Motley Fool Money - Diving Into Crypto

Episode Date: January 23, 2022

In the complex world of crypto, how do you separate the junk from the value? Motley Fool cryptocurrency expert Bernd Schmid joins producer Ricky Mulvey to discuss what long-term investors should look for in this emerging space, including:  - How to think about allocation  - The real-world problems that blockchain platforms are already solving  - Fundamental differences between Bitcoin and Ethereum. Stocks: OSTK, NVDA Cryptos: BTC, ETH, SOL, MATIC What Is Proof of Stake (PoS) in Crypto? - https://www.fool.com/investing/stock-market/market-sectors/financials/cryptocurrency-stocks/proof-of-stake/ What Is Cold Storage in Crypto? - https://www.fool.com/investing/stock-market/market-sectors/financials/cryptocurrency-stocks/cold-storage/ Host: Ricky Mulvey Guest:  Bernd Schmid Engineers: Rick Engdahl, Dan Boyd Learn more about your ad choices. Visit megaphone.fm/adchoices

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Today on the show, we're going in-depth on crypto. Let's face it, this has become an area of investing with a lot of noise. So Byrne joins producer Ricky Mulvey to discuss how to find value amid all that noise, how to think about allocation if you want to dip your toes in the space, the fundamental differences between Bitcoin and Ethereum and a lot more. I'm so excited for this. Joining me now is Byrne Schmid. He is our crypto expert in the lead advisor for the Fool's Digital Explans.

Explorers program. For me, especially as I've explored this space, it's very, it's confusing, it's deep. There's 80,000 cryptocurrencies out there. So, Byrne, what are some of the general principles you look at when you're evaluating essentially what's good and what's bad? Hey, Ricky. Thanks for having me here. And I'm definitely very passionate about the space. Though I wasn't aware that there were already 80,000 of these things out there. However, probably, anyway, 90 to 95 percent of them aren't very useful. And so there's actually two things I'm looking for to answer your question, or that I look for when I analyze such a project.

The one is, does it solve a real-world problem in a way that wasn't able to be solved without the technology it's built on, like blockchain, distributed, such technology. So it should really employ the technology in a way that, yeah, it's being, yeah, that it solves a problem that otherwise wouldn't be solved. And the second one is, are they actually doing it? Like, is there a code already written? Is there a network effect generated? That's, that's a, actually what I'm looking for. Are there people joining this network? And is there a way forward on this where we see exponential growth for this technology or this project developing?

So is there a problem? And is there room for growth seems to be the two ideas here that you're really looking for? And hearing you in past interview, something I started thinking about, too, is when we talk about crypto, we're really talking about three types of things. There's cryptocurrency, there's asset back currency, and then there's platforms. Can you briefly kind of talk about about the difference between those three? Yeah, I have to say, this is a framework I used to work with, but it's continuously evolving. And right now, but for a broad concept, I think it's still useful to have it.

So cryptocurrencies, people generally like to talk about cryptocurrencies when they talk about anything in the space. Ethereum is a cryptocurrency, Bitcoin is cryptocurrency and whatever Solana, whatever people know. It's all cryptocurrencies. In my point of view, I'd like to differentiate a little bit. In cryptocurrency, you have the word currency, but what is the currency? A currency is something, right, as a medium exchange of exchange or it can be used as a store of value, like it's money, but not all of these, so what people call cryptocurrencies in my

opinion, or even objectively, don't try to solve a problem that currencies or money are trying to solve. And so I'd like to reserve the term cryptocurrency for coins or projects who do that, actually, like Bitcoin. Bitcoin is, like, if you read the white paper, it was meant to be in medium of exchange, digital medium of exchange. So it's definitely cryptocurrency. So you're not seeing people trying to build applications on top of a Bitcoin like they can on something like Ethereum. Actually, it could happen and it does happen.

I don't know if it will succeed in the end. But from the idea of the concept was meant Bitcoin, the medium of exchange in the very short white paper. Whereas Ethereum, for example, the second big. biggest project out there, also in the hundreds of billions already. It was meant to have programmable money. You write programs, so-called smart contracts, which are running on that platform. So that's why I wouldn't call Ethereum or ether a cryptocurrency, but I would see this as a so-called platform, the second big pillar that you were talking about.

And then I think as third, you mentioned asset-back tokens. So this could be security tokens, for example, or you could, for example, tokenize real estate that means you create a token on the blockchain, for example, on Ethereum, that represents a digital right on really a real estate project that is out there for a building. And so this is, it's not a cryptocurrency, it's also not a platform, but yeah, it's a token which represents some real world value. And I'm excited to dive in kind of deeper into those three types of cryptos later into this conversation. But something I've generally struggled with is crypto is generally a place where

you kind of dip your toe and you have to use these exchanges. It's not something that you can necessarily easily, I should say there are ways of doing it, but easily hold in something like an IRA. So for someone who's newer to crypto, let's say they have about $1,000 to $5,000 to invest, and this is money that they're comfortable setting aside for three to five years. How do you generally think about allocation for that kind of beginner who's willing to dip their toes in? It depends also on your interest. But I think most people who just want to have the interest as an investor and don't want to use these ecosystem so far, I would say, open an account with one of the bigger exchanges you find just to drop some names. It's not an endorsement.

Coinbase, Gemini, this is Avalanche, Anchorage, Krakhan. There's a couple of exchanges out there. Each offers different kinds of coins, but all of them offer the bigger ones, and that's where I would start. Like Bitcoin, Ethereum is, I think, still worthy of an allocation. And then depending on how deep you want to get into the weeds, there's certainly an actually very, in my opinion, very promising projects among the 80,000 that you mentioned. If you just look at the top 100, I'm sure anybody can find 10-15, which could excite them

if they have the time to dig into. So I would probably, to stick with your example, if I had $5,000, I would probably put 80% of it 50-50 into Bitcoin and Ethereum and the remaining 1,000, probably in one or two projects that excite me most of the bigger ones. And there was the concern, or there is a concern, right, that among some cryptocurrency followers, that if you don't physically hold the cold storage of your tokens, if you don't have it on a USB drive that's locked away, somewhere, you don't own that token, especially if it's on a exchange. Is this something, this sounds like something that you don't necessarily believe in? Do you feel comfortable using these large exchanges for crypto transactions? Yes, I do feel comfortable. The ones I mentioned, I don't have any bigger concerns about those.

There are some, for example, Binance is one I like to use. They have two platforms, one for non-US and one for US investors, so probably it doesn't affect US investors so much, but I use the one outside. actually the biggest exchange out there, but I oftentimes have issues withdrawing my coins from there. And I'm the one who likes to use these coins. I usually put them on my wallet and then employ them in a defy project or whatever I want to do. I want to stake them. And Binon sometimes doesn't let me do that. Especially when they see active trading, they've occasionally shut it down. And that's been a subject of criticism among a lot of investors. And I think one

reason that people have been a little bit fearful of getting in, especially to those smaller name cryptocurrencies. And that's fair. And so I actually don't subscribe to not your wallet or not your keys, not your coin. So I still believe that whatever Biden shows me I own, I really own. I mean, they know who I am and I don't think anybody could take it away from me, aside from some real hacks that could happen, I suppose. But I generally feel more comfortable, especially if it's bigger amounts.

to have it on my own wallet and control of myself. But that's really just me personally. But aside from just the risks, aside from the cybersecurity aspect, you mentioned that there are some exciting projects and problems that these coins are trying to solve. What's one problem you're seeing addressed in crypto right now, a meaningful problem that is being solved by this kind of technology? There's so many. It's difficult to just pick one example.

But one, just because I researched it, I think, yesterday and today, is projects that actually do video live streaming. And I wasn't aware of that, but apparently for broadcasters, video live streams are really expensive. It goes into the, if you have the numbers, correct me if I'm wrong,

but it's really a couple of dollars per hour, is it hundreds of dollars, and then you need set up fees and all these things. And the main, one main reason is the transcoding. So you're transmitting the video to, as you're broadcasting it, but then you want to have the receiver of the video,

being able to play it, fluently, if that's the right word, without interruptions. And so people with lower bandwidth, they cannot download your video probably with the bitrate in the quality that you uploaded it with, but they want to have a lower quality to have it like a fluent stream of video. And others with a high bandwidth,

they want higher quality video. And that means you actually, the video that upload, it needs to be so-called transcoded into different bitrate that then can be adjusted based on the user's bandwidth. And this is apparently really expensive in the current world with YouTube and Twitch and everybody. They have the resources to do it. But if you now use, for example, you, well, make a short, it turns out you could actually, for this transcoding process, you could actually use yours or mine computer, mainly the GPU, the graphical, like your graphics card essentially.

It's very efficiently, does the transcoding process very efficiently. And so you can make a peer-to-peer system, a net, of people who provide essentially a GPU power to this network, and broadcasters can use it and users benefit from it. And they can actually cut the costs, I think, roughly to one-tenth of what decentralized entities use. And that's only because of, well, it would be possible without blockchain, but blockchain now, you can build in these incentivization mechanisms that you would actually be really interested

in providing your GPU power because you get directly reimbursed by these coins that are being generated. And so you can use this technology to create this network and create the incentives for people really building this peer-to-peer system. It's happening. So it's the right balance of there's a problem, which is, you know, the way that we use GPU power on our computers is incredibly inefficient. But also the personal issue of, you know, burned in Germany, why would I share my GPU with you here in Denver, Colorado? And this is a way of incentivizing people to participate in that exchange. Yes, and you know there are so many problems.

If you just think about all the censoring going on, in Twitter, in YouTube, and this is because these platforms are controlled by centralized entities, and one of the three big promises that they call them that crypto or this distributed ledger technology brings is actually the removal of the middleman. You can replace these people in the middle with a technology that cannot be censored in the end. Yeah, and there is one example of that recently on Rule Breaker investing. David Gardner sat down with Aaron Bush, and he talked about the removal of the middleman in terms of smart contracts.

So let's say the example he used was, let's say you wanted to bet on the North Carolina basketball team. I wanted to bet on the Texas basketball team. We could have a smart contract, and that bet could take place without any middleman. If Texas wins, I would get the money. North Carolina wins, you would end up getting the money. Are you seeing smart contracts being used in that kind of way, particularly in the gaming space? I see this is happening.

So it definitely exists, and it's very easy to do. And there's so many examples like this. What I don't see is right now many companies employing this type of technology, like using smart contracts to make such systems which already exist more efficient, like sports betting. But I have no doubt in my mind that this will. happen. Because this smart contract, once you have it, it's there. You don't have to maintain it. It has, well, it does have some cost operating for the transactions you generate, but it's very

cheap to then operate such a system. I think I could imagine why a sports gaming company, though, would not want to employ that because it would, in essence, kind of cut the spread that they have on these games. But I would think that if you were invested in the gaming space, especially excited about these sports gambling companies, this is something that you maybe would want to be concerned about or look into because it could be a huge disruptor for them. Thanks, Richard, for framing it like this, because that is actually the case. These people would disrupt their own business model if they would use these kinds of things. They are the middleman, and they have no incentive replacing themselves.

This is the dilemma. I want to move on a little bit to talk about Bitcoin, because I think it's the most well-known brand. it's where I have some complicated feelings towards it because it's the number one. It's the biggest brand name, but it also has a lot of problems. One of the issues that I've seen are two, one of which is that the ability or the room, I guess, for price manipulation and the other being transaction time. So the amount of time it takes for those blocks to move on average is 10 minutes. Is a medium of exchange, is that simply too long when you expect, you know, if I Venmo you

five dollars, I expect that to happen instantly or I worry about where my money. money went. Do you think that transaction time is too long for it to be a useful medium of exchange 15, 20 years from now? Yes. I don't think so that Bitcoin will fulfill the vision that Satoshi Nakamoto, the writer of the Bitcoin white paper, the inventor had for it to be a medium of exchange. And I don't see, and I think most people actually don't see Bitcoin now that way. Bitcoin, I would rather a mousy as a potential replacement or a competitor to gold as a store of value in an inflationary environment.

For many people, Bitcoin has been that and it could be in the long term. However, there's, we talked about things being built on top of Bitcoin. There's something called the Lightning Network, for example. It's actually, it was meant to solve exactly that problem. And there's transaction. So it's like it's called Lightning Fast Network. settling time, settlement times. It's happening very fast. It's cheap. So there could be stuff built on Bitcoin that might bring Bitcoin in that direction.

On the other hand, I don't know if we need that. We have already, let's call it competitors of Bitcoin, who actually are much better at fulfilling this medium-of-exchange value. They have very fast settlement times, et cetera. And I think they could do that better. One other area we talked about is kind of that the potential for price manipulation, in Bitcoin. So I read this on Business Insider, said, quote, the top 40% of all Bitcoin is held by just under 2,500 known accounts. So, price manipulation, especially, you know, it can happen at these smaller levels, but even at the larger levels, even at the area of Bitcoin, is that something that concerns you as a crypto investor?

It doesn't. You can have very long philosophical discussions about this, but I think there are about 40 million wallets out there with bitcoins, with non-zero values of bitcoins in them. That means 40 million owners of Bitcoin. Two and a half thousand of them is like 0.01% or something like this, a bit less. I don't know. It's, of course, a few people. But, you know, what are they in for the questions? Like, what is their motivation?

If they want to manipulate the price, let them do that. If they can manipulate it down by selling their Bitcoin. but then what do they want to do? So then they ultimately solve the problem because they have to distribute this Bitcoin to others. And if the network grows broader, in the end, this problem will solve itself. It's such a philosophical discussion. I think you cannot manipulate the price in the long term, right? And for us long-term investors, I generally believe that Bitcoin has a sincere chance of not replacing,

but being a competitor or even just an alternative to gold. And it could be there in five to ten years. And then I don't mind if today I pay, what is the price now, $40,000 today and $30,000 tomorrow. It's for me mainly the same option that I have on the future. Well, and I think price manipulation can be, I see your point of at an incentive level. It doesn't work because if you own the currency, you want it to go up and then you can only, it's hard to sell your way up, especially if you're creating more supply and the demand stays stable. But I think that is a general concern, especially for the smaller coins, something like Dogecoin.

We saw that a year ago with Elon Musk going on Twitter, and you start to worry about the incentives. Why is he so excited about this cryptocurrency that seems to be a meme coin but doesn't really solve any hard and fast problems that I can see? The world has become weird in some ways. This is one story. I've never understood. I'm not sure why Elon Musk was jumping on this indeed, mainly because I didn't see a value. Probably, I might just, not probably, but I might just be wrong, but I don't see a value and the problem that Dogecoin solves and why Dogecoin is more suited to do whatever,

you know, must things it's supposed to do than any other coin out there. Whatever he wanted. So let's move on to number two. This is the idea of platforms that we mentioned in the introduction platforms a little bit different than Bitcoin, which is a digital gold medium of exchange. This is where we start talking about things like Ethereum and Solana, of the things that NFTs are based on, that more applications are based on. So one question, I don't understand, Bern, and while I have an expert here, is what is it about Ethereum that allows developers to build on it in an easier way than something like Bitcoin? It is mainly because Vitalik Buterin, one of the founders, the main founder of Ethereum, he actually

saw Bitcoin. And he, if I remember correctly, I think he wanted actually Bitcoin to become something. He wanted to make Bitcoin programmable. But Bitcoin has to spend, and then that's here today, and I think that's one of its qualities. It has this strong community which thinks, no, we don't want to change the code. It is like what it is. And we want to keep it, and that's our strength. And he said, but look, if you make it programmable, you can.

And we mentioned these sports betting. And there's so many use cases out there with smart contracts. He said, I can use this technology to just create programmable money. So I'll do it. And that's what he did with Ethereum. and it could very easily happen. You can take the code of Bitcoin, extend it, and make it similar to Ethereum. But Ethereum has done it first in an alternative way and has generated this network effects

and now is quite big already. People are using it. So it's been quite successful. So the users of Ethereum are more willing to change the product than that of Bitcoin. Can you think of some of those changes? One of which I, again, know very little about. That's why I'm asking you. Ethereum is moving to a proof of stake model instead of in terms of mining and how you're

rewarded with those coins. Can you describe a little bit about some of the changes you've seen with Ethereum as it's developed? Yes, I'll do that. But first, to this Ethereum developers or the community more willing to change, probably yes, but that's also because there are different use cases. Ethereum wasn't meant to be what Bitcoin is. Bitcoin didn't want to be what Ethereum is. And so it makes sense to have these two systems and probably more.

in the future. And in terms of Ethereum, developing further, it's a very good point that you mentioned, this switch to proof of stake. That's a very big change. It's actually, it's in the transition state right now. I think the switch will occur at some time this year, where they will switch from the so-called proof of work, where minors, they have to employ a lot of computing power to contribute to the network to a proof of stake where you actually don't need much computing power. And this will make the network 99% I think more efficient in terms of energy consumption. One of the interesting things about Ethereum and these platform solutions, tokens, is that people can build on them in one way that exists in Ethereum is something called layer two solutions.

Byrne, what are these? And how should investors look at them? It's a great question. And it's a topic we could talk about four hours only. It's very complex. But these layer two solutions, they want to solve a specific problem, which is a problem of scaling. So Ethereum is like Bitcoin. It's a proof of work system.

We talked about that before. And based how they set it up, they can process about 15, 20 transactions per second at a maximum, and that's it. And that's by far not enough. Just to have a reference, Visa and MasterCard, they can process tens of thousands of transactions per second. And on top of Ethereum, you already have applications, which could actually, theoretically require this amount. You have exchanges where people trade coins with each other. You have lending protocols where constantly people deposit tokens and lend.

There's activity happening. And the Ethereum blockchain just cannot transact or process all these transactions. And that's why the fees are very high. High demand. Supply is limited to these 15 to 20 per second. So you pay a lot of money. And these layer two solutions, they want to solve that by building on top of Ethereum. A layer 2 solution, to keep it simple, is something a separate, let's call it a system,

which processes all these transactions, for example, specifically for one of these exchanges. It processes all these transactions, but it's settling them only in batches on Ethereum. So let's say there are many traders on one of these exchanges. They're trading coins with each other, and let's say this exchange is built on the layer 2. Then you have, whatever, 1,000 transactions per second. And then these are being batched together by the Slater2 solution and then sent to Ethereum in one transaction. And essentially, you settle these thousands or thousands transactions in one transaction

on Ethereum. And that's how you can make Ethereum scalable. That's a way you can get the gas fees lower as well. My understanding is that with Ethereum, the more transactions, the more congestion there is on the system, the higher the gas fees are. And that's been a big problem for people who want to transact on there. because one of the promises of crypto is getting rid of the middleman, and then I can see people being understandably annoyed when they see these high fees to do a transaction on these defy systems.

Absolutely. I want to talk about Solana for a sec, too, because that's a solution, a coin, a token, whatever we're calling it on this podcast that has a lot of attention. And one reason is because it has lower gas fees, lower fees associated. with it. That was a primary reason that I set up a position in it. And I guess I'm asking, is that investment thesis kind of sound to you, or do you think those layer two solutions for Ethereum will eventually get around those high gas fees on the main platform? This is also like a topic in itself and a really interesting question. You framed it very

well, I think. So I think, indeed, Solana is meant to do something much better than Ethereum does, which is exactly that's the scaling problem. And Solana can, I also. The promise is that they're able to scale as much as Visa MasterCard, what I mentioned before, and do this is really fast, settle very fast, and gas fees are low. They do this by sacrificing on another dimension, which blockchains have. It's the aspect of decentralization. A blockchain works by you have a lot of so-called modes. These are, let's say, called servers.

They're running this blockchain on the code and run on them in parallel, more or less. In Ethereum, almost anybody can do it. In Solana, you need, it's very high hardware and software requirements to do that. So they're not as many. And that's why people say Solana is not decentralized and blah, blah, blah. But that aside, I think Solana has this really interesting value proposition. And now, exactly, I don't see Solana competing right now with Ethereum, but with these layer two solutions. Like, if I'm an application and I want to build a blockchain application, a decentralized exchange or whatever,

I can decide, do I go to Solana or do I go onto a layer two or? Ethereum, Polygon, for example, both have similar promises or another alternative. And you asked me, how I see that play out. I don't know. My current feeling is that you will have different layer ones. You will have a Solana, you will have Ethereum and probably a couple of others, and each specialized in what they do best and people being built on top of that. I'm not 100% sure about Layer 2 solutions.

I used to think you don't need them if you can do that on the layer one. On the other hand, there's some really interesting technologies being developed, very complex stuff. The most interesting to me are so-called zero or technology based on zero knowledge proofs, which is a mathematical concept. And there's a company called Starkware from Israel, which does that. And they're building layer two solutions for Ethereum. And what they say and what it does is actually they solve the scaling problem without sacrificing, for example, the decentralization that I mentioned before.

So with this stockware solution, they say you actually inherit the security of Ethereum, the decentralization of Ethereum, but you have it scalable. So that actually means you have all the benefits of Ethereum without the drawback, the low transaction speeds. And so if this really proves it to be true and if they can generate these network effects that we talked about in the beginning of the show, I think these layer two solutions, they stand a chance. And potentially even on Solana, why not having applications,

hundreds of thousands of transactions per second, running on a layer two on Solana, depending on the specific requirements that they have. So it's more about how people are using the solutions. And maybe there is one for this idea that the more decentralization you have, the more difficult it is to process a lot of transactions at once. The third place I want to go with this discussion is the area of cryptos that scare me the most, and that's the asset-backed currency. This is, I think, where you're seeing a lot of controversies.

This is where you're seeing a lot of difficult to enforce promises. We talked about asset-back currencies is this thing that I own a token, which means I own a share in, could be anything, could be a piece of real estate, it could be a book that somebody bought. I guess my question is, is this where solutions are a little bit more difficult when you're saying I own a token that's backed by a stake of ownership in a book or the... piece of real estate or the future earnings of an athlete. That's fair.

And I think here's the legal aspect. Like, it's not solved right now. I think there will need to happen a lot of things, and they're happening. I don't know how fast, but in the next one to two years, I think we will see solutions. Like, if somebody offers, let's say, a piece of real estate on the blockchain, and how do you trust this guy that you really own this piece of real estate by owning the token? And you have to verify that yourself. So, but here's the good thing.

There's regulators also in place. There's actually, so, yeah, the SAC, that they have regulations in place for so-called security tokens. And I think a real estate or a token backed by real estate in the end would qualify as a security token. That means somebody issuing that they will need to be regulated and they will have to fulfill some reporting standards and all these kind of things and make it transparent. What do you actually really own? So it's actually possible to verify. They can only trade on certain regulated exchanges in specific cases. So you are kind of, I don't like this world in this case, but I have to use it.

You are protected in a certain sense. You can trust that this guy, if it trades on this exchange, that actually they have done the due diligence for you and you actually do own a piece of real estate if you buy the token. And then there's also this a way that asset-backed tokens are bringing in collectibles, that I think are both interesting and raise a lot of questions. One of which was there was a Dow that bought a book that is essentially how this person interpreted Dune and how it would be a movie.

And they bought the book as a Dow and then said, we're going to make an animated series based off of it. But now a lot of critics are saying, just because you buy a book doesn't necessarily mean you own all of the rights associated with it. So I think you're going to see a lot of these interesting legal questions play out. And unfortunately, a lot of some people get burned in the process. Yeah. I didn't know this example before, but this is a really good example of what we talked

about before. That you're buying the book, but you don't have the right to generate whatever based on the story in the book. If they bought the rights, they wouldn't need the book. So they could a doubt, they could form a doubt to buy the rights if somebody whoever owns it is willing to sell it. And then, I don't know how you legalize it in the end, but if you own, then And as a doubt, this right, then you could actually do all these things. You could create movies, et cetera. But yeah, this is actually the legal aspect. This is not the blockchain problem that will be solved.

But how do you do it in a legal way to do these things? However, there's no question in mind also that this is going to happen. Why should, for example, the rights to a book, why wouldn't you tokenize it? Why wouldn't you put it on the blockchain? It makes it very easy to generate the market for these things. Or think about patents, intellectual property rights in the patent office. If you put it on a blockchain transparently, you know what is there. And at any point of time, you know who owns which patent, for example.

If you have the patent in your wallet as a company, you can at any time say, look, we have this patents. And like the process makes it so much more efficient. If you want to sell a patent, you know, you just make a blockchain transaction and that's it. Yeah. In some ownership cases, it's going to make a lot of sense, but you're still at the very beginning stages.

I think for creative projects, it's going to be. may be more difficult than just intellectual property. I can't imagine dealing with a decentralized group of folks who want to have input on how we're going to adapt the animated series of Dune and having to listen to all of those notes. But Godspeed and good luck to them. A couple final questions wanted to ask you before we wrap up this Sunday show. What are some publicly traded companies?

Maybe you're a little bit concerned about getting involved in crypto directly. What are some publicly traded companies? that you think are using crypto and blockchain, defy, in an interesting way. Love the question. I'm talking my own book here. So full disclosure, I own this company, and it's the major part of my stock portfolio that I still own. I think there's one which so far has been doing that better than anybody else.

Like, in terms of utilizing blockchain, there's a lot of other companies, I think, which will profit from the general trend. For example, Nvidia, I think it's a full favorite, which produces hardware that will be used in many of these proof of work systems. But one company which really tries to solve problems, which couldn't be solved without blockchain before, is overstock. Not overstock itself. So the retailer, their company, well, you know them better than me. I'm in Germany.

I can't use them here. But they're actually an online retailer. Competitors wayfair. I think they sell a lot of home furniture. But they have, they found it. And the history is really interesting. It's another podcast. You should talk to the founder of Overstock about that.

But based on the history, they have decided to go into blockchain. They were also one of the first ones, if not the first one, accept Bitcoin as a payment in 2013 or so as a side note. However, they actually developed a system themselves called T-0. T-Sero tries to solve the problem that we experienced almost exactly a year ago with what we saw with AMC in the stock market, where actually more shares were sold short than actually shares are outstanding on the market, and then you create these short squeezes and all this havoc in the markets,

and Robin Hood has to close down, and all these things, this could be solved, or this problem wouldn't be there if you had a settlement system where you actually know exactly at which point of time, who owns which kind of share, which right now is actually not the case if you really dig deep. Shares right now are settled at the T plus 2 time frame. That means if you buy a share from somebody else,

two days later it will be settled generally. And T0, as the name suggests, they build it on a blockchain. You could do the same. It's essentially instant. If I buy an overstock share from you, it gets transferred to me and I know I own it. That's it. And Overstock does that.

And not only with T-Zero, but because they have started to build knowledge with blockchain and these technologies, they invested in other startups. And they do this under the umbrella of Medici Ventures, which is a subsidiary for Overstock, and they own really interesting blockchain startups in there. And some of them doing really interesting stuff, and it's really being employed.

Another one that excites me a lot. They do the central bank digital currencies. And actually, Nigeria, one of the biggest African countries, they have used the overstock subsidiary to implement their central bank digital currencies and I think also Bahamas or Barbados one of these Caribbean islands

they also do it and more and more countries are doing that. Then they have votes, digital voting like voting on the blockchain while you guys know a bit or two about how difficult the current voting system could be. So yes overstock is the one company that I own for that where I think they can really solve

a lot of these issues out there. That's not the one I would have expected. I was going to guess like an NVIDIA or a computer chipmaker, but overstock, something that I will be putting on my watch list. Bernschmidt, lead advisor on crypto at the Motley Fool. Appreciate your time. Thank you for having you, Ricky. That's all for today, but coming up tomorrow, what investors should know about China's middle class and the stocks that could benefit from their consumer spending? As always, people on the program may have interest in the stocks they talk about and the Motley

fool may have formal recommendations for or against, so don't buy ourselves stocks based solely on what you hear. I'm Chris Hill. Thanks for listening. We'll see you tomorrow.