DAA Manager Insights: Blockchain Assets Pty Ltd
Klaus Schwab’s saying that “Change can be frightening, and the temptation is often to resist it. But change almost always provides opportunities — to learn new things, to rethink tired processes, and to improve the way we work. “ This is the logic our DAA manager Blockchain Assets Pty Ltd (Ian Love and Calvin Ngo) is seeing in blockchain trends. Today’s insights point toward interesting trends that not many of us are aware of.
In 1992, when many multinationals were coming to Asia for the first time and rapidly expanding their footprint there, you moved to Hong Kong and helped PwC establish businesses in Cambodia and Vietnam. In 2016, you got involved with blockchain, and a few months later you founded Australia’s first digital asset management firm. It seems you always recognize good opportunities and follow the trends. What are some opportunities and trends you see in blockchain today?
We are of the view that blockchain technology is enabling a whole new ecosystem of human interaction in which interactions will be peer-to-peer in a trustless environment.
At a macro level, throughout human history, the slow trend has been a movement away from centralized power structures (think of the movement from monarchy to democracy and the constant struggle for freedom), and blockchain technology is the tool that can rapidly accelerate the adoption of decentralized governance structures for the betterment of humanity.
On the investment side, I see three concurrent waves of opportunity.
Existing “real world” businesses that are able to enhance their economics by adopting blockchain technology. Projects like Hyperledger, R3, and the Ethereum Enterprise Alliance are examples. But there will also be companies that simply add “Blockchain Ltd” to their company name or announce a blockchain initiative, and these will also enjoy share price growth as a result of the hype.
On the crypto side, there will be projects that disrupt and in some cases extinguish “real world” businesses. This is most of the existing cryptos.
Even more exciting, and also on the crypto side, projects will emerge that are natively enabled by blockchain technology (for example, Facebook was natively enabled by the internet; there was no Facebook equivalent in the analog world).We have no idea what these will look like but will know them when we see them.
The bigger long-term gains are going to be in waves 2 and 3 above, and our fund only invests in these waves. The best way to get exposure to these waves is through buying and holding crypto-assets for the long term. We believe that the best assets have not yet been imagined, and we will hold the majority of our investment in the most advanced projects (Ethereum, for example, but also BAT and Digix) pending the identification of the four or five better “killer” projects in this space.
Talking about taxes and crypto: do you believe the government is already prepared for all this blockchain innovation and the opportunities that can be reached via these new concepts?
Governments around the world are becoming aware of the potential of blockchain technology and developing their “personality” on how to deal with it. There is an initial mantra of “We love blockchain technology but don’t like cryptocurrencies.” To me this is like saying “We love the internet but don’t like email,” or like trying to unmix a gin and tonic.
Taxation is reasonably simple. Existing laws could treat crypto-assets either like foreign exchange or like property. There is a question around compliance and how tax authorities can enforce existing laws, but even then all they need to do is request information from exchanges. Taxation is not an issue. The bigger issue is what the government is collecting taxes for. If they put government services on the blockchain, a lot of those services will become redundant, and therefore the need for taxation will be considerably reduced. This is something they think about.
Foreign exchange control is a much more complex matter. We already know which countries have strong protections around the trading of their currencies. Even those countries with “hard” currencies will start to fear losing control over the economic impact of monetary policy if that impact is reduced due to the use of cryptocurrencies. Cryptocurrencies do have the potential to disrupt the power of central banks, and this is something no government will take lightly. This clashing of currency cultures (fixed monetary policy (protected by code) over discretionary monetary policy (administered by independent third parties)) will go on for decades. It will be one of the last great struggles between the people and the centralized power of governments.
Your position in Bitcoin Cash is much bigger than your Bitcoin position. What was the logic behind this decision? Do you expect Bitcoin Cash to overtake the “throne” and become the new king of crypto?
We are expecting Ethereum to overtake BTC first before the end of the year, and then Bitcoin Cash will overtake Bitcoin but perhaps stay below Ethereum.
We prefer Bitcoin Cash because the supporters behind its development are staying true to the original mission statement of Satoshi’s whitepaper. Two prominent supporters, Roger Ver and Craig Wright, are very credible individuals with a deep understanding of economics and mathematics. They are both thought leaders, and their motives seem to be aligned with the objective of delivering cash via a peer-to-peer electronic cash system.
We believe Bitcoin Cash will become the cash for the world and that Ethereum will be the most important commodity the world has ever known.
What would it mean for the crypto ecosystem if more established companies chose the tokenization model? Is there a chance that these companies will overtake the spotlight?
I have a slight concern about established companies entertaining the idea of tokenizing their businesses. The equity joint-stock company model will not blend well with the DAO/ICO model of the blockchain world. There are some lessons in the equity world that can and should be brought into the crypto world, but to apply the crypto model to existing structures is to me a bit like using a jet engine to power a Spitfire.
It will be very interesting to see how these worlds blend and merge over the coming decades. I suspect many scams (intentional or otherwise) will involve joint-stock companies issuing crypto for no good reason and that a crypto-driven bubble will emerge in the equities market. We have not seen this yet, but it will come, and it will be huge. We will not participate in that at all; we are 100% on the crypto side and are playing a long game 10–20 years in the making.
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