Epicenter - Learn about Crypto, Blockchain, Ethereum, Bitcoin and Distributed Technologies - Chris Burniske & Jack Tatar: Cryptoassets – The Rise of a New Asset Class

Episode Date: January 17, 2018

Over the past year, cryptoassets have exploded in popularity. From a mere $18bn at the start of 2017, the aggregate market cap of all cryptoassets recently reached $820bn as interest in Bitcoin and its cousins went mainstream. Jack Tatar and Chris Burniske joined us to discuss their new book ‘Cryptoassets: The Innovative Investor’s Guide to Bitcoin and Beyond’. It is one of the first systematic views on cryptoassets from a mainstream investor’s perspective. Topics covered in this episode: How Jack and Chris originally became interested in Bitcoin and cryptoassets Why the term cryptoassets is a good umbrella term for the different kinds of tokens The different categories of cryptoassets: Cryptocurrencies, cryptocommodities and cryptotokens How cryptoassets fit into an overall investment portfolio How to value cryptoassets Whether we are in a cryptoasset bubble and expectations for the future Episode links: Cryptoassets on Amazon Cryptoassets - Book Website Cryptoasset Valuations – Chris Burniske – Medium Why I like the term, “Cryptoassets” – Chris Burniske – Medium The Crypto J-Curve – Chris Burniske – Medium Bitcoins are the best investment in my retirement account - MarketWatch This episode is hosted by Brian Fabian Crain and Meher Roy. Show notes and listening options: epicenter.tv/218

This is Epicenter Episode 217 with guests Chris Berniski and Jack Tater. And welcome to Epicenter, the show which talks about the technologies, projects and startups driving decentralization and the global blockchain revolution. My name is Brian Parvian Crane. And I'm Meher Roy. Today we are interviewing Jack Tater and Chris Berniske who are the authors of crypto assets, the innovative investors guide to Bitcoin and Beyond. We'll walk through the universe of crypto assets, classifices, assets, classify them, talk about how to value them, and how they should be part of any smart

investors portfolio. Jack and Chris, welcome to the show. Thank you. Thanks for having us, you guys. Cool. So let's begin with yourself, Jack. You've had a sort of a long professional career in the investment management field. Tell us your story about how you got involved in the blockchain space. Yes, I appreciate it. So I've spent nearly three. decades in financial services from being a financial advisor sitting with clients and taking a look in investment portfolios. And I guess back in 2013, after writing about retirement, I discovered the thing called Bitcoin. And we took a look at it. I run a research firm. We took a look at it from the research perspective. And at the time, we produced a research report that soon turned

into a small book called What's the Deal with Bitcoin. But then I started to start a to take a look at it as an investment vehicle. Writing on retirement, my view was, well, can Bitcoin be considered an asset and an investment? So that led to a series of articles on MarketWatch about investing in Bitcoin for retirement, following the ups and downs of that investment, and ultimately it doing pretty well for me as an investment. That led me down the rabbit hole of Bitcoin and crypto assets, and soon led me to fortunately connect. with Chris Berniske, and that led to the book. And since that time, I've been involved in some startups.

I've been an angel investor to a number of startups. I've also been an advisor to a number of startups in the crypto space. So I'm down the rabbit hole right now, and like you said, I've had a long experience, and I think I can bring some of the financial analysis side of it into this as well. So, Jack, I'm at, I mean, retirement portfolios, Time and planning sounds like a very kind of old fashioned thing. I imagine leather couch and class of scotch and that kind of thing. So how is that perceived?

I mean, you must have been among the first people in that area to think about or write about Bitcoin. What did your colleagues say? Well, it did take a lot of scotch to obviously, you know, convince these colleagues that I was going down the right path there. But, you know, soon you young guys will have to deal with retirement as well. But I think what was interesting is when I did write the articles, and I wrote them on MarketWatch, which really was a financial investment platform.

And you're talking back in 2014, 2015. And I remember specifically one article, and I invested my own money into this. And I did it in such a manner. I'm sure we'll be discussing the financial planning aspects of it. But I remember writing one article where I essentially lost half of my investment. and at the time I couldn't get out of it and a traditional investor might get out if they've lost 50%. I couldn't get out of it because of the structure of the investment.

And I remember writing the article and I think it was one of the most commented articles in MarketWatch and I contend that no one has been called an idiot or a moron more than I have been in this one article. And so it was great. And now I wear it as a badge of honor because about six months later I wrote an article about how it was the best investment in my retirement account.

But I think at the time, people, and this is back in 2014, where, you know, this was well before even Jamie Diamond was stepping up and calling it a fraud and then realizing, oh, yeah, he made a mistake. So, yeah, there was a lot of criticism around it. But once again, I did it in the concept of not taking a moonshot, but putting it in as a, what I felt was a suitable investment and crafting it into my, asset allocation models. But believe me, there was a lot of justice when I did write some follow-up articles where I had made a lot of money and secured my retirement and all those other people who now call me a moron. I don't know where they are, but it's very easy to do that from the

internet. But I do have to get the leather couch. I like that idea. I'll go with the leather couch. The scotch, you know, everything else, you know, that's good as well. So I do want to toot Jack's horn for a second because that book, What's the Deal with Bikcoins? He put out May 2013. So that was before, you know, the late 2013 run, the first time Bitcoin crossed $1,000. You know, far before it had really crossed mainstream consciousness. I think we had an early run early on in 2013, right? We went from something like $3 to $30 or was it $30?

to 300, but we had that run in spring of 2013, but it was really November of 2013 that put Bitcoin on the mainstream radar for the first time. And Jack was in there before that. And he was in there when we were all calling it Bitcoins. And so when I did my due diligence on Jack, he definitely earned a lot of street credit for me when I saw he had published in May 2013, an actual book. I think the, and I appreciate that, Chris. Thanks. What's interesting is many people say to me, well, I guess you were buying Bitcoin back in 2013. And sad to say, I wish I had, but at the time, the only place that you could really buy it was with Mount Gawks. So I could have potentially bought it and who knows where it would have ended up,

maybe with Carpellus and his cats or whatever, whatever ended up with the funds there. But it's been interesting to follow since that time. So, yeah, I've been involved. I've seen a lot of things I know where the bodies are buried. So thank you, Chris. I appreciate that. Yeah, and of course, Chris, actually, I remember you sent, because you were at this company, ARC investments, and I remember that you guys wrote a paper there about Bitcoin being this new asset class, and you sent it to us because you were a podcast list, and this was like a long time ago,

and I remember seeing it, it was like, oh, this book could make an interesting episode. And it was always sort of in the back of my mind. So it's been a long time that I've kind of wanted to have you on and talk with you. So I'm glad it finally happens. Well, thank you. So what was ARC investment and how was that through that job that you first became interested in Bitcoin? Or how did that happen? Well, personally, I had a friend dragged me down the Bitcoin rabbit hole in my last year of college.

So early in 2012, I think it was. dragged me down and was, you know, really excited about a number of concepts. But at the time, the main application that Bitcoin supported was the Silk Road. I don't even think Coinbase was around at that point. It was very limited in terms of what you could do in the ecosystem if you weren't a developer. And so while it was an interesting thought experiment for me, and I've gone back and I've looked, I have like a Facebook post on a company page that I was working on, like about Bitcoin and I've had friends come back to me with conversations that to be honest, I don't remember about Bitcoin in that period. There was then about a two-year gap where I remained tangentially interested, but again, didn't think of Bitcoin as an employment opportunity until I joined this firm Arc Investment Management in the summer of 2014.

ARC was a startup at the time, didn't have any funds, so it was just getting off the ground, just crafting its portfolios, and as a thematic technology investor, I was put on the next generation internet theme, and that involved putting in the elements to that theme, which included things like cloud computing, internet of things, machine learning, social media, and we ended up putting cryptocurrency in there as an element. And our director of research was a big proponent of Bitcoin, as was Kathy Wood, our CEO, CIO. And so everyone was on board.

But this was, I mean, the ETF that I worked for originally, ARKW, when we launched that in October of 2014, there was pretty much no way to get Bitcoin exposure into an ETF. And so we held like token plays, not in the 2017 sense of the term, but more these small cute plays like Nvidia, right, for the GPUs or Taiwan Semiconductor who has the fabrication plants that produce the ASICs that go into a lot of Bitcoin rigs, but nothing substantial and we were actually approached by Grayscale who had the Bitcoin Investment Trust

that would be coming online exiting from the private placement into GBT. So they approached us in late 2014 because they said, hey, here's this public fund manager that has ETS that has cryptocurrency on their website. And so that kicked off about three quarters of a year to a year of due diligence on Bitcoin. The paper, well, I published a couple of papers summer of 2015. I had to look deeply into the long-term security of Bitcoin's network, so the long-term incentive model and trying to figure out what an equilibrium transaction fee would need to be to sufficiently secure the network from a 51% attack, all kind of sort of nerdy stuff that I would have had to do if I were due diligenceing, you know, an equity like Red Hat or Facebook, different, but different things I had to investigate,

but same amount of rigor. And then ARC became the first public fund manager to invest in Bitcoin in September of 2015 with the first purchases of GBT happening in the mid-201. range when Bitcoin was in the mid-200s. And I think GBTC got all the way to $3,000 at its peak. And so it's been a phenomenal investment. And that gave me leverage to just increasingly focus on crypto, really lost all interest in inequities by late 2015, early 2016. And so I ran with ARCS crypto effort for about two years and then very amicably have

transitioned on, I remain involved with ARC and as a board, on the board of ARC, but then now I'm running my own firm called Placeholder, which is a venture capital firm that invests in decentralized information networks, incentivized by a token, and I'm doing that with Joel Mnegro. Fantastic. Well, so let's get into the first thing that seems to be something dear to your hearts, which is this question of how do we? we call these things, cryptocurrency of course, is the term that's most often used, but doesn't

necessarily make so much sense for many of these things. Why do you guys think this is so important what we call them and what are your proposals in that regard? Well, we named the book crypto assets to be very clear that we think this asset class goes beyond currencies. And you referenced, Brian, a little bit ago, the new asset class white paper I put out with Coinbase that we sent to you in 2016. And it really draws from the seeds of what we lay down in that paper in that this asset class as a whole, I think of more as an asset class native to information networks. And the novel ways in which it organizes and incentivizes human activity, I find to be an innovation much more akin to when the joint stock companies in the early 1600s were created to fund merchant ventures,

right, long-term capital projects for return on that capital. And so really pulling this asset class and this movement out of the currency conversation because that gets us into all kinds of dead-end arguments and conversations around, you can't have so many currencies and they're too volatile and yada, yada, yada. and more pulling back and saying, okay, this asset class as a whole, we call crypto assets. Within that asset class, there are verticals, just as within the equity asset class, there are verticals by sector or market cap or growth or value or whatever it may be. And so within crypto assets, we think of right now three verticals.

There will likely be more in the future. We might actually have a fourth. But cryptocurrencies, cryptocurrencies, crypto commodities, crypto tokens, and the fourth that you can maybe add with CryptoKitties as Crypto-collectibles. But if we just start with cryptocurrencies, you know, per economics, the definition of a currency is something that serves as a means of exchange, store of value, and unit of account.

So means of exchange is exchanging this unit for goods and services, store value is self-explanatory, and unit of account is really the measuring stick of value. And those are things like Bitcoin, Lightcoin, Zcash, Monaro, ripple, those guys target being a currency in a more universal sense. But most of the assets out there, I would argue right now are crypto commodities, which Ethereum kicked off.

And so just as in the physical world, we have physical commodities like oil, wheat, natural gas, bananas, copper, gold, so on and so forth, and those commodities lay the foundation to building finished goods and services, I would say in the crypto space we are seeing the birth of markets to price digital commodities. So why can't I trade, you know, on CME cloud storage futures or bandwidth futures or GPU flop futures or all kinds of derivatives off of those digital commodities? And I think that what the crypto markets are creating are these global 24-7 markets to price these digital commodities and provision these digital commodities, which is extremely important when we think about this transition from physical to digital, that pretty

much our entire society is going through. The last one, and I'll keep it brief, of crypto tokens, is really when we just think of, again, using the physical analogs of currencies and commodities come together, form an economy to produce finished goods and services. I think of cryptocurrencies and crypto commodities as laying these foundational layers, blockchain layers and application service layers, so that finished digital goods and services can be provisioned to consumers, and a lot of lot of those finished digital goods and services will have their own tokens. So this is things like, you know, Auger or Steam or Aragon I may even put in there. And so that is, that, that is the stack that I, that I think of, that we think of for this space right now. This is this whole point

about crypto assets, I think is very important because I've grown very frustrated with seeing the press and seeing the media constantly refer to this whole space. as cryptocurrencies, and they equate everything back to Bitcoin. And we really need to recognize that there are these differences that Chris has laid out within the whole category of what we're discussing here. Ether cannot be compared to Bitcoin. And we keep hearing the press say, oh, well, which cryptocurrency is going to survive, Ether at Bitcoin. They are different. and it's very, very important, and it's a major part of what we wanted to accomplish in the book, was to divide this space up, as Chris has mentioned.

Additionally, it's also important when you start to take a look at investments and evaluating these businesses and these coins because they do have different uses. And potentially at some point in the future, you're going to see this classification come into play when we have investment vehicles, like Chris is saying, cloud futures, and things along those lines, that are going to provide diversification within this space for investors. So it's very, very important that people don't put everything under the concept of cryptocurrencies. And I honestly believe 2018 will be the year that will pull the curtain aside and show people that there is more to this space than just Bitcoin. And part of that

is to get away from solely looking at Bitcoin and solely referring to the space as, cryptocurrencies and recognizing that they're crypto assets and accordingly as an asset, they're investable vehicles. So let's explore the boundary between some of these categories. So you can start with the category, cryptocurrency and crypto commodity. So Bitcoin, according to you, is a cryptocurrency. Isr is a crypto commodity. What defines the boundary for some asset to be.

a cryptocurrency and a crypto commodity? The boundary is inherently fuzzy, and all asset class definitions and differentiations are fuzzy is what I found as I've dove into the academic literature over the years. The distinction that I make between, say, Bitcoin as a cryptocurrency and Ethereum as a crypto commodity is Bitcoin's, Bitcoin was brought into the world, to serve on a global basis these three use cases, right? Means of exchange, store value, unit of account.

Whereas Ethereum was really brought into the world to provide this decentralized world computer, which I would think of as a digital commodity, and with units of ether converting into gas to pay for access to that decentralized world computer or that digital commodity. And so for that reason, I think it, and, and, And early on, you know, when Vitalik talked about Ether, I believe he said, you know, this isn't meant to be an investment or this isn't meant to be speculated on.

I forget the exact quote. And certainly it has, Ether has become an investment over time and something that people speculate on. But really, it's the genesis, I think, that differentiates. I do want to add one wrinkle here, which frustrates some people. But while I agree and I do believe in this classification and hope that we can refine the classification and there's lots of people with good ideas around app coins and utility tokens and different ways of slicing this pie, and I think it's all healthy and it's all additive. One other way to think of these assets, if you think of each crypto network as a economy that provisions a single good or service or a couple goods or services,

then each native unit within that crypto network does technically serve as a currency. And so within that network, it should be serving means of exchange, store value, and unit of account use cases, intra network. Now, what I would argue differentiates between something that is serving as a currency intra network versus a cryptocurrency more broadly is how many networks is it used within. Right. And so Bitcoin is this interchange, this mother change, or mother chain that is used to swap in out and out of all these other assets of all these other crypto networks. And in so doing it, serving more as a universal currency, which is why I would call it a cryptocurrency, as opposed to a lot of other assets, which primarily just operate within their own network, their own crypto network. Ether, you know, is bending these lines because it has gotten so big. used as a means of payment. But those are just some nuances.

Yeah, actually, I wanted to kind of weigh in on that because I think Ether is an interesting example here. On the one hand, of course, you write, right? It was really marketed in the beginning in the right paper says, okay, it's just like gas, pay for computation on this world computer. But I think if you look at the valuation is in my eyes, or let's put it like this, if it was actually just used for that, I think the valuation should be like much, much lower. And you have the problem there too that if the price goes up, the cost of computation goes up,

it makes network less attractive. So people would want to move elsewhere and run the computation elsewhere. Because, you know, to a large extent, I think like running computation on these like blockchain networks is going to be, you know, somewhat somewhat of a commodity, right? You'll be able to run it on like one network or the other network, you know, as long as they have like somewhat similar security characteristics. So I think if you look at ether, actually the only way you can justify this valuation is if you assume that it will have this kind of currency function for smart contracts and maybe be used as like collateral or. And so I actually think that the if you had like really good stable coins that could move across chains, that could be a huge threat for ether.

What are your thoughts on that? Well, first of all, I just want to say the fact that we're doing this classification and discussing this classification is a major point about valuing these assets. And as Chris mentioned before, this is probably going to evolve. But putting the stake in the ground with this taxonomy allows us to better value and evaluate each of these coins and each of these assets. And I think this is going to be very important because there are going to be people out there who are smarter than me who are going to analyze the space and bring up a lot of these points and evaluate them within the context of where they stand in terms of this taxonomy. And also, like you say, going across the board.

I think it is a very interesting thing. Chris mentioned before that maybe there's a fourth crypto collectibles, right, which is interesting. But I also think in looking back at the book, the whole rise of ripple that has occurred has also forced me to look back on, and Chris mentioned it before, that we viewed it as a cryptocurrency. And you almost wonder if some of these assets can potentially change. I'm not sure that we can view ripple as a cryptocurrency anymore. perhaps it's more of a crypto commodity. But what's important is that we set the basis for how to evaluate these coins and how to view them. Because what you're going to find in the next year is you're going to find that there will be analysts and there will be tools and resources

available to us to now evaluate these assets. We're going to have data. We're going to have smart people looking at this. And what we've tried to do here, and I think what we're going to see more people doing is laying that foundation for how to evaluate these assets. So when we put together the taxonomy and the division there, it wasn't to be the be all and all. A lot of it was to say, here's a foundation, here's, there's room for growth and to evaluate it. And all of these points that you're bringing up, I think will play well for people to understand how to evaluate these as assets, how to evaluate their network value. and ultimately can they exist and should they be investable in their current state?

And specifically, I would say you brought up ripple jack and Brian, you were mentioning Ethereum. I think this is where we go back to while there is this taxonomy of cryptocurrencies, crypto commodities, crypto tokens, and we'll add crypto collectibles. within each asset, each crypto asset within its crypto network, acts as the native currency within that crypto network, or perhaps a private currency. And so within that network, one of the three use cases is store value.

And I think over time, we will see battles for different crypto assets to capture more mine share, more store value mine share. Currently, Bitcoin has the most store of value mind share. but Ethereum certainly a lot of ether holders are using it as a store value or you know investors that are hoping the future utility value is such that it will lift the price of the asset but no matter what the asset is and this is particularly the case for ripple there needs to be a contingent I think of hoddlers if there's not a contingent of hoddlers then you could have if you

have all the entire float of the asset base that is circulating as a means of exchange, you will likely have pretty high velocities. You know, Bitcoin's means of exchange velocity, I estimate at around 15. Most other things are going to be north of that, given the confirmation times. And you could actually have pretty low network values to sustain large economies or large transaction volumes within these crypto networks. So the store value aspect is key. And we have seen the financialization of so many asset classes. Like, if you go back to the early 1970s when we went off the gold standard, that's really when oil and copper and a bunch of physical commodities started more becoming financial, or there was a whole financialization component added to their utility to the

world. And so this is just a continuation of that. And I don't necessarily think it's a bad thing. It's just there needs to be a balance, right, between store of value and the actual utility or means exchange of a crypto asset. Yeah, I think that's a very good point. I guess my impression of the markets today is that almost everything gets treated as if it was kind of the store of value thing and valued on that basis. And I remember back in 2013 and maybe 14 when people were talking about Bitcoin being used for remittances.

And it was interesting too because then I did like some kind of math and you look at the Canadian remittance market, right? And let's say now on the one side I like sell euros for Bitcoin and it gets sent over and converted and for a local Nigerian, I don't remember what the currency is called there. But for, yeah, so and if you did the math and you have to look at the size of the remittance market and you assume that, you know, one of these transactions, maybe they would only hold a Bitcoin for a day. or it could be less.

And then the effect on the price was actually almost negligent. It could actually be used to manage a huge amount of the remittance market proportion without really driving up the price. I guess that's kind of your point. This falls into the valuation framework, and we could jump to valuation. but this idea that the equation of exchange could become, and I would argue will become, the bedrock to crypto asset valuation. So the equation of exchange being MV equals PQ.

So M is the monetary base, size of the monetary base. V is the velocity, which you were just kind of implying there, Brian. And then P is the price of the good being offered within that economy are sold, and Q is the quantity. And so within that framework, and if we just stick with Bitcoin, right, if we think of PQ for the remittance economy as the amount of money transferred using Bitcoin to facilitate the remittance economy,

then we take something like, okay, there's $500 billion remittance economy. Let's say Bitcoin takes 10% of that. That means each year Bitcoin, has to move $50 billion in order to facilitate that use case. And then, you know, let's assume a velocity of 10 just to make it easier. We can get into how we've quantified velocity later. But a velocity of 10, so I have that 50 billion PQ, say, and I'm dividing it by a velocity

of V of 10, which gets me a necessary monetary base M of 5 billion, which is really not that much in order. what that would claim is Bitcoin would need to store $5 billion in value to facilitate 10% of the remittances market at this velocity. So there's lots of assumptions baked in there. But then you can start to stack these, right? And the one that everyone use right now is digital gold, right? You have a $2.5 trillion global financial gold market. And I use the global financial gold market, not total above ground stock.

So 10% of that is $250 billion. And so that currently justifies Bitcoin's network value. And with something like holding it as gold or store value, that actually has a velocity of zero. So you pull it out of the float. I've written about this on a lot more detail on Medium, a post called Cryptoacet valuations with the whole framework and an open source model on it. But I think there are truly ways we can value these things.

But you're absolutely right that right now, the prices. of most of these assets are based on expectations of future utility and not current utility value. I would just like to draw attention to Chris's post on Medium around this. And it's required reading for anyone who really wants to get a basis for evaluation. One of the other posts I like, which simplifies things for me, which is helpful for me, was this post about the J-curve. And this was something I saw during the dot-com era as well. And the crypto j curve that Chris talks about is the fact that assets are made up of utility value and speculative value.

And when something comes out, like we saw it to dot com, there was a high speculative value. And at some point in time, there's a need to come down there in speculative value because of just what it is speculation. but ultimately, there needs to be value seen in the utility aspect of this. And then we have that j-curve. And when there's a realization in the utility of that asset, it goes up. Now, we were seeing that with Bitcoin, or we saw that with Bitcoin. There was a lot of speculation, and then we had a burst in the bubble. But then all of a sudden, we started to see the utility of Bitcoin.

A lot of these things, as Chris is mentioning, store value, remittances. So all of a sudden, there is now the value in the utility of the token. that sends it up, accordingly, the J-curve. And I think this is an important and a simple way of looking at these assets for some of these assets like a ripple and some of these other cryptos where there's that speculative value, but really does the token, does the coin have any utility? And if it doesn't have any utility, we're probably going to see that go down substantially. But once the utility is realized, and with a lot of these assets, the utilities will be realized,

they will shoot up. And I've done some work taking a look at some of the dot-coms, where, and we write about this in the book, where we've seen during the dot-com, the speculative value was such that all of these stocks went up. Well, accordingly, when we realized that there was nobody behind the curtain, they went down to zero. Pets.com, all of these, they went down to zero. But accordingly, even if you look at Amazon's chart, Amazon had that speculative value, and then it came down, because, because people were concerned, and then all of a sudden, we realized that there's a major utility in that asset,

and we had the J-Curb. So those two pieces of it, Chris's work on the valuation and his formulas there, and the CryptoJCurb, I think a required reading for anyone who really wants to get a basis for the valuation of assets that are out there right now. In the book, we talk about potentially valuing some ICOs, which I think is another thing to look at as well,

but that's really required. reading for anyone looking at the valuation of these assets going forward. So, yeah, I mean, like the, I think the Christmas Post really walks through, like, the history of Bitcoin and how there was this, like, speculative value that was accrued in 2013, and then it went out of the market and the utility came up. And so the, like, sort of the ratio of the speculative value and the utility value is what, uh, case changes. in a cycle which I feel is what Chris is trying to say is like a j curve. My question here is when we look at like all of these different assets, all of them give

different kinds of utility. So Bitcoin, the utility is supposed to be store of value. Ethereum, the utility is supposed to be accessing transactions in this world computer, presumably the same for other smart contract platforms. monaido the utility might be transacting on the dark net so and some and some of these utility values are entirely subjective right like i might place a very high utility on store of value somebody else might place very very little value to having a store of value so if the meaning of utility for all of these different assets is it doesn't

not translate from one network to the other and from one person to the other, how can a valuation model be based on this idea of utility? So it's a great question and the idea of utility for any individual crypto network shows up in the PQ side of the equation of exchange, where we have to think about the digital service being provisioned and what is the price per unit of that digital service? And then once I have that assumption, I can also apply cost decline curves, right? So just to use a very simple example, Filecoin, or we could use something like Orchid, right, decentralized VPN or a mesh network or whatever it may be.

The crypto commodities are easier to do this for, so I'll just run with Filecoin for now. There is a dollar per gigabyte that we know based on current cloud vendors that people are willing to pay to store their files. And there is a pretty well-known cost decline curve for storage going into the future. And so I can project what is going to be the dollar per gigabyte stored on the file coin network in 2018, 2019, 2020, going out to 2030. So that's the price. I can also make a projection on the quantity of gigaqq.

gigabytes being stored. And I can do that by looking at the total addressable market of cloud storage and gigabytes and creating an S curve. I use an S curve that actually I used a lot at ARC under the guidance of Brett Winton, the director of research there, where you put in things like, okay, when is the network launch, when does, you know, when is there the inflection point at 10 percent, how long does the sweet spot of the S curve last? But anyway, an S curve to show the adoption cycle within the total addressable market will give me the gigabyte stored by Filecoin in any given year. When I multiply together the price per gigabyte, which is P, by the number of gigabytes, which

is Q, I get a dollar amount of value that is transacted in the Filecoin network on any given year in exchange for the good being provided, which is Cloud Storage. Once I have that and I can have that for every single year, I then have an assumption around velocity for any given year. And I can divide that PQ by the velocity to get the monetary base necessary to support that economy. And then the last step is, and this is in each subsequent year, right, I have then M the monetary base or what we would call the network value.

Well, network value, that gets a little trickier. I can circle back to that. monetary base in the float to support that economy. And then I divide that by the number of tokens that are in the float to get a utility value price per token every single year. And then let's say I've projected that out to 2025, I can take that utility value in 2025 and discount it back to the present to actually get a rational market price for this asset today based on future utility value. Some percentage of that rational market price will be supported by current utility value, and the delta is the speculative value. And so that's the basic framework.

The only wrinkle in there that I didn't really mention is taking out from the float right at the very beginning, the percentage of the asset being held by hoddlers and stakers, if there's some bonding mechanism necessary for the nodes supporting the network. because really the only assets available in any given year within that economy are the ones that are freely floating and therefore can be exchanged for that good or service. You know, Brian, you mentioned before about the guys with the leather couches and the scotch. You should have them. They should be watching this type of thinking that's going on because this to me is evidence of what we're looking at here. You can't call this a fraud. You can't call this something that is a fad. Because when you're able to take what Chris is talking about and a lot of the things that we've looked at,

when you're able to take a lot of these resources and these tools to evaluate these assets, it further proves that we are really looking at assets that need to be considered for investments and for companies going forward. So, you know, I would invite all those people as they're sitting around their leather couches and drinking their scotch to pay attention to this to show them, like I said before, almost pull the curtain aside that there is a big world out here because what you're going to see, I do believe, is the type of thinking that Chris is mentioning is going to be what we're going to see from analysts over the next few years from the investment firms and beyond. And we don't even have to rely on investment firms. Chris's work is all open source. You go to Twitter. You get such amazing analysis that's out there.

This clearly shows that we're not in a situation that is going to go away. This is very solid. This is very, there's a foundation here for these assets. And the fact that you can evaluate them in the manner that Chris is speaking about, I think is something that's very important for people to take a look at and to understand and recognize. I sort of agree that, again, like when the joint stock companies came about for the first time, the fundamental ways of valuing these assets as the net present value of the discounted cash flow probably took

a sanctuary or two in order to be developed, maybe even more, right? Exactly. What you seem to be suggesting is, okay, that there's going to be like rational ways of valuing these crypto assets and perhaps one of the, your proposal is, is that mv equals pq that equation of monetary velocity is going to be a is going to be d one that that does it so maybe i can take an example and illustrate and like test my thinking of it so maybe we could like value ripple using mv equals pq like the xrp so for our listeners that that may not be aware. The essential role of the XRP is to sort of pay transaction fees every time a transaction

occurs on the ripple network and the ripple network ideally is going after the market of cross-border currency transfers. So the P here is the price per the service. So let's say parties are willing to spend 20 cents in order to transfer money. cross border on average so that becomes P and then there's a Q which is the demand for the transfer of cross-border money flows in the world so it'll be a huge number right so it'll be per year there might be I don't know trillions of dollars of demand to transfer money like that so that be the price the transaction cost people are willing to pay to transfer money cross

border multiplied by the amount of money people are willing to cross borders in a whole year, that is P cross Q. And that's one side of the equation. The other side of the equation is M into V, where V is the velocity, which is how many times are people willing to circulate the XRP? In a given year. In a given year.

So that depends on sort of the behavior of the holders of ripple, how they are acting in some way. Yes. And if you take this PQ and divide it by V, that should be sort of the market cap of the monetary base. Yeah. And so there are tricky things specifically with the cryptocurrencies. So sometimes I'll consolidate PQ just into annual transaction volume because that's, you know,

just the turnover of that cryptocurrency. I think the way you approached it is another interesting option. if you said, okay, what is the average dollar per transaction and what are the number of transactions? Specifically, if XRP is only being used to pay fees and not actually the medium that is transacting all of that value if it's only the fee. I don't know how everything's going to work out for Ripple because you don't have to use XRP necessarily within interledger or the Ripple network. I would say the thing that people should most keep in mind around Ripple is it has been emphasized as a fast settlement time cryptocurrency, which implies a high velocity. And the higher the velocity, if you think about velocity in the denominator, then the higher the velocity goes, actually the lower M needs to be to support whatever size economy PQ. And so that's just something that people need to wrap their minds around.

And to go back to the last point of the example I used, before we perform these calculations, we should take out the percentage of the float that is being held by hobblers or bonders. And so then that only leaves the assets that are in the float to facilitate this economy, which then allows you to get a monetary base that you divide by only, the tokens or assets that are in the float to get you a dollar value per token, the trick here is to truly get the network value, you then have to take that dollar value per token and multiply it by all the assets that have ever been issued because not necessarily all of those assets are on the float.

And so that's where network value can expand beyond the monetary base solely necessary to support that PQ. Cool. Well, I want to move to kind of the other part that perhaps a lot of people are not as familiar with their listening to this podcast. And you guys spend a lot of time on that in the book, which is looking at Bitcoin, looking at crypto assets, more in the larger framework of, you know, portfolio, a diversified balance portfolio. So, Jack, you are and have done a lot of work around portfolio construction, retirement planning. Can you give a, I mean, very just sort of brief overview of like, what are some of the kind of frameworks you use in that? And how does cryptocurrency and crypto assets fit into that? This is a very important discussion because we're seeing more and more people come into this space and investing money into the space.

and they're coming in, basically, throwing money at it and thinking that they're going to make a lot of money. And in essence, they have. But when I started to look at this space back in 2013, 2014 as an investment, I looked at it from the perspective of financial planning asset allocation. And in the book, Chris spent a lot of time with Art Laffer, who's an economist. We depended on the work of Sharp and Harry Markowitz, who was kind to discuss modern portfolio theory. So it's very important to evaluate investing in anything from the perspective of your overall portfolio. Now, everyone's going to have a different risk profile, everyone's going to have different financial goals or whatnot. But to put all your assets into all your money into one asset, you may look back and may say,

well, I made a lot of money on Bitcoin. Thank God I didn't put in anything else. But you've always got to protect yourself against the risk. So when I looked at this, I looked at this from the portfolio allocation and asset allocation models that are out there, which typically you'll see are equities and bonds. Back in 2008, after the financial crisis, a lot of the financial firms realized that you didn't get that diversification by being in stocks and bonds. When the markets crashed, they both went down. So there was this view that you needed to have assets that were non-correlated.

And this asset class known as, or asset classification known as alternative assets, became something that the financial firms started to say, you need to have a portion of non-correlated assets in your portfolio to protect yourself against downturns in the market. So we started to see allocations come along that said maybe 50% in equities, 30% in bonds and 20% in these alternative assets as a way to protect your portfolio. And a lot of this depends upon the work that, like I said, Harry Markowitz did in modern portfolio theory.

So when you take a look at alternative assets, what you find is they typically are made up of things like gold or real estate or hedge funds and things of that nature that are non-correlated to the rest of the market. So my view was, well, it seems to me that something like Bitcoin fits that model. of an alternative asset. And when we started to take a look at the non-correlation of the asset

and recognizing that it's actually, there's actually a higher level of non-correlation between Bitcoin and the overall markets, equities and bonds, than even gold, it provides even a better level of non-correlation

than these other assets. And we've done some other work around volatility and things of that nature. Ultimately, the feeling was Bitcoin can fit into your portfolio a prudently allocated portfolio as an alternative asset. And in this way, financial professionals, investment professionals, can potentially look at this asset for their clients

and provide diversification, provide portfolio protection by investing into Bitcoin and crypto assets as this alternative asset sleeve. And that was what I made my investment in Bitcoin on back in 2013, 2014, And it's a big part of what we tell people now in the book is how they should be looking at their overall portfolio and investing accordingly into these assets. Now, of course, everyone's situation is different. Someone like Chris, who's a lot younger than me, he may be willing to take a little bit more

allocation into crypto assets than potentially I am, who is closer to distribution of assets than accumulation of assets. So everyone is different. but to be able to view your portfolio in a more holistic manner and say, where do crypto assets fit in? We feel that there is principles and there are resources and tools to do that. And so that's really where I feel that if you view these crypto assets as an alternative investment and fit them in accordingly to your portfolio, then you can fit them in in a prudent manner. Now, as that happens, let's say you invest 10% in.

into crypto assets. And you had done that for the last year, you might realize that that 10% is now 30% of your portfolio because of how it's grown. So then you have to take a look at rebalancing that portfolio and bringing it back to your asset allocation. Now that becomes something that's of interest to people because they're saying, wait a minute,

I've got this winner here, why don't I just ride that horse and keep going? So you've got to take a look at your own situation and say, do I need to do some rebalancing to come back to my original portfolio allocation. And someone like Harry Markowitz and modern portfolio theory would say rebalancing is important. Does that mean that you sell all your winners and because maybe you have nothing but winners in your portfolio?

Well, then it becomes something to consider. And I know, Brian, you and I have talked a little bit about, I think it was Wences who wrote this article about not selling Bitcoin or keeping a portion of your Bitcoin because it potentially could go up. I think it's an interesting perspective, but I also think you have to have rules in place when you invest. And those rules can be around asset allocation and portfolio allocation and things along those lines.

Additionally, there may be some rules within the crypto asset space. I have kind of learned myself that as much as I would love to rebalance and sell things and come back to a prudent asset allocation model, I may find that maybe from my perspective, I don't want to sell all of it. So I've found myself selling potentially 70% and keeping 30% for the long run. So this is in essence actually pushing some of the rules that are out there around asset allocation. But I think it's very important for people when they start to invest in this. And the key thing is invest in this and put this into their portfolio.

They have to do it with the rules. And that's why it's very important. like I say, we spent a lot of time in the book around how this fits as an alternative investment within prudent asset allocation. And I do want to add one thing. I think everything Jack just said is great and on point. And prudent when getting off the ground in this space, right, like first rule always of crypto investing is never invest more money than you're willing to lose. Just time and time and time again. That said, depending on how. who you are and depending how early you got into the crypto space, you may be at a point now

where you have set aside a nest egg in hopefully an asset outside of the crypto space that's totally uncorrelated to crypto. And maybe you have a diversified portfolio there of equities, bonds, real estate, precious metals. It all depends on how much you've made in the crypto space. But from there, if you have that, then, you know, this idea of hoddling and compounding capital starts to get extremely important. Because if you just bought and held Bitcoin or ether or whatever it is and you let that compound, compound, let's say you've taken out your cost. So at that point, it's just monopoly money for you. That is when the returns can be truly astounding. And so, I mean, it's the idea that you need money to make money. And so it really,

it's a nuanced subject because it really depends on what your risk profile and your asset base is as an investor. The other thing I would add, and Chris, I think it's a very exciting time for people who have invested in the space and are investing in the space. The thing I will also throw in there as well is don't lose sight of the fact that at least, here in the United States, the taxman is watching. And we're starting to see even with the new tax law that there are going to be some more stringent taxing regulations that are going to come into play here. So just recognize this, recognize you've got to do your record keeping, and recognize that there may be some reasons for tax selling and things along those lines. But I think the beauty

of this whole discussion is we've moved from just Bitcoin, the technology, the technology, the societal impact that it has to now evaluating it and the crypto assets in the investment space and putting all of these concepts of financial planning asset allocation that Brian's buddies with the Scotch and the leather couches spend a lot of time doing. And now we've gone there and we've integrated that into the discussion. It's a very exciting time. And hopefully, like, Like, you know, I've often said Bitcoin is almost a gateway drug for millennials to invest

and for people to get involved in investing. So I think it's a good thing. And I'm glad it's legal. Well, let's speak a little bit about where we are right now. So you guys wrote this book. I mean, it came out pretty recently. It came out a few months ago.

But, of course, publishing being slow, you had to finish it earlier. And I think you had some kind of date, maybe it was January, I think of last year, exactly year ago. End of March, start of April is when we submitted the full rough draft of the manuscript to McGraw-Hill. But I think you had a cutoff date where you used basically when you talked about the values and returns, right?

I think that was in January. So we did a few things. It depends on the chapter. You're absolutely right that for some of the Bitcoin-specific chapters, we just said, okay, Jan 1, 2017, so that we wouldn't cherry pick. We wouldn't be accused of cherry picking. But then for some of the other assets, depending on what we were exploring and the point we were trying to emphasize, we just included as much data as we could, say, for like volatility

analysis or developer contributions. And so some of those data points took us up to the start of April, 2017. But, you know, when we started writing the book, Ether was at $7. Bitcoin was at 700. And it was like writing while running up a mountain or running up an avalanche. You know, what's interesting, another point about it is that we had the cutoff in March. And I remember Chris and I, we were, we had written obviously about the ETFs. And there was a whole Winklevoss ETF.

And if you remember, the decision was coming down about the Winklevoss ETFs in March. March 10th. March 10th. And so we were. We were very nervous because as much as you can say about the numbers, we made the content around theory to make it as evergreen as possible so that the numbers don't detract from the message. But here we were with the Winklevoss situation,

which could be out of date two weeks after we went to the publisher. So we had to hold off on that. I think that was the last thing that we ended up fixing was finally when the decision came down around the WinkleVos CETFs, fitting that into the book. And that was a bit nerve-wracking for us. So I do want to kind of come back to this, though, right? Because I agree.

I mean, I think if you look at the content, like valuation methods, analysis, the portfolio, things. Like all of those, I think they're still valid, right? They still kind of make sense. However, the figure of the kind of aggregate cryptocurrency, cryptocurrency, crypto asset market cap at that time was around 24 billion I think when you wrote it today we're at over 700 so we have an increase of about 30x now obviously people bought back then you know they would have followed your advice although I guess it was hard to do since the book was not yet they would have done phenomenally well but what about today I mean do you guys feel the same way I mean because also if he if he if you look at it the thing today for a few days ago I looked at this drawn 13 billion so was like, what is drawn to read the white paper? And it's like some... I mean, I don't know, maybe there's something there,

but it just seems very incoherent, poorly written thing that unclear, if it's anything at all. And then we have things like Kodak, now announcing Kodak coin. We obviously seem to be in some kind of crazy bubble. So how do you think about it today? Here's an interesting, so I'm definitely going to answer that, but I just blew my mind for a second, so I'll share it with you guys. The official release date of the book was October 19, 2017.

Without anyone looking, what was the aggregate network value of all crypto assets, October 19, 2017? No looking. I want to hear everyone guess. 150? Oh, very close, Brian. 170 billion. So it has gone up 4x since the book was published. I'm not taking credit for that full run by any means.

Maybe Mr. Tater had a little bit to do with it. But, you know, all justing aside, the markets are white-hot right now. There's no doubt about that. It is not a situation where I would recommend someone dumping in, you know, all of their life savings, I don't think I would ever recommend that. But even, you know, sort of this prudent model that Jack and I talk about of one to five percent, depending on your risk profile, etc. Even with that money, I would recommend averaging in and realizing more than anything, this is a multi-decadeal game. And if we approach what's going on with crypto assets from

Carlotta Perez's framework of technological revolutions and financial capital, then this is, we are less than 10 years into a 50-year techno-economic paradigm shift. And it fits all of the patterns in terms of the web is consolidating around Google, Google, Apple, Facebook, Amazon. They are data aggregators that are crushing the competition. Meanwhile, you have an open data layer system called blockchains, which are percolating up, growing fast, and inevitably, with these highly disruptive innovations and these techno-economic paradigm shifts, you're going to have all kinds of volatility, right? Speculation lays the foundation for innovation, and we are really entering what Carlotta

would call the frenzy stage. So we've been in the eruption stage. We are now entering the frenzy stage where increasingly financial capital will divorce itself from the actual reality, from what's being built. And we're going to see some cycles over this of this over the next few years, I would argue. And then the question becomes, okay, when does the music stop and when do we have the big crash? Because lots of people have been talking about, oh, this is a bubble, and we're going to have a crash and blah, blah, blah. And I agree with all of that.

But I think in 2017, we had three, if not four corrections of 30 or 40 percent, right? In the traditional capital markets, that's a crash. In crypto, I classify a crash more as 80% plus. When we look at late 2013 to January 2015, Bitcoin lost 85% of its value. And so when I think about that big crash, we may have one of those, say, in 2018. I don't know. I don't have a crystal ball. But when I think of the big crash in the longitudinal perspective, I'm looking at the peak

of the tech and telecom boom, 2000, Bloomberg Tech Index. was when you adjusted for inflation about $4 trillion. So we right now are about 20% of the way there. And the tech and telecom boom, we shed a couple trillion in value. And so I think that the big crash will come when we are well into the trillions. I think we will lose. We will shed trillions of dollars in network value. But until then, I'm not, you know, I'm not.

obsessing over trying to call this crash. I think Peter Lynch is famous for saying, far more money has been lost preparing for corrections than in corrections. This is, if you think about the tailwinds of what's going on here, and you are approaching it from a 50-year techno-economic paradigm perspective, and you are just adding, adding,

incrementally, responsibly, adding, adding, adding, over time, you will be fine in 2015, or sorry, in 2015, 250. You will get hurt if you're buying a ton now, freaking out in six months because half of your net worth is gone and so on and so forth. So it's really important, and I'll end my tirade now, to just responsibly ease into things. There's no rush. We're going to go through booms and busts. The big one is probably a few years out when we're well into the trillions or five years out or ten years out.

But it's just important to remain cool-headed about what's going on here. I want to make one comment. I totally agree with Chris. You mentioned before about Tron and Tronics. And I want to draw something to the book that I think, you know, Chris and I spent a lot of time on this recognizing that things were going to, things could potentially blow up as they have. But we also put things in the book on how to value assets that I think stand the test of time and can be evaluated and people need to look at. You mentioned tronics. Okay, and we all know we've seen that rise up.

You mentioned about the white paper. In the book, we laid down a framework for how to evaluate assets. And specifically, these are things that can be used for the ICOs out there, white paper, developers, community, all those types of things. And the reason we did that was so that people would view assets that they were going to put their money into, like a TRON, and put it through this evaluation method that we put out there. You mentioned about the white paper of TRON

and was now seeing articles about Tron and what was wrong with it, if you had gone and taken a look at our framework for evaluating these things and evaluating ICOs that we talked about in the book, you might have recognized these types of things. In fact, we even talk about Ponzi schemes, the history of Ponzi schemes and what Ponzi schemes mean for twofold. First to kind of talk about how Bitcoin wasn't a Ponzi scheme, but additionally to also say how you could potentially see crypto assets.

that are Ponzi schemes. So we laid out a lot of these theories and a lot of this framework out there, not only that doesn't really have any, it's not set in time, but can be used to evaluate the crypto assets out there. We talk about this time is different thinking. I mean, this is the type of thinking

that people have around crypto assets. They need to understand the historical basis of this as well. And that's why you'll see chapters in there that talk about a lot of things. lot of these things. And the reason is, is not so much to get hung up on, on the numbers that are in the book, but the theory and the foundation for studying this space that we tried to lay out in the book that we feel can transcend any time in any market movements. Great. You know, I actually, I totally agree that the book does deliver on that. And it does

provide some very good frameworks and methods for, for going about this. Now, this is one more thing I would love to get kind of your assessment on. So we did the podcast with Ari Paul that I'm sure you guys know. I think it was maybe around five, six months ago. I think that was, I'm not sure if he had started, if they had started their fund that they were just about to start. And, you know, as, as Chris, as you pointed out, the market cap even then was much lower. And he at that point said that, okay, he knew of about, or he estimated that there was about 100 billion of kind of, you know, institutional, you know, kind of traditional investment money waiting to be invested into the space. And, I mean, that is the one thing that I feel like, even though these valuations seem

outlandish in many cases, that there's just this avalanche of people basically following exactly your advice, Jack, and saying, okay, I should have some exposure to this thing. It is a good asset class to have in the portfolio. It has a big future. You know, I must get into this. and not so much exactly looking at the project, right? So how do you guys look at this situation right now? You also see this huge avalanche of just money coming in.

And maybe one point to add. To me, it seems that has a kind of inevitability to it as well, right? Because if you know others are going to do it, and others are going to say, I want 3% of my portfolio in crypto, you know that has the price is up. So you also want to do it, right? and you're allowed to do it before the others. Do you guys think this is a big driver

and will continue to be a big driver? So something that I'm always looking at, there's kind of two parts to your question. There's, I would say, the institutional capital and then the retail capital and what's coming in and what's coming in when. I think we're still at the tip of the iceberg with institutionals. I mean, you've got some, clearly you had the hedge fund lift

craze of 2017, the crypto hedge fund. But in terms of sort of established financial incumbents, a lot of them, they do have their toes in the water. You know, a lot of like the authorized participants or trading shops or people are working on this, traditional hedge funds, they are working on this. So they're there, but they're not deploying capital at scale yet, because weirdly enough, especially for some of the big quant hedge fund shops, the markets are still too small, still too small in terms of liquidity and the volume that they would like to move through with their algos. So I don't think the institutional side is there in the way that it's sometimes portrayed.

And a great example of that would be what happened to Kodak stock yesterday, right? Kodak announces Kodak coin, which is really issuance of a new asset that there's no indication of how that asset is going to drive cash flows to increase the value of codec stock, which is how codec stock is valued. And nonetheless, the stock, I think, popped 130%, 150 million dollars in value was created. And I would argue that is more because in the traditional capital markets where more institutional investors are, there is still a thirst for products that they can trust that they can hold to gain some kind of exposure to crypto without holding crypto directly.

And so that was an example to me of the unmet demand and thirst on the institutional side still for crypto exposure. And it's just going to require more securitized instruments, instruments that fit the puzzle pieces of ETFs or mutual funds or other institutional money managers constraints. They can't buy Bitcoin directly. It's not necessarily that they don't want to. Then on the retail side, I'm always trying to figure out what amount of this appreciation is due to new fiat currency coming into the markets versus sort of the speculation multiple where people bid the price of assets back and forth. So I bid up Ripple and then I can bid up Ether and then I can bid up Bitcoin. and we see this cycle, right, where Bitcoin pumps and then some air comes out of it, the all the other crypto assets pump.

Now Ethereum is starting to develop its own thing, but there's this rotation cycle within crypto assets. And so I estimate roughly $15 billion a month comes into the crypto markets of new fiat. And I can run through that calculation. It's basically just assumptions around the number of new users per day, the average buy-in per new user, and 30 days in a month. And so, I mean, that's a very back-of-the-envelope estimate, but that's how I approach the retail in flow and interest as well. Let me just respond to Chris's point,

which I think is a very, very valid point about Kodak, is that it does show the appetite for the retail investor to want to get involved in this space. And I mentioned before the WinkleVos ETF and how that was dismissed and how we still don't have one. I think you're going to see that change over the next year or so. I think you're going to start to see Bitcoin-based ETFs come along and make potentially other kinds of cryptos.

The key thing here is that the user experience for the retail side has to be improved. I mean, you can talk to people who say, you know, I want to get involved. I open up an account of Coinbase. Everybody gets pointed to Coinbase and they grow frustrated. And then they want to buy this asset and they have to go to another exchange. It is not an easy thing to do. It is a hard job, honestly, to invest in crypto assets. The user experience has to be improved,

and there have to be instruments that I think will make it easy for people to invest. We're getting there. I think it's an opportunity, and I think you're going to see it. Additionally, I think you're going to see diversification in the space. I think you potentially will see investments

that allow you to invest in different segments and have diversification. Ethereum, perhaps Minero, perhaps ripple in a portfolio. I think you're going to see these types of things. One point on the institutional point that Chris made, I thought it was very interesting this year with ICOs. Beginning of the year, ICOs, anybody could get into ICOs.

It was a very democratic way for the average person to really make some money. I remember the old days of IPOs. You couldn't get an IPO unless you went and played golf and let your broker win at golf. That was the only way you'd. could get an IPO stock. Okay. Now all of a sudden we have the ICO market and anyone can get in.

And six months ago, you could have threw a dart in any of these ICOs and you could have made money. What we've seen now is obviously we've seen a lot of lousy ICOs come along, but we've also seen institutional shops start to jump in and say, wait a minute, we want that ICO. So you've seen some of the democratic nature and the individuals benefiting from ICOs kind of falling by the wayside with a number of these ICOs, which has shown the institutional money coming in. And I mean, how many times you looked at the ICO markets as

there's a pre, pre, pre, pre sale and millions are being thrown in by institutional shops and institutional money. So I think that's been an interesting aspect as well. But clearly it shows institutional money is coming in. I think to Chris's point, very valid. The markets may not be big enough for that. But on the retail side, there's a huge opportunity for people to come along with investment vehicles that are user-friendly and allow people to easily and seamlessly get involved in this space and not have to wait for a company to change their name to incorporate blockchain or to come up with coins or whatever, but to be able to play in this market and do it easily. And I think once that happens, the exciting thing for me is then,

people can rely upon advisors and investment professionals to provide advice to them around the space because right now they're running blind. And we need to see some more advice and professional help around this space to help out the average investor. Makes sense. So we're coming to the end of the show.

So I think the final thing we'd like to cover is your experience of writing the book and like, So your book is one of the first that really tries to go into the theory of like, like classify crypto assets, value crypto assets, and covers the whole universe as opposed to being a book just about Bitcoin. After you published the book, the markets have changed a lot. Is there anything in particular that you wish you had done differently? Well, to give a little bit of background and then circle back to what do we wish we had done differently,

You know, the book was born by Jack sitting down next to me at Consensus 2016, I think it was. And Jack was the one who pitched me on the idea of the book. Jack's really the one. Jack was the genesis of the idea of the book. And he was like, you know, I'll get us, I know an editor, I'll get us an agent, we'll submit a book proposal. And I was kind of in disbelief. And we went and we did it. And lo and behold, we got a deal from McGraw Hill, I think, in November of 2016, started writing

December of 2016. So it all came together rather quickly. But when we were putting together the book proposal, what we realized is there truly was a market opportunity. Because while the crypto asset markets weren't, you know, the craze that they are today, I think when we started writing the book, actually, they were at $10 billion in network value for the actual start in November, December of 2016. But what we realize is there had been two previous eras of, books about this space. There had been the Bitcoin books, right, like Jack's early book, but then the Bitcoin Big Bang, the age of cryptocurrencies, and I would say digital gold by Nathaniel Popper really sort of was the marquee book of the Bitcoin era of books. The second

era really followed sort of the progression of the space. They were the blockchain books, or the blockchain borderline not Bitcoin books. You know, that sort of Bitcoin winter we went through of 2014, 2015, 2016, as people were, you know, saying, oh, clearly Bitcoin's not going to work, it's dying, but it's this blockchain thing, this DLT thing that's really cool. And so we had those books. And, you know, the authors of those books, they are fans of crypto, so I should give them credit for that.

But the emphasis is on blockchain technology. And with the blockchain revolution really encapsulating that era. This third era that we felt coming, but we saw a window for and an opportunity to write a book for, is really the crypto asset era. It's going beyond Bitcoin. It's going beyond blockchain technology. It's saying this is an asset class as a whole. This is the whole variety of what's going on here. This is what it means as an innovation for the world.

but really focusing on the permissionless public blockchains because you never ever bet against open in the history of information technology. And so that's why we wrote this book. And we feel very fortunate with our timing. And we do think that there will be a proliferation and we're already seeing it on Amazon with self-published books of these more broader crypto-focused books, sort of this third era of books on this space. in terms of things that we wish we had done differently, I mean, Jack and I joke about this often, and we have been getting inquiries about, you know,

will we update the book or will we write a sequel or what do we want to do? I have to focus on Play Solter. I'm exhausted. I don't think I can write another book for a while. But it is true. I'll just leave it to blogging on Medium for now. But it is true that there is so much, I think Jack and I have learned over the last year that we could write a second book, no problem. And not to say it would be better than the first book, it would just go into more detail on more

topics that we know people are craving. And so I'm happy with how we did the book. I think we could write another amazing book if we put our minds to it or each individually do that. And I guess where I finally land on the book is it fits a more. market need and provides the foundation that a lot of people are craving in this space right now from a perspective that they can relate to. I will just share with you a little bit of a secret here is that originally we wanted to call the book or the book was going to be called something different.

And it was interesting because we spent a lot of time discussing this. But originally the book was going to be called blockchain assets. And we spent a lot of time evaluating that. And a lot of that discussion... Which would have been a nightmare. Right, right. And a lot of that, and even crypto assets, people are like, what the heck? You know, they're expecting a horror story.

But a lot of our discussions around that crystallized a lot of our thinking around the taxonomy and led us to the spaces that we brought the book. So we grew a lot writing the book and it really crystallized. and synergized our thinking around this. I do want to share one last thing about it, which I think is a good example of this whole space. We published the book, and we have a very good publisher, and the book came out, and the book met some immediate success.

That success was really a surprise to the publisher, to the point that if we have listeners out there who went on to, to Amazon and found themselves being unable to buy the book because it was out of stock, it wasn't our fault. I think that people were surprised by the interest and the support in this book and in this title. And I think it surprised even the publisher, which I think says a lot about this whole space, is that there's still this disbelief or this dismissal of this space as being as big

and as of interest as it is. And I think that was kind of an example of this. And, you know, where we go with this going forward, we don't know. We were trying to, you know, like Chris says, trying to keep our social media and medium and even the website that we have about the book up to speed. But it was an interesting take. I'm glad I was able to do it with Chris. And I do believe that the book has found a good time in being published where it

was, but I do think there's a lot of value that if you go into the book can transcend this current time frame and even things into the future. We tried to put a lot of theory in there, which I think still pays dividends to this day. Fantastic. Well, thanks so much, guys, for coming on. It was a real pleasure. We were running quite late, but it was so enjoyable. I can't, you know, that's how it goes. So, yeah, thanks so much for writing as book and coming on. It was really interesting to talk with you guys. I'm sure there will be a lot of kind of follow-ons and updates, and changes in the valuation frameworks, the markets, and hopefully we can do a repeat of this at some point.

Of course, we will link to the book, some of Chris's Medium Post on this valuation framework, Jack's articles about how he lost his retirement money in Bitcoin and then gained it again. And yeah, so I hope we just can check this out. And yeah, thanks so much for tuning in. once again, we are going to be back next week. And if you want to support the show, you can leave us an iTunes review.

Actually, Chris, you did that once. I saw it. So thanks for that. I did. I'm still waiting for my t-shirt. Yeah, yeah. We're going to get new t-shirts, mate, and you're going to get the first one. Wait, what do I have to do?

What do I have to do for a shirt? Come on, I'm one of those guys that loves freestyle. Well, you can leave us an iTunes for you or you can send a really nice note and probably either one would work. Well, thanks to you guys. Thanks for having us on. Thanks. Thanks, really appreciate it.

Thanks. Thank you.