Naval: The Investor

SF Blockchain Week post #3

Abstract:

Naval Ravikant gives a full spectrum view on the current state of the blockchain industry. It’s a balanced view that focuses on solving specific problems.

Commentary:

Institutional interest is just starting, but the buidl crowd has a lot of work to do to solve for scalability and figure out adoption.

Notes:

Institutional interest

Paradigm, Sequoia crypto light — legitimizes crypto funds, other LPs and other VCs

USV, Sequoia, A16Z gave the green light on crypto

Willing to take these risks

Legitimization story, but other endowments will kick the tires for another 12 months

Slowly inching in

Institutions are waiting for high quality custodians

Coinbase, BitGo, Ledger, Anchor

Largest classic institutions

You need to have custody

The power of crypto is in decentralization

You can be your own bank or you don’t need a bank

The real revolution is armies of programmers deploying code that drives consensus mechanisms

It’s still at the infrastructure layer

The institutions will eventually come in if the technology works

Problems

None of the coins are very decentralized

We don’t have enough developers within each of the coins

Two big areas, distribution of the coins themselves — 25 million bitcoins estimates

It’s not billions

How many machines are using bitcoins?

Not enough of those

How many dapps are functioning? Not enough

How many wallets on Android and iPhone, that infrastructure doesn’t exist yet

Fair coin — give 1 or 2 to everyone on earth

ICOs only go to a small group

Airdrop is the newest thing

How do we get these coins into people’s hands

Obstacles

Not good enough wallets

No killer dapp

The intersection of a country’s currency collapsing while population can get access to crypto

We redefine money after every few lifetimes

There’s no real analogy here

You are intersecting money, technology, governance

I don’t think anyone knows

Skeptics

Strong argument of skeptics — expensive database

A blockchain is only needed if you need censorship resistant, permission-less programmability, using coin to coordinate an entire industry

Filecoin can create a mechanism to coordinate the file storage ecosystem

Blockchain is inefficient

Crypto becomes the government’s most powerful tool

It runs counter to the way current government is constructed

It’s always a negotiation between government and individual

Will governments allow it is a big deal

Markets are larger than governments

In the fields where it does apply, it is incredibly important

It doesn’t have to have a lot of applications

Your investment model

Deeply technical teams

Working on layer 1 scaling, decentralization, consensus mechanism

People working on blockchain even if it weren’t cool

The rise of shadow financial system

dydx, dharma, 0x

everything wall street does that is exotic — high frequency trader — is done by bankers over the phone, very manual

there’ll be a day 2,3,4 years from now crypto does better

trades 24/7 global, trustless

stablecoins are there

Shadow financial system will technologically exceed the existing financial system

Advice for entrepreneurs

If you are technical, contribute to open source projects

There’s a handful of developers working on bitcoin

Community development is a big deal

There’s no master set of resources

Synthesis and communication

Get ready for when something bad happens with Zcash, Monero

Crypto is just code

Code is just speech

Speech is just thought

Government might try to control your thought