I must admit that the entire crypto currency and blockchain trend has been a struggle for me to figure out. I’m from the old school that mutual funds are great and gold is better. As I looked around and saw my friends investing in Litecoin, Ethereum and Bitcoin I admit I was curious, when it hit $18,000 I was enamored by this new currency and figured I better buy some myself or at the very least find out more.
I suddenly came upon people in my network that wanted to either ‘mine’ the cryptocurrencies, buy lots of it before it became unreachable or who wanted to develop the next great ‘blockchain’. They all wanted in!
For the uninitiated, grab your nearest programming geek and a couple of coffees and ask him to explain the nuances of what’s happening in the currency market.
Recently, billionaire investor Warren Buffett told CNBC the recent craze over Bitcoin and other cryptocurrencies won’t end well. “In terms of cryptocurrencies, generally, I can say with almost certainty that they will come to a bad ending,” the chairman and CEO of Berkshire Hathaway said.
So how does one enter an investment with the financial guru saying it’s hogwash? Considering Buffet has always shied away from new technologies, as a matter of course, perhaps it’s just not a good match for him.
Tim Draper, considered the inventor of viral marketing” in 1996, and who famously bought 30,000 Bitcoins at a government auction (with a value of $19MM) was at a recent conference in Vancouver sponsored by Canada’s Cannacord Genuity Wealth Management firm. He said that Bitcoin “is the biggest opportunity for mankind since the inception of the internet.” He said that as the Internet transformed the music business, the entertainment industry and now shopping we now have the opportunity with Bitcoin to change the way we think about finance and banking.
Draper is a guy who puts his money where his mouth is and believes in everything he does. He spoke out against Sarbanes-Oxley regulations, stating that they limit the viability of taking companies public. In 2000, Draper spent $20 million on a failed measure to support school vouchers.
Considering blockchain is incorruptible, honest and secure it’s no wonder we are trying to find ways to implement it into our economies. When you consider that blockchain takes the human element out of any ledger transaction imagine the money saved by getting rid of the middlemen, i.e. bankers of the world. It’s true that any industry that provides bad service with high costs is vulnerable to a blockchain takeover. There’s more to this than just banking, imagine replacing the way we buy insurance and real estate for a couple examples of wasted fees and bad service.
Draper said that he believes Bitcoin can be worth between $5k and $1MM in the next three years. Quite the range but what he was saying is that cryptocurrency is not going away and who knows where the frontier mentality will take it.
The conference discussion turned to government and blockchain that made a lot of sense. In a world where corporations are global entities why not governments? Governments are competing for us to be citizens because we can move physically and virtually. Most governments are already decentralized and virtual which are the tenets of blockchain. Governments keep track of your pensions, health insurance, your safety net (welfare and other programs), your ID’s and who knows what else?
Estonia saves 2% of its GDP by being a virtual government and offering people the opportunity to be virtual citizens. Estonia’s ‘E-Residency’ is a new digital nation for global citizens, powered by the Republic of Estonia. Estonia is the first country to offer e-Residency, a government-issued digital ID available to anyone in the world. E-Residency offers the freedom to easily start and run a global business in a trusted EU environment.
The new Estonia wants to be a sort of ‘start-up nation’ with a new digital infrastructure to deliver public and private services, e.g. government as a service.
Other countries can complete in the same way as Estonia to solicit newcomers, entrepreneurs and investors. Good governments are getting the ICO’s and good entrepreneurs that are leaving the less desirable blockchain blockers like China in droves.
Bitcoin and blockchain also decentralizes the distribution of wealth. Having said that the innovators who started cryptocurrencies had a thought in mind that this new currency would become a movement. Where Web 2.0 was a learning tool focusing on content and communities, Web 3.0 (crypto and blockchain) aims to highlight intelligence in an organic fashion through the interaction of people. Bitcoin has created thousands of decentralized millionaires instead of a couple of Jeff Bezos.
We are very much still in the infrastructure building stages of Blockchain. Focusing on the ‘bubble’ that is Bitcoin and others keeps us from seeing the forest for the trees. Deep compelling innovation could take this era to trillions.
Considering the complexities of all this I was wondering about the downside to cryptocurrencies and blockchain. I figured that if cryptocurrency’s goal was to remove the middlemen then the banking community might not be too pleased.
I spoke to Daniel Estulin, the award winning investigative journalist and best selling author/movie producer of The True Story of the Bilderberg Group (the book was published in 64 countries and translated into 41 languages). He has given two speeches at the European Parliament on the Bilderberg Group and the international monetary crisis. In a front-page article, Wall Street Italy called Estulin, “one of the few people who understands the current crisis.”
Daniel, a 2015 Nominee for the Nobel Peace Prize, has no love for the Bilderberg group who he feels is behind complex manoeuvres to keep the banking status quo or at least allow the banking community to ‘own’ the new cryptocurrency and blockchain movement.
We hear a lot from people who, fundamentally, do not understand how the world is run. The trending thought that Bitcoin is going to blow up the central banks is somewhat flawed because the government, the elite are not going to let it happen.
While the idea of getting rid of the middlemen mentality and decentralizing the financial system itself sounds ingenious and the beginning of a ‘movement’ it’s flawed. As Estulin told me, ”the governance system in control is analog, not digital. It’s very important for the economics of it. If you look at how the government structure is run, you get as many people and smart people as possible innovating, testing and trying, and you have this prototype phase. The richer you can make your prototype phase, the better. The way they get the prototype phase to be rich is by making sure that everybody is making money prototyping. We have price suppressed and manipulated all over the economy, but here you pump it. The more you pump the price, the more you attract people coming in and figuring out how to prototype.” From everything I have heard the economy is on the prototype stage.
Currently, there are two problems that need to be solved: blockchain is not scalable and is not economically feasible. The obvious focus is on how do we create open ledger database technology and cryptocurrencies that can scale and be economic?” These are two of the biggest issues of what they want prototyped.
The more I look at the technology of crypto and blockchain I see a short term future with huge profits, a possible movement or New World Order depending on what side of the ledger you’re on but an agenda by others to keep it from reaching mass acceptance.
Maybe Warren Buffet is right, this “won’t end well.”
Gary is a Partner of Equifaira Advisors Inc. Liquidity Event Planners
Originally published at www.equities.com.