The Wolf Of All Streets - Is Blockchain Eating Wall Street Or Is Wall Street Eating Blockchain? | Alex Tapscott, Blockchain Research Institute

Episode Date: October 23, 2022

Alex Tapscott is a prolific writer, speaker and investor. Together with his father, Don Tapscott, who has also been on the podcast, he co-authored the best-selling book “Blockchain Revolution: How the Technology Behind Bitcoin and Other Cryptocurrencies is Changing the World." They also co-founded the Blockchain Research Institute, a multi-million-dollar think-tank focused on cryptocurrencies and underlying technologies. I sat down with Alex during Mainnet in New York to discuss what has changed in crypto, why he thinks that this bear market is different from the one in 2018, and why he believes that nothing can stop crypto. Alex Tapscott: https://twitter.com/alextapscott ►► JOIN THE FREE WOLF DEN NEWSLETTER https://www.getrevue.co/profile/TheWolfDen  GET UP TO A $8,000 BONUS IN USDT AND TRADE ALL SPOT PAIRS ON BITGET FOR ZERO FEES! ►► https://thewolfofallstreets.info/bitget   Follow Scott Melker: Twitter: https://twitter.com/scottmelker  Facebook: https://www.facebook.com/wolfofallstreets   Web: https://www.thewolfofallstreets.io  Spotify: https://spoti.fi/30N5FDe  Apple podcast: https://apple.co/3FASB2c  #Bitcoin #Crypto #Trading The views and opinions expressed here are solely my own and should in no way be interpreted as financial advice. This video was created for entertainment. Every investment and trading move involves risk. You should conduct your own research when making a decision. I am not a financial advisor. Nothing contained in this video constitutes or shall be construed as an offering of financial instruments or as investment advice or recommendations of an investment strategy or whether or not to "Buy," "Sell," or "Hold" an investment.

Alex Tapscott is a renowned speaker, author, and thought leader in the crypto space. Few people are better at articulating the future of Web3 and the potential of crypto. You definitely do not want to miss this conversation. So you gave a renowned TED talk called Blockchain is Eating Wall Street. Could you make the argument now that Wall Street is eating blockchain? Yeah, I haven't thought of it that way. You know, when I gave that speech, Blockchain is Eating Wall Street, it was the fall of 2016. It was a time that was before like DeFi had really entered the vernacular.

And certainly there weren't any of these kinds of projects that we see today. But there was, we saw the potential basically for this technology and this asset class to replace a lot of the functions of what the industry does. And I think that at the time we said there's a difference between what crypto and blockchain does and what fintech does. You know, fintech is really just digital wallpaper. It's a better user interface to access the old world of financial services. DeFi is something totally new.

DeFi is reimagining the industry from the ground up. So what does the financial industry do? Provides people a way to move money, store money, access credit, exchange assets, raise growth capital, insure against risk, do auditing, and do identity. And those are the key components. And for the three years after I gave that speech, that call looked prophetic. But now, to your point, we're seeing as DeFi and crypto grows, there's more big money that's

entering the industry. And as a result, a lot of traditional financial players, big banks, hedge funds, market makers, asset management firms are getting involved. But I would say right now, Wall Street's not eating DeFi. I think Wall Street is trying to create some form of hybrid that gives them access to a high growth market and the potential for big returns without trading away the things that they're used to,

which is centralization, control, oversight, and so forth. And I think if you look at the past year, what's happened in 2022, it's actually been the DeFi names that are more organic and more crypto native that have fared much better than the companies that were funded by more traditional players. Companies like Celsius and Voyager are corporations that had, in some cases, big Wall Street, big pension fund backers and didn't end up doing that well. Part of the reason was because they were centralized and because they were opaque, it wasn't obvious that there was trouble brewing until it was too late.

Whereas with DeFi, everything is transparent. And so I think, yes, we're seeing more big players in the space, but DeFi is still doing its own thing. Right, it's hard because sometimes I don't know whether I'm supposed to cheer for them to come in because they're big money and the number will go up. And if we want mainstream adoption, we need Wall Street too. Or if I should say, get out of our sandbox.

This was built to kind of be a hedge against everything you guys are doing. Yeah. Well, I'm definitely in the former camp. So, you know, this is a new technology paradigm, right? Blockchains, Web3 creates a digital medium for value. And so that means that we can create digital versions of any asset in the world. And some of those assets are assets that haven't existed. There are new kinds of projects that are being created that will create new capabilities, just like the internet created new things that didn't exist before. But there's also a lot that the internet did that improved the way that existing things

work, how we consume content, how we consume the news, how we're able to communicate with each other. So all of those things are good. And so I think in order for this to reach its potential, you do need mass adoption. And part of mass adoption means enterprise and institutional adoption as well. The way that I look at it, there's different kinds of institutions. There are institutional investors who are, you know, I think people hope dumb money that's going to come in and bid up the price of assets and, you know, cause the number to go up. But then there are the companies that recognize that they need to be in this industry and they need to be building in this industry, not just buying, right?

And so you look at companies like NASDAQ, for example, launching its digital asset business, Starbucks with its NFT project, all the big fashion houses, you know, looking at create like the creator economy as a new way to, you know, stay hip and relevant. Game studios that are looking to build things in GameFi, Wall Street banks that are looking at DeFi lending pools as forces of liquidity for the trading operations. That's not just big money buying the tokens and hoping it goes up. That's big companies that recognize the potential of the technology and building new capabilities with it. And that, to me, is a really exciting thing. Yeah, it certainly doesn't seem that they're scared off by the bear market or concerned about the longevity of the asset class.

Yeah, I get this question, rephrase the question slightly, which is, you know, is this a repeat of what we saw in 2017, 18, right? Where we had like a big, you know, bubble pretty much, like a lot of excitement, you know, big new, big new thing. The big new thing then was ICOs. The big new thing here is, you know, went free. But now we've got a blow off top and we're in for a long bear market.

And putting aside what happens with the price, because I can't predict the future, there's some pretty positive signs that adoption is not slowing down. So after 2017, 18, during that crash, the number of Bitcoin wallet addresses that held less than 0.01 Bitcoin, which was like $100, $200, declined significantly. People who came into the market got burned and they left. The little guys. Lost their $100 and said, I'm leaving the casino, man. I should have never trusted my cousin Vinny with that stupid Bitcoin idea. This time, though, the number of wallet addresses that are hitting, sorry, that have that sort of bare minimum are hitting new highs

And they are every day now some sometimes that's people with multiple wallets or maybe it's businesses and institutions of multiple wallets But you're seeing a broadening of ownership of the asset class So that's on the retail side and then on the institutional side What you're seeing is a bunch of companies that have been planning clearly for a long time to launch with new crypto Web3 strategies. They're not going to stop because the price went down for a few months. It's like they're making multi-year business decisions. And anybody who's committed to doing this and spending millions of dollars is not going to be derailed by the moves in the market in the short term.

So I think that seeing more and more institutional, more corporate implementations of Web3 is going to be the key trend. And by the way, this isn't enterprise blockchain that we're talking about. I think the story for the first few years of this industry, call it from 2015 to 18, 19, and maybe even more recently was, okay, we like the benefits of blockchains, but we're going to do it our own way. And that's because to give them some credit,

the public blockchain infrastructure was not ready for prime time. But I think the lot has changed in the last year and a half, two years. We've seen all layer ones, we've seen layer two and other scaling solutions. And I also think the Ethereum merge is going to be a huge catalyst for enterprise adoption. Because if you talk to a lot of businesses, and I do, like I was a co-founder of the Blockchain Research Institute, our membership

includes companies like FedEx, Exxon, Delta Airlines, Coca-Cola, big brands, big corporations that aren't necessarily high tech. They always looked at some of these protocols and said, this seems like maybe we're not quite ready to do stuff on these platforms. With the Ethereum merge in the rear view, now there's opportunities to scale that technology. The fact that it's now 99.5%, whatever, less carbon intensive, it's going to be a huge boon for corporations because a lot of them are under the gun from investors and regulators for ESG reasons. And so I just think the conditions are lining up really, really nicely for a period of substantive, long-term enterprise adoption of blockchain. Not proofs of concept, not press release announcements,

but actual real meaningful business transformations. And that, if you think about number go up and you want to talk about price, like what happens to the value of ETH if all of a sudden half the Fortune 500 is building on that platform, for example, right? You know, it's going to probably be good for the value of the underlying platform. Yeah, I mean, my sort of not financial advice whenever people ask, you know, what part of crypto should I be in?

I want to be in the metaverse. I want to be in NFTs. It's basically what you just described. Just buy ETH. Buy a couple of layer ones, you know, have a small investment in each because you'll benefit from whatever's built on top of them. You don't need to find the 100X metaverse that wins if it's built on Ethereum. Exactly. Yeah. And honestly,

investing in this asset class is actually quite difficult. Everyone thinks it's easy because there have been these life-changing wealth creation events like the Ethereum token launch. But for every project like that that ends up being very successful, there are many more that have failed or fizzled out. And even the ones that still exist, if you look at the average entry point for most investors, a lot of them are underwater. Like Bitcoin right now is right at its realized price, which is basically the sort of average price that- It's pretty crazy when you think about it. I know. And it's only happened twice before. So to me, it's like either Bitcoin's this we're all wrong about this and maybe this isn't what we think it is,

or this is, you know, a very historic, generational, generational buying opportunity. But to your point, like once you go down the long tail of tokens, man, the quality and the success rate drops so significantly that it does make investing in this quite tricky. Yeah. I think that your average investor probably is best to stay away from anything beyond the top view by market cap and then see what happens next. But listen, you're on top of this all the time. Are there any trends or new use cases that are particularly exciting to you right now? I think I'm looking at a lot of the same things that other people are looking at.

I think that with the focus on consumer-facing applications being a key element, so things like gaming, you know, the growth of DeFi, all the things that can help to drive incremental user growth to Web3, I think is going to be really important. I also think that, you know, the big trend that I think is really underreported and not covered well enough is this enterprise story. I think everyone's looking at the merge as this is so great, it's going to help to scale, you know, define these other things. And it's going to clear the deck for network upgrades and the introduction of sharding and all the rest of it. But no one's really talking about, hey, maybe this is the, you know, the broadband moment for crypto, for Web3.

Then all of a sudden, there's not really that much you can do on the web in a 56 kilobit modem, right? The web is a passive medium for consuming information, and the information comes at you slowly and it's not really presented all that well. Well, now we've got a new pipe and that new pipe is going to make it easier to do much cooler stuff. And I think of the Merge as being kind of like that move to broadband where we've got this new pipe. Now, the Merge didn't make Ethereum faster or more scaled necessarily, but it's the big thing that had to get out of the way for all those other upgrades to occur.

And so that's why I think the news on the Ethereum side is going to come fast. By the way, it doesn't mean I'm an Ethereum maxi by any stretch of the imagination. I think that especially when the market recovers, the demand for state and the demand for blog space is going to be very significant. And I think that there's going to be more and more demand for blockchains that are application specific or specific to certain kinds of use cases, you know, small dollar transactions, gaming, large dollar transactions, you know, Wall Street. Metaverse, NFTs, whatever. All this stuff.

And so I just see that, like, I don't know which of these L1s and which of these scaling solutions is going to, you know, guaranteed to be successful, obviously. But you can see that some are, you know, gaining widespread adoption. And I think that as a result, you know, the rise in title lifts most boats.

So do you think we get to a point where every major corporation has some sort of Web3 compatibility presence? I mean, Starbucks. And what's crazy is that you get news that Starbucks is literally incorporating NFTs and we don't even get a price move in the crypto space anymore based on it.

Yeah, no, that stuff doesn't move the needle, which is interesting. I think that for the next few years, you're going to hear a lot of announcements from companies that they're starting some Web3 initiative. And then after a few years, you're going to stop hearing that. Not because it's just like a company announced it's like Internet strategy, you know, like it's just or it's mobile strategy. It did when the mobile web became really popular with the invention of the iPhone. It's like, why doesn't Facebook have a mobile app? Oh, we're into mobile, mobile, mobile, mobile. And then nobody talks about mobile anymore.

Like, oh, if we're into mobile, it's like, yeah, of course you are, because that's the internet. That's how we access the world. And it'll be the same thing here. You're going to stop hearing about Web3 because Web 3 is going to be ubiquitous. Right, when it just becomes the underlying technology of everything. And is that the metaverse to you? No. I think the metaverse is just an element.

Well, I mean, it's worth sort of talking about how to define that. So I think most people would agree that the metaverse is some combination of a persistent online world that you can access using VR or AR or something like that. And then, because there are people talking about the metaverse without VR, I'm not totally sure what that is. Zoom. Yeah, right. And then there are other people, by the way, who talk about the metaverse without Web 3.0, and I'm not totally sure what that is. Zoom. Yeah, right. And then there are other people, by the way, who talk about the metaverse without Web3,

and I'm not totally sure what that is. Because if you're using, you know, if you're in Mark Zuckerberg's metaverse, and he's taking a 50% break on all transactions inside of the app, and you can't move those assets if you buy them outside of that universe. And you have no say over how the platform is run. And the terms of service can be changed on you at any point in time. And people can be kicked off without due process. That's not the metaverse.

That's just what we have today with a VR headset. That's just Web 2.0. And no legs. Yeah. Web 2.0. Yeah, you're just like a floating blob. I don't even get to have legs. I know. Come on, Mark. You're just a smiley face with no legs.

So, you know, I think you need that idea of digital property rights for the metaverse to work. Because if the metaverse is going to reflect our physical world, then it has to have some of those same kinds of basic rights, the same kinds of basic components. And right now, on the internet, like, digital property rights are only enabled kinds of basic components. And right now on the internet, digital property rights are only enabled through blockchains. That's the only way they can be enabled. Do you see a place for Bitcoin in the metaverse in that sort of future that you just described? Or has Bitcoin become sort of this real world bearer asset, digital gold, and then everything else is built elsewhere? I can't say how smart people who are in this space

are going to use Bitcoin or figure out how to build on it. It's not my place to say. I think that Bitcoin's clearly established itself as the preferred long-term store of value crypto. But I think there's a growing sort of feeling that it's not particularly useful as a platform for programming applications because that's not how it was designed. And people have been trying. I mean, I've had conversations with VCs who have been at this

since 2014, 15, and they were funding projects that tried to build applications, DeFi and Bitcoin. And it's just not quite what it's designed for, right? It's like trying to design cloud on email. I mean, they're both the internet, but not really. They're both different things. You just can't do it. Maybe they interact in some way, but they're just not the same. So it sounds like if we're going to have specialized

blockchains, which is what I believe too, we'll sort of live in a multi-chain world. Slata maybe becomes the gaming platform and AVAX the enterprise or whatever they are. Doesn't that mean that we should be focused heavily on interoperability and how to solve those problems? Because right now all I see is bridge hacks. Yeah.

Well, that's one of the crucial weaknesses of this whole thing is that everyone talks about composable blockchains, composable liquidity, applications that click together like Lego. But the fact is they're all built in different ecosystems. And the only way we've had to connect them is bridges. And bridges are clearly not the sustainable long-term solution. Because the more successful a bridge becomes,

the more a target it becomes, right? Because all these assets locked in these bridges and a big attack surface and any flaw and all of a sudden they can be completely drained. So you need ways to connect these different chains together. Maybe that means that Ethereum wins out and everyone moves back. I don't believe that. I just don't think there's enough state in that network to support Web3.

So I think you need some solution. I think that Cosmos, for example, is a good example of a platform where the basic idea is every application should have its own chain, which it can program into whatever sort of needs it needs, like whatever sort of specifications it needs. But all of these different chains are going to have shared, some shared capability, right? Some shared security, some shared functionality, and they're all going to connect with each other.

And I think that feels like a logical path, like a logical end state. It's like, yeah, that makes sense to me. I don't know how that's all going to play out. Yeah. And the thing that very few people talk about is that we have this push for decentralization and this utopian decentralized world, but it's all on Amazon Web Services. It's all on AWS in the cloud and it's completely centralized. I know. And I'm not sure that, I don't know what the solution is to that. There are decentralized computing and storage networks like Filecoin

and the Cache network and others, but they're tiny compared to the cloud providers. I don't know if this is possible, but if you could gather all the computing resources of big data centers and pull them together the same with the same kinds of data centers that like AWS and others employ and No single, you know company or entity had majority rule. It was more like Like the big boy mining network. Yeah, exactly. Let's say we'll call them nodes And and they'll stay will stake something. No, you know, I just think that's the only way that this works. And that goes to another question, which is, you know, how will things like the metaverse ever that are Web3, you know, like OpenSea, for example. When you have an NFT, you have, you know, an ERC-721 digital asset. But it's still eBay.

Yeah, except they're the platform. But also all the art and all of the other metadata that goes into that thing you own is not stored on-chain, right? Right. The board ape is not on-chain, like the image of the board ape. So we're still relying on these centralized players to smooth out the user experience. So is that just a growing pain, and soon we're going to have that functionality and we'll get over it?

Or is this really a technology that will exist on some kind of a spectrum, right? Where at a certain point, you're going to make trade-offs with centralization for convenience. I don't know. I think it's that. Yeah, it's starting to look like that,

but you could also make the case that like... And that's still better. Yeah, for sure. It doesn't have to be black or white. Exactly. If we can program property rights into the internet, uh, and give people a way to prove their clear title to the things they own and their own data and, you know, give them back some economic value, like some economic, um, rights online, then that's like

a very good outcome. Even if it means we're not going full web three, but I still think it's too early to say. I agree. Do you think that, uh, anything can stop this at this point this point? No. Regulators? No, no, no. Well, look, can regulators change the shape and nature of how this innovation occurs? Absolutely. Can they put the cat in the back of the bag? No, I don't think so. But it doesn't mean that the industry shouldn't be organizing for a dialogue or fight, depending on your perspective, to ensure that its priorities get addressed and that if any rules do get created, that they're ones that foster innovation.

And by the way, there's plenty of precedent for this, you know, with the first era of the internet. With the first era of the internet, there were people, by 19, I think by 1997, there's still only one internet connection in the US Senate. Ted Kennedy. So 100 people, one internet connection. And one senator, who didn't have the internet connection, reminds me of people who have never used, you know, any of these tools, said the internet is just a platform for publishing pornography, and would actually print off porno that his staffers would find online. I guess they'd go to an internet cafe or to Mr. Kennedy's office, I don't know, and print

off a bunch of internet porn. And this guy would go around waving this internet porn in everyone's face. And then there were other people in government who said, well, this feels like radio, so if you want to create a website, you have to get a CB radio license. And that's got to be issued by the government. And these are the kinds of proposals that were floating around. But the government took an enlightened approach. Telecommunications Act came into effect.

And as a result, the conditions were laid for the commercial web to really flourish. So I just think this time there's a similar thing where, you know, if CB radio licenses required to launch websites in the US, the web would have happened somewhere else. It just wouldn't have happened in America. And I think if you're an American policymaker or business leader, you want the web to happen, you want Web 3 to happen, you know, in the United States. You think.

You think. You think. So we've seen that way. Or at least not from the voices that are screaming the loudest. Well, sometimes the loudest voices are not representative of the, you know, body politic of the majority. So we'll see. I mean, it seems like there's an inevitability about it anyways.

It just may take longer. But no matter what, the younger generation eventually comes into power and they already get it. Yeah. I think so. And so the powers that be will eventually be either 130 years old or gone. And I think that the Generation Z and everyone younger is just going to be completely native to this

and it's going to be a part of their lives. Yeah, I mean, people were shocked when our generation went online for the first time as teenagers or as kids. And for our parents, the idea that people used computers at all was kind of a novelty. Personal computing, even in the 1990s, was a very small thing. Computers were business machines that

were used for data processing. They were not tools for communication and for fun and for play. And I think a lot of people feel the same way about Gen Z and even kids younger than that who are just kind of crypto-native in the same way that people born in the 70s and 80s kind of grew up internet-native. It was not unusual in that way. So I think you're right. So what's the next TED talk? Web3 is eating the world. I like it.

I like it. Well, let's hope that the world doesn't eat that in Web3 then. Great to finally sit down and do this in person after so many times across the screen. Thanks, this has been great.