I am positive about cryptocurrencies on a 10+ year horizon.
But when I talk about them, my arguments are not solid enough. So here I will try to articulate some reasons for the positive belief.
Reason One: Successful Role Models
Fred Wilson, Chamath Pahilapithiya, and Peter Thiel, all of whom I look up to for their ideas and breakthrough success, are positive about cryptocurrencies. Fred Wilson, investor in companies like Coinbase, seems positive about crypto in general:
I think some crypto asset (and possibly a number of crypto assets) will have a price chart like Amazon’s current one in 18 years. But we will have to do what Amazon did, hunker down and build value and survive, for quite a while to get there. And I think things will get worse before they get better.
“I would be long bitcoin, and neutral to skeptical of just about everything else at this point with a few possible exceptions,” Thiel says.
While all three of these powerful minds are worth following, Chamath Palihapitiya and Peter Thiel strike me personally as aggressively independent thinkers. They say things other people don’t, and hence maybe think thoughts other people don’t. If they arrived at a positive opinion for bitcoin independently, I interpret that as a very strong signal.
I understand that this is not a strong enough reason in theory, multiple intelligent people can of course be all wrong, but it would be very unlikely.
Finally, it is not just these three, there are many other stellar minds equally, if not more bullish on crypto.
Reason Two: Religious Enthusiasts
I mentioned this is passing before, but the crypto enthusiasts I come across have an idealistic, almost religious fervor. To me, it is a leading indicator of innovation. Of course, superstitious beliefs by themselves are not predictive, but engineering effort directed towards a seemingly unbelievable vision – that’s something worth spending some time thinking about.
As an example, consider this Crypto Product Manager, whose religious style I also mentioned in a previous post:
She reads books on Buddhism, and is an international-level bodypainting artist.
I know this is a sample size of one, but the purpose is to illustrate, and I am sure this profile is not uncommon. Engineers and Product people who are drawn to art and mysticism look like radical innovators to me (I wrote about this in a bit more detail in Unicorns, Dragons, and Galactic Worlds).
But there is some evidence too. According to the book ‘Where good ideas come from‘ by Steven Johnson, a bulk of innovation from 1800-now has happened via a non-market networked framework. These are open networks of innovators not working for financial rewards. In such an open system, more innovation happens because:
All of the patterns of innovation we have observed… liquid networks, slow hunches, serendipity, noise, exaptation, emergent platforms – do best in open environments where ideas flow in unregulated channels.
I am very much a capitalist, but the author makes compelling points:
Economic incentives have a much more complicated relationship to the development and adoption of good ideas than we usually imagine… When you introduce financial rewards into a system, barricades and secrecy emerge, making it harder for the open patterns of innovation to work their magic.
But the author makes no points about the kind of people who participate in these networks. Why do they spend energy innovating if they are not motivated by money? What drives them? To me, significant effort which is not driven by money or survival smells of religious levels of belief in an idea.
And innovators in crypto sound very much like innovators of open source, with their levels of belief and passion. Indeed, some people look at crypto as ‘Open Source Data’.
Following the history of information technology and the massive trend towards open source, we can see that democratizing information is the natural next step in the incessant trend to open source, and thus the next big opportunity for innovation
But let me not get into the market trends. Ultimately, I look at idealistic people, and the crypto sector seems to attract them in large proportions.
Reason Three: The Vision
Finally, I am bullish because of the vision of a decentralized world. Here it is more than optimism. The more I think and learn about centralized entities – from big companies, to big countries to networks like Facebook, the clearer it becomes that they create at best, sub-optimal, and at worst, harmful outcomes for us.
I want a more decentralized world. I want to help create such a world. I believe we will have better products and better lives in such a world.
My ideas on cryptocurrencies are not fully formed, this is a start. A big missing piece – what do products look like in such a decentralized world? How do cryptocurrencies help us create fundamentally better products? I plan to learn more about these, and will of course share ideas as my learning evolves.