Mike Novogratz’s Keynote Speech For Xend Finance DeFi Hackathon 2021
We are honored to have had Mike Novogratz, CEO of Galaxy Digital, give a keynote speech at the largest blockchain Hackathon in Africa’s history. Mike shared deep insights on the African ecosystem, his investments with companies based in Africa, his sister’s long-standing connection with Africa, and what he sees for the future of the continent, in terms of blockchain development and cryptocurrency.
His 20 minute speech covered a broad range of topics with a lot of personal antidotes (which was streamed by over 10,000 people live). Mike is a former Partner at Goldman Sachs and a former hedge fund manager, who got into Bitcoin for the first time in 2013. We highly recommend watching the whole speech.
(We have many more free panel sessions and speeches in store, so please register for “Decentralizing Africa and Beyond” here: https://hackathon.xend.finance/ or follow us on Twitter and Telegram for updates:
https://twitter.com/xendfinance
https://t.me/xendFinance)
You can catch his speech here on our YouTube channel starting at the 54:28 minute mark (the opening ceremony with Xend Finance CEO, Ugochukwu Aronu, and Xend Finance CMO, Kevin Leu, precedes his speech):
For the complete transcript of his speech, please see below:
Mike Novogratz Keynote Speech for “Decentralizing Africa and Beyond” Hackathon:
Alright, I’m starting. Guys, thank you so much for having me, ‘poor Kevin is stuck in some kind of… a cyber jail’.
Listen, it’s a busy week in New York, there’s a big crypto conference in New York, so lots of the crypto kids are here. I got this invitation from Xend Finance to be the Keynote speaker and I was thrilled because I think Africa is so important. I have a 19 year old son and I always tell him, you know what? You’re older than 50% of the people in Africa.
Africa is the youngest continent we have ever had by a long shot. The average median age in America is 38, in Europe, it’s over 40, and so Africa has a very young population, and a diverse amount of countries and it is really is essential for the good of the continent, for the good of the people, and actually for the good of the planet that we get Africa right over the next 10 years. When I look at the global population statistics, the UN did a study of the global population by 2040 or 2050 maybe, and a 100% of the population growth for the planet comes from the continent of Africa, and so if we get it right, which is building infrastructure, which is building education, which is getting governance and less corruption, I think the continent could thrive.
I visited China for the first time in 1993, I’m sorry 1992 and when you go to Shanghai, it didn’t look like Shanghai today and you had the dream to think that you could go from these, you know, fields and a few buildings in Shanghai to something that makes New York look small today, and so, when everyone says “Africa can’t do” I think they’re crazy. You have to dream the dream. If we look at what China did in 30 years, you have to understand that it’s possible for Africans to do the same amount and so I have been investing my money in some African companies — a few in Nigeria, one in Kenya.
My sister Jacqueline Novogratz runs a thing called the Acumen Fund. She’s been investing in Africa for over 20 years. She lived in the 1980s in West Africa and then in Rwanda before the genocide and so I feel like I’ve been connected to the continent through my sister even longer than my own visits, and every time I visit I end up loving it, and so, you guys have a big task at hand. Your task is, you’ve got to build an economy, jobs that keep Africans wanting to live in Africa and not migrate, and I think crypto and the blockchain can be a big part of it.
If you want to think about digital money, Africa was way ahead of the rest of the world with things like in M-Pesa, and all the different mobile money brands that exist around Africa, and so just like with the cell phones jumping the technology of landlines, Africans were the first to do it with with digital money and now we’ve got the opportunity to have to shift to the blockchain.
Blockchain could be immensely helpful in distributing goods and services that are mostly electronic goods and money to the population in a direct fashion. It could be immensely helpful in bringing transparency. If there is a criticism of Africa as an investor and a criticism of many of the government regimes is that there’s been plenty of corruption, you see lots of corruption all over the place. The blockchain in lots of ways is like an antiseptic for corruption. It brings transparency and it can bring great wealth creation and we’re seeing it all over the crypto ecosystem.
There’s always a tension when you have a new technology coming between the people that want to control things and people who want to build a new technology, so it’s not an easy straight road, but I certainly think there’s a big opportunity set up. Not over the next six months, but over the next 10 years for Africa to really adopt blockchain based systems, to start running more of their finance, financial economy, and in times the consumer economy over blockchains and so let me tell you a little about my journey and how I see the world developing.
I first got into Bitcoin in 2013, Bitcoin came after the global and US financial crisis, we had a global financial crisis in 2008 and then a European financial crisis in 2012 and Satoshi Nakamoto whoever she was, created the Bitcoin white paper as a response to this breakdown in trust in central authorities that took corruption to feeling like the game wasn’t fair. It was followed by the Ethereum white paper which was built on Bitcoin. My insight that I think has stayed the test of time, was that what made Bitcoin special was that it was the first digital signature you couldn’t counterfeit and because of that we could have scarce money or it turned into scarce digital gold.
Once we started programming on top of it with Ethereum, you could have digital art that is scarce, social tokens now like identity, we can have payment systems. And all of a sudden in the last two years in the US, really in the last six months we’ve seen an explosion of usage mostly in the NFT space. It was the first space where people said, these blockchain are used for more than just gambling. And now it’s woken up everyone in America to realize that crypto is not just a bitcoin bet.
Bitcoin is very important, I love Bitcoin, I own a lot but it’s not just a crypto bet. Crypto is not just a Bitcoin bet, it really is a technology bet, and so we’re seeing all kinds of excitement in the different ecosystems, the Ethereum ecosystem, the Terra Luna ecosystem, the Solana ecosystem, Polkadot, Cosmos, the whole Tendermint ecosystem, and many more. It’s a little bit of a renaissance for the tech side of crypto people are building. This is a space that’s innovating unbelievably fast, but it’s still unbelievably small in the scheme of total world financial assets.
World financial assets are like 440 trillion and we are 2 trillion or two and a quarter trillion, which is about less than a half a percent of the world financial assets. One of my thesis is that over the next few years that half a percent grows to 2% and then 4% and then bigger as our systems grow bigger. I’m seeing that the single thing that gives me the most confidence is the amount of human capital that moves into the crypto space.
I was on a boat last night and I was the oldest by 20 years, I’m 56. If it was a Live audience you could say oh, you don’t look 56. But my kids say dad you look 56, but everyone was 35 and under 22, 26, 28 and unbelievably talented. I interviewed Do Kwon, who was the founder of Terra Luna. He’s 30. And I asked them how he did when he was at school, he took 15 AP classes and got fives on all of them, and I was thinking, when I was in high school I took two and got fours. So he’s one of hundreds and hundreds of unbelievably brilliant scientists, engineers, programmers, entrepreneurs, salesmen that are moving into the crypto space.
When I think about the space, I think of it over a multi-year period, I’m wildly optimistic. What does that mean for Africa? The one thing that’s interesting about these spaces is, we’re creating global platforms. Right now we have an American bond market, we have a Japanese bond market, we have a European bond market, there are some bonds that come out of Africa with much higher yields in South Africa and Nigeria, but we don’t have a global bond market. Compound or some of the other decentralized finance interest rate platforms anchored on the Lunar network are global, people can lend and borrow their money globally.
When I think about one of the biggest problems as an investor, investing in Africa over the last 20 years, I think about how the currency depreciates and how fast it depreciates over time due to politics. When you control the currency, you can print as much as you want, you can keep people happy. In time, it makes your currency weaker and weaker. If you think about that, who does that hurt? It hurts the poor, it hurts the middle class. Hard to say when your savings are just worthless each day.
In some ways, Bitcoin and Stablecoins are far more important for people on the continent than they are for people in the United States. The dollar is pretty stable. It’s much more stable than most currencies in the developing world. I always say this all the time, Bitcoin is important, but in the developing world, it should be a basic human right to be able to take your hard work and store it somewhere that you know it’s safe, that it’s watched and it’s not going to depreciate in value, that it most likely will appreciate in value.
It doesn’t always appreciate in value, it was 47,000 dollars 48 hours ago and it’s 42,000 now but by all means is it a perfect store of value. But overtime with more adoption the price continues to go higher and maybe just as importantly, your ownership is codified on the blockchain that the whole world can see. That should give people security and safety that what they own is theirs, that it won’t be taken away from them by any government, it wouldn’t be taken away from them by bad actors.
I could have been more optimistic about the space. I’m really hopeful for African growth, I’m really hopeful for the blockchain to develop in Africa, but I’m also realistic that it’s going to take a tremendous amount of work. It’s going to take investment not just from Africa, but from the outside world. It’s going to take investment in infrastructure, in education. It’s going to take an internal revolution of thought. You can’t have corrupt regimes over and over and expect people to thrive. And so why I’m not hoping for a revolution, I’m hoping for a revolution of thought, in that governance stability and fairness is more accepted in African politics.
I would be lying to you if I don’t say it’s my single biggest worry in the world, when I started off, I said we have a population either benefit or bomb. It’s an amazing dividend to have so many young people that can actually change the world, or it could become a real hindrance if those young people aren’t educated, don’t have opportunities, and don’t see upside, and so it’s on the backs of Africa right now, but also the world to make sure that this giant population of youth turns out to be an amazing gift for the continent. Again, history is going to tell us that and it’s going to tell us that in the next 19 years by 2040, we’ll know whether Africa moved in the right direction or not. I’m sharing, praying, investing, and willing to help but I think it’s really up to you guys to make sure that future comes true.
So what of the blockchain here in the US? What’s my prediction, my forecast of what’s going to happen in the next few years in blockchain here in the US? I think we’ve got a really tough 12 months of negotiating with regulators and hoping to get the regulatory framework done properly. Crypto people like to think they live outside of the regulated world but you can do that as a very small ecosystem. The moment you want to be a big ecosystem, you have to participate with governments. Governments are not going to allow the financial infrastructure of their countries to just be hijacked by some renegades, and it’s learning how to work with regulators, learning how to work with governments, learning to compromise some. Those words usually taste bad to the purest crypto people, but it’s a reality, and that’s starting to happen. I’m actually optimistic about that. I think you’re going to see continued development in blockchains.
People don’t understand blockchains well enough yet. If you guys are Hackathoners, you guys probably understand them better than me, but there’s a real debate between how decentralized the blockchain should be and how fast it should be. So there’s a tradeoff between speed and decentralization and security.
Most consumers don’t know the difference, they look at the TV and they don’t care what’s on the back of the TV as they just care that they can watch their program, they don’t know how it works. I think in the longer run the same thing will be true with blockchains, but I think regulators and big businesses are not going to want to build on really unsafe or more centralized blockchains and so that debate is gonna play out over the next couple years. The market is going to decide what the sweet spot is. Blockchains like Terra Luna, which feel a little more centralized than Ethereum, now have the chance to slowly decentralize. So maybe you could start more centralized and build to be more decentralized. Blockchains like Ethereum which are too slow have level two solutions and side chains which they hope are temporary until Ethereum can really scale up to fulfill what it thinks It’s destiny is.
So, for you guys who are building projects, who are coding on top of these blockchains, you’ve got to think about which one you want to bet on, which ecosystem you want to bet on, where’s the momentum in those ecosystems? Do we want to build things that can be cross chain probably? So, I think that’s a big decision that will work out over the next two years. Then, I think adoption just takes time, the way it normally works is that I show someone Bitcoin, they get excited, what’s next? then Ethereum, and before then they’re looking at DeFi and other protocols and you know they go on this Journey.
Our company Galaxy, we try to take customers on that journey. The journey is getting faster and faster, but it’s still a journey, and so, I know if I close my eyes and come back here in 12 months, the Bitcoin price will most likely be higher, but more importantly, more people will use it. I think about 200 million people in the world now use crypto. That’s out of almost 8 billion. So, it’s growing at over 100% a year. When the Internet was at its fastest, it was growing at 60% a year. So that’s how exciting the crypto space is in terms of growth rates, it’s why I’m still bullish price wise even after a few days like the last two which were not too great for prices. I do think with growth rates and adoption rates like we’re seeing, with technology changing as fast as it is, there are only reasons to be optimistic.
So I’m going to stop here and see if there are any questions, I don’t know If you have a chance for a Q & A. Like I said, I’m honored to be here. I am thrilled for you guys, I’m cheering for Africa and I love the fact that you guys are all at a Hackathon.
