a real example. Yeah, 0:11:54.840 --> 0:11:57.400 let's do that. A few weeks back, I participated in 0:11:57.400 --> 0:12:02.080 a crowd sale known as er gun. And what Aragon does. 0:12:03.000 --> 0:12:05.079 We'll walk through sort of my process right when I'm 0:12:05.679 --> 0:12:07.600 when I'm figuring out, Okay, am I going to participate 0:12:07.600 --> 0:12:10.600 in this? First thing I do is okay? What is 0:12:10.600 --> 0:12:14.440 the use case? Is this survival use case? What Aragon does? 0:12:15.080 --> 0:12:18.160 You're gonna have to hang with me here. I'm just 0:12:18.200 --> 0:12:22.679 gonna listen. Aragon U is a platform on top of Ethereum, 0:12:23.080 --> 0:12:28.520 uses Ethereum's decentralized world computer, and it basically provides um 0:12:28.559 --> 0:12:32.920 and out of the box system in order for corporations 0:12:33.000 --> 0:12:36.160 to run on top of the theorem. So provides cap 0:12:36.240 --> 0:12:42.720 table accounting, payroll management, things like that. And so what 0:12:42.840 --> 0:12:46.800 it's gonna be used for long term is facilitating decentralized 0:12:46.800 --> 0:12:54.520 autonomous organizations. So Ethereum is a basically is a crypto. 0:12:54.679 --> 0:12:59.360 It's a current cryptocurrency, but commodity crypto commodity that has 0:12:59.400 --> 0:13:03.040 all this You're called it a decentralized world computer upon 0:13:03.160 --> 0:13:07.200 which you can run new application, exact companies and stuff. 0:13:07.640 --> 0:13:11.880 And you participated in the initial coin offering of a 0:13:11.920 --> 0:13:16.240 company that runs on top of ethereum, whose business is 0:13:16.280 --> 0:13:20.520 going to be facilitating other companies to run on top 0:13:20.600 --> 0:13:24.560 of ethereum. Yes, the only thing I would change in 0:13:24.600 --> 0:13:27.800 what you said, You've got to exactly correct is replacing 0:13:28.000 --> 0:13:32.640 company with protocol. These aren't that they're not companies and 0:13:32.720 --> 0:13:37.280 that they're not generating cash flows necessarily, they're facilitating through 0:13:37.320 --> 0:13:41.400 software distributed software. And so Arragon is not a company, 0:13:41.520 --> 0:13:44.840 it's a protocols protocol. Does that mean that there's not 0:13:44.960 --> 0:13:48.280 like a corporate entity associated with it? Now, this is 0:13:48.360 --> 0:13:53.760 something of experimentation UM. Different projects are experimenting with having 0:13:53.840 --> 0:13:59.839 foundations or are different UM entities that won't necessarily classify 0:14:00.040 --> 0:14:03.720 as a cash generating company UM in order to support 0:14:03.800 --> 0:14:06.240 the development of the protocol. But there's not going to 0:14:06.360 --> 0:14:12.280 be you know, quarterly earnings calls on revenue and earnings 0:14:12.280 --> 0:14:14.840 and Eve done all these things. That was step one. 0:14:15.440 --> 0:14:18.599 So that's evaluating long term, do I think this is 0:14:18.600 --> 0:14:22.600 going to be a viable project. Then look into the team, 0:14:22.880 --> 0:14:27.240 great pair of developers behind this project, and then we 0:14:27.320 --> 0:14:30.840 get more into logistics. And in order to participate in 0:14:30.880 --> 0:14:34.000 a lot of these sales, you have to send either 0:14:34.080 --> 0:14:39.080 bitcoin or ether to an address. And uh, let's let's 0:14:39.120 --> 0:14:41.600 say we're using ether in this example. So what I'm 0:14:41.640 --> 0:14:43.880 doing there is I am sending Ether that I have, 0:14:44.400 --> 0:14:47.280 which stores value, right, and sending it to an address 0:14:47.680 --> 0:14:51.920 that lives on Ethereum's blockchain, and in depositing that Ether 0:14:52.440 --> 0:14:57.440 in that address, basically that address records. Okay, this other address, 0:14:57.520 --> 0:15:01.280 which represents Chris, is entitled to a certain number of 0:15:01.280 --> 0:15:05.240 these units of Aragon, which is the ticker an team, 0:15:05.680 --> 0:15:08.840 and so in that process they're able to accept in 0:15:09.000 --> 0:15:12.920 mass capital um from the outside world that is then 0:15:13.080 --> 0:15:19.120 programmatically exchanged into shares of their of their new protocol these. Okay, 0:15:19.120 --> 0:15:23.360 so now you have these coins from the Aragon. What 0:15:23.400 --> 0:15:24.840 are they? What do you do with them? What are 0:15:24.840 --> 0:15:28.320 they for? How do they create value for you? Um? Well, 0:15:28.480 --> 0:15:30.880 there there are those two aspects of value, right. The 0:15:30.960 --> 0:15:35.960 current utility value versus the discount and expected utility value. UM. 0:15:36.080 --> 0:15:40.280 The UH. The reason for Aragon. One of the main 0:15:40.280 --> 0:15:43.560 reasons for Aragon to have a native token is actually 0:15:44.120 --> 0:15:48.640 UH to facilitate a decentralized court. Um. So if you 0:15:48.720 --> 0:15:53.760 have these organizations right running on top of Aragon, let's 0:15:53.760 --> 0:15:58.280 say there's disputes, um, Since they're decentralized organizations, they won't 0:15:58.320 --> 0:16:01.600 necessarily go to the courts we think of them. UM, 0:16:01.640 --> 0:16:04.560 they will actually go to the masses and let the 0:16:04.640 --> 0:16:08.600 masses decide upon what is the truth or not the truth, 0:16:08.640 --> 0:16:12.000 what is right or wrong, and pay out using the 0:16:12.120 --> 0:16:17.240 native Arragon token to the people that perform that service. 0:16:18.040 --> 0:16:20.360 So we've gotten very abstract. Yeah, no, I know, but 0:16:20.440 --> 0:16:23.960 that's right because you know, I think where it's seventeen 0:16:24.120 --> 0:16:26.920 and everyone's got an open mind and people realize. So 0:16:26.920 --> 0:16:28.800 it's okay, we can keep going down this. But it 0:16:28.880 --> 0:16:34.760 is pretty abstract. It is abstract. Now, these courts are 0:16:34.800 --> 0:16:38.680 they like and you say that people are going to decide? 0:16:39.320 --> 0:16:41.360 Are there going to be literal votes? Is there people 0:16:41.360 --> 0:16:44.320 on a jury and who will participate? And is it 0:16:44.400 --> 0:16:48.760 like something like the algorithm decided? So decentralized votes, right, 0:16:49.320 --> 0:16:53.080 UM a broad set of actors that anyone can can 0:16:53.120 --> 0:16:56.840 participate in. If you have the token, yes, if you're 0:16:56.880 --> 0:16:59.280 involved within the network, you will get paid out in 0:16:59.320 --> 0:17:05.960 the token UM for for voting correctly UM. And so 0:17:06.480 --> 0:17:10.520 what happens over time is as more organizations build on 0:17:10.600 --> 0:17:14.439 top of Arragon, there will be more demand for that 0:17:14.520 --> 0:17:19.080 token for these conflict resolution use cases. But there's also 0:17:19.320 --> 0:17:22.800 because this is open source software, it can evolve over time, 0:17:22.840 --> 0:17:24.800 there can be further use cases that are built in 0:17:24.840 --> 0:17:28.720 that require that and you need So let's say I'm 0:17:28.760 --> 0:17:32.320 a business and so you know, let's they go to 0:17:32.359 --> 0:17:34.760 the very end consumer some business and like, oh, this 0:17:34.840 --> 0:17:38.240 seems could write there. You said, the Arragon is positioning 0:17:38.240 --> 0:17:41.000 itself as a service to businesses. Right, what's a kind 0:17:41.080 --> 0:17:44.760 of business that might benefit from this UM. Well, this 0:17:44.840 --> 0:17:48.719 idea of a decentralized autonomous organization, it's not like a 0:17:48.720 --> 0:17:50.840 typical entity as we get it now. It would be 0:17:50.920 --> 0:17:55.679 a sort of new kind of well organization's UM it 0:17:55.840 --> 0:17:59.920 is taking your typical organization. Let's take an insurance company, right, 0:18:00.200 --> 0:18:03.800 So an insurance company is really a number of policies 0:18:03.800 --> 0:18:07.880 and procedures, right, a number of If this, then that statements. 0:18:07.920 --> 0:18:13.199 That's what claims management is. And what's happening is we 0:18:13.280 --> 0:18:18.600 are having um, these processes be written in software, so 0:18:18.800 --> 0:18:23.359 you can actually have a waterfall of decisions, right UM. 0:18:23.400 --> 0:18:27.240 If let's say, if Christ misses his flight, UM pay 0:18:27.320 --> 0:18:29.320 him thirty dollars. If he doesn't miss his flight, he 0:18:29.320 --> 0:18:32.360 doesn't get paid anything. But it can become more complex 0:18:32.359 --> 0:18:37.000 than that, more conditional. And so these organizations, these processes 0:18:37.000 --> 0:18:39.520 are being written in code. And the reason it's called 0:18:39.560 --> 0:18:45.399 the decentralized autonomous organization is just as we have autonomous vehicles, 0:18:45.440 --> 0:18:49.520 these organizations are expected to in part run themselves, and 0:18:49.600 --> 0:18:52.720 so in running themselves, they need to be on top 0:18:52.760 --> 0:18:57.200 of a platform that helps facilitate that and interfaces beneath 0:18:57.280 --> 0:19:00.880 that with ethereum, which is, you know, dividing the compute 0:19:00.880 --> 0:19:05.080 power to process all of these these decisions. Here's a 0:19:05.160 --> 0:19:08.760 question I have that als sounds pretty cool right now. 0:19:08.880 --> 0:19:12.720 There's clearly a lot of uh, I think when I 0:19:12.720 --> 0:19:16.720 look at it, a lot of speculative fast money coming 0:19:16.720 --> 0:19:19.240 into the space, people who are looking for to make 0:19:19.320 --> 0:19:22.800 a get rich fast which is not necessarily an indictment 0:19:22.840 --> 0:19:25.600 because they've always that's always part of any industry, So 0:19:25.640 --> 0:19:28.120 it doesn't necessarily mean bubble. I don't know, but there's 0:19:28.160 --> 0:19:30.680 clearly just a lot of people looking for flips, looking 0:19:30.720 --> 0:19:36.000 for trades. Two questions A is anyone actually using these 0:19:36.000 --> 0:19:38.439 tokens yet in a or and do any of these 0:19:38.840 --> 0:19:42.920 antionies actually exist where there's a real ecosystem for these 0:19:42.960 --> 0:19:45.879 tokens or is it still all in basically in the 0:19:45.920 --> 0:19:49.440 trading realm. Actually that's my first question. You know, are 0:19:49.480 --> 0:19:52.160 there any saying, oh, this is really here's an organization, 0:19:52.240 --> 0:19:55.199 or here's a protocol and people are really using it. UM. 0:19:55.240 --> 0:19:58.840 A lot of these teams have what are called test nets, 0:19:59.320 --> 0:20:02.000 where they have what you could think of as a 0:20:02.040 --> 0:20:06.439 minimum viable protocol UM that's in development, just as for 0:20:06.480 --> 0:20:09.560 example with the Genomics company right something that's gone public, 0:20:09.960 --> 0:20:13.200 they're running it through the process getting it to the 0:20:13.320 --> 0:20:19.960 end market, the end consumer. And for Ethereum and the 0:20:20.000 --> 0:20:23.000 apps decentralized apps that are being built on top of 0:20:23.000 --> 0:20:25.879 it or protocols, a lot of those do not have 0:20:26.000 --> 0:20:29.000 mainstream use as of yet. As you said, UM, there's 0:20:29.040 --> 0:20:33.720 a lot of discounted expected utility value or speculative value 0:20:33.760 --> 0:20:37.239 to these assets. But what's key right now for me 0:20:37.280 --> 0:20:39.800 when I look at something like ethereum, the users are 0:20:39.840 --> 0:20:44.160 the developers. It's it's not a mainstream application. My mom 0:20:44.280 --> 0:20:46.200 or grandma is not going to be using it. It's 0:20:46.200 --> 0:20:49.280 the developers and the developers, because this space is so young, 0:20:49.880 --> 0:20:51.919 um are the ones that are building it out. You 0:20:52.000 --> 0:20:53.679 have a lot of people starting to talk about this 0:20:53.720 --> 0:20:56.320 as Internet three point oh um. It took a while. 0:20:57.200 --> 0:21:00.800 I mean, the Internet had its origins in nineteen packet switching, 0:21:01.119 --> 0:21:03.200 so it takes a while to build these things out. 0:21:03.800 --> 0:21:07.679 Right now, we have mostly developers using ethereum. We've got 0:21:07.720 --> 0:21:09.560 a lot of mainstream use cases for a bitcoin, I 0:21:09.600 --> 0:21:13.480 would say increasingly so um, and over time there will 0:21:13.520 --> 0:21:15.720 be more mainstream users, but right now they are definitely 0:21:15.760 --> 0:21:19.600 mainstream speculators. There mains. I think that's a very well 0:21:19.600 --> 0:21:23.320 pushed So there are mainstream speculators sort of everyday people, 0:21:23.480 --> 0:21:26.400 or you know, even not many everyday people, but certainly 0:21:26.480 --> 0:21:30.600 people saving enough to like figure out how the geeks speculating, 0:21:31.680 --> 0:21:36.480 but nothing really you know, basically all of these projects 0:21:36.600 --> 0:21:39.480 are still in the infancy in terms of actual uses. 0:21:39.880 --> 0:21:43.000 Everything is largely in its infancy. I mean, if we 0:21:43.040 --> 0:21:46.240 go back in time, so Toshi Nakamoto released the Bitcoin 0:21:46.280 --> 0:21:49.760 White Paper in late two eight, So the whole movement 0:21:49.840 --> 0:21:53.480 is not even a decade old. And and and you 0:21:53.600 --> 0:21:57.480 raise a good point where speculation lays the foundation for innovation. 0:21:57.640 --> 0:22:00.159 When we look at you know, the railroad boom, or 0:22:00.200 --> 0:22:02.640 when we look at, um the tech and telecom boom, 0:22:02.880 --> 0:22:05.640 we had a fiberglut. People build things out way too much. 0:22:05.680 --> 0:22:09.960 They got ahead of themselves. And that's okay, um, it's 0:22:10.080 --> 0:22:13.960 it's a predictable pattern we've seen over time. Another question 0:22:14.000 --> 0:22:17.280 I have is could you get into a situation in 0:22:17.280 --> 0:22:22.960 which the speculators discourage actual usage. In other words, it's 0:22:22.960 --> 0:22:26.240 so it's perceived as being expensive. Let's say, you know, 0:22:26.440 --> 0:22:29.040 I'm trying to let's say, do something more. I know 0:22:29.080 --> 0:22:31.679 that there's some of these, uh like these ones that 0:22:31.720 --> 0:22:35.360 are trying to build prediction markets based on top of ethereum, 0:22:35.359 --> 0:22:37.439 which is something I've been looking into things well, you know, 0:22:37.600 --> 0:22:39.679 trying to do my research. But I'm interested. I've always 0:22:39.680 --> 0:22:42.399 been interested in prediction markets and I think, you know, 0:22:42.400 --> 0:22:44.600 it's interesting idea and I missed, you know, I wish 0:22:44.800 --> 0:22:47.080 in trade were still around on some of these sides. 0:22:47.440 --> 0:22:50.119 But on the other hand, like do I really want 0:22:50.160 --> 0:22:53.040 to be Let's say I wanted to get involved in that. 0:22:53.320 --> 0:22:56.280 Do I really want to pay up to get involved 0:22:56.359 --> 0:22:59.520 in this prediction market or put my tokens at risk 0:23:00.119 --> 0:23:02.600 if the tokens keep soaring in price, and I'd be 0:23:02.600 --> 0:23:07.040 better off just holding them UM so really quick. The 0:23:07.080 --> 0:23:11.480 prediction market thing, that's partially what underlies Aragon prediction market 0:23:11.520 --> 0:23:15.560 to resolve disputes for companies UM now in terms of 0:23:15.680 --> 0:23:21.639 the value of these tokens actually being debilitating to the 0:23:21.720 --> 0:23:24.679 underlying utility of the protocol UM. It's something I've been 0:23:24.680 --> 0:23:28.600 talking about with Joel manegro a lot um. Joel manegro 0:23:28.760 --> 0:23:32.320 So he was the blockchain lead at Union Square Ventures. 0:23:32.880 --> 0:23:38.160 UM clearly reputable firm. UH, and one of our concerns 0:23:38.560 --> 0:23:40.680 is exactly as you said when you look at atherorum 0:23:40.840 --> 0:23:44.800 right now. For example, the native token for ethereum ether. 0:23:44.960 --> 0:23:47.040 The more that goes up in price, the more expensive 0:23:47.320 --> 0:23:49.479 it is in some ways to use the network, and 0:23:49.520 --> 0:23:52.199 so there needs to be a way UM and Ethereum 0:23:52.240 --> 0:23:55.480 has tried to solve this with the dynamic exchange rate 0:23:55.760 --> 0:23:58.680 for the units that you pay to use UM. It's 0:23:58.720 --> 0:24:01.560 it's world computer called US. So people are working on 0:24:01.640 --> 0:24:06.919 ways to dissociate UM the rise and value of the 0:24:06.960 --> 0:24:10.199 token from actually using the underlying network. So basically, in 0:24:10.240 --> 0:24:13.080 other words, you don't want to have a situation where 0:24:13.160 --> 0:24:16.720 let's say, you know, going back to what's the dispute, 0:24:16.720 --> 0:24:20.440 what's the I c ou participate aragon aragon. So let's 0:24:20.480 --> 0:24:23.000 say it costs x amount of what's the unit called 0:24:23.080 --> 0:24:26.239 is to just called an arragon T. All right, Let's say, uh, 0:24:26.480 --> 0:24:28.680 it costs x amount of A and T for this 0:24:28.840 --> 0:24:32.720 dispute resolution mechanism. You don't want a situation in which 0:24:32.800 --> 0:24:35.720