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Health and wealth portfolio

The Coronavirus Stock Portfolio

Health and wealth portfolio

Today we’re proud to introduce THE HEALTH AND WEALTH PORTFOLIO. It’s four companies that we think will do exceptionally well in the coming years, in the aftermath of COVID-19.

In brief, these four companies are The Clorox Company (CLX), Amazon.com (AMZN), Zoom Video Communications (ZM), and Netflix, Inc. (NFLX).

We’re all about blockchain investing, not stock picking. But you’ll recall that our Blockchain Believers Portfolio (which is looking better than ever) has the majority of holdings in stocks and bonds.

As the stock market implodes, there is more opportunity than ever — provided you are willing to buy and hold for the long term. (It’s going to be quite a while before the smoke clears.)

As we continually preach, you’ve got to zig while everyone else is zagging. Right now, everyone is zagging for the exit. Time to zig.

To beat the market, you must bet against the market. This is common sense. Here are four bets you might want to consider.

The Coronapocalypse

First, a quick story. I was due to speak at several events this week as part of Boston Blockchain Week, including the Boston Fed. All canceled.

Next week, I was scheduled to speak at the Global Blockchain Expo, the huge technology event in London. Canceled.

From there, South by Southwest in Austin … you get it. EVERYTHING IS CANCELED.

So I had an inkling this was coming before everyone else. And I see a bigger picture: It’s not that the cancelation of these events will hurt the local economies. It’s that without those events, deals don’t get done. No new connections. No new sales leads. No new business investment. Everything slows down.

Now we’re all going to be working from home for the foreseeable future, and — let’s be honest — worker productivity goes down when people telecommute. On top of that, all the kids are home from school and college, so parents have to babysit.

All this against a backdrop of uncertainty: no one knows how long the Coronavirus pandemic will last, and our nationalistic approach to solving it means we don’t have a good global response. So spending slows down, demand slows down, productivity slows down – all the makings of an extended recession.

I say this all this with no trace of fear. I’m not afraid of the virus. I’m not afraid of recession. I’m not afraid of death. I’m not afraid of losing my job, my business, or my home. I see opportunity everywhere.

SMART INVESTORS SEE OPPORTUNITY EVERYWHERE, ESPECIALLY IN TIMES OF CRISIS.

Note I said “opportunity,” not “opportunistic.” Our mission is to find investing opportunities that bring “health, wealth, and happiness,” as I’ve been signing off every one of my columns since Bitcoin Market Journal began.

I hope the impact of COVID-19 is short-lived. But I believe this is an economic tidal wave that will hit us in stages. So as everyone is fleeing to get out of town, let’s start laying down some sandbags and looking at companies that are not only likely to survive — but to thrive.

The Clorox Company (Stock Ticker: CLX)

Two words: Clorox Wipes.

Every building I enter now has a container of Clorox Wipes and an industrial-sized squirt bottle of Purell hand sanitizer. How can we possibly estimate the sales growth these two companies are going to see this year? There’s one big difference: Purell is a private company. Clorox is public.

(For new investors, that means you can buy shares of Clorox stock using any online brokerage like E*TRADE – but know that we do not provide investing advice, only ideas. Do your own research and never invest more than you’re willing to lose.)

34 Percent

Courtesy Clorox Annual Report

We spent some time digging through the Clorox business, which encompasses a number of household brands — from Glad trash bags to the magnesium supplement Natural Calm (which people are also going to need).

But it’s Clorox-branded products that make up a third of their sales: bleach, spray, wipes, disinfectants, and even the Total 360 System, which looks like something they’d use to disinfect an alien spaceship.

Way back in 2014, the company put together a 2020 Long-Term Strategy, with a 3-5% annual growth target. As of 2019, they were at 2.4%. Given the vast quantities of Clorox that will be consumed in the fight against COVID, I’ll let you decide whether the company will make their goal by the end of 2020.

My vote: Clorox is going to clean up.

Netflix (Stock Ticker: NFLX)

People are being sent home by the millions. Workers. Students. Adults. Children. Babies.

They’re going to get bored.

Parents need a way to babysit the kids? Netflix.

Students finished your three hours of study? Netflix.

Adults trapped at home, can’t go out to eat or the movies? Netflix.

Sure, there are plenty of other streaming video options, not to mention videogames and plain old broadcast TV. But Netflix has a streaming product unlike any other, customized to your viewing preferences, with an enormous amount of quality original content. They’re the leader.

We also looked at other streaming companies, including Disney (whose streaming Disney+ memberships will likely take off), but the closure of Disney theme parks may offset these earnings. Netflix is a pure play: although they still have a small legacy DVD-by-mail business, the real business is streaming.

Netflix’s streaming memberships have increased year over year for the past 3 fiscal years, and so has their average membership fee, as you can see here:

Global streaming

Courtesy Netflix annual report

Netflix also reports strong seasonality: when customers buy internet connected devices, they watch more. That’s why Q4 (when everyone is buying new devices for the holidays) and Q1 (when they’re continuing to watch them) are their strongest seasons. Expect that trend to pick up during COVID.

Finally, Netflix is even stronger internationally than it is in the U.S. International memberships make up about 50% more than domestic memberships, making it a great company to capitalize on the international audiences staying at home during COVID-19.

(Funny how the virus doesn’t recognize national or political borders. It just sees one human species.)

Zoom Communications (Stock Ticker: ZM)

There are plenty of videoconferencing systems out there. In my experience, they all suck, except Zoom.

We do a lot of video calls with clients, and we’ve found that most videoconferencing software takes forever to install, doesn’t connect you properly, loses the connection randomly, and just generally provides a terrible experience.

Zoom, in our experience, just works.

As the company said in its offering prospectus, this causes a kind of “viral enthusiasm” among its customers. (If only they knew how literally that phrase would come true!) Over the last week, I have heard so many people — from churches to schools – say, “We’ll Zoom in.” It’s becoming a verb.

Yes, Zoom is a newly-listed company. But it has had a 5x growth in three years:

Zoom annual report

Courtesy Zoom Annual Report

It’s the only pure-play videoconference company in the Gartner Magic Quadrant, where it ranks with industry behemoths Microsoft and Cisco. And it has the highest user ratings on the aggregator site G2Crowd:

Stars

Courtesy Owl Labs. (Note we also looked at Slack, but found it too young and unproven.)

The Zoom business model, like the Netflix model, is a subscription-based service. The SaaS model means more predictable revenue, since you can look at their number of subscribers, subtract their estimated churn (i.e., lost subscribers), and project their future growth.

Everyone is going virtual. Some people will try to use Google Hangouts or GoToMeeting. But when they get frustrated, guess where they’ll Zoom to next?

Amazon.com (AMZN):

If you think of Amazon as an e-commerce company, you’re wrong. It’s a logistics and infrastructure company. And now is Amazon’s time to shine.

Amazon has one of the most advanced warehousing and distribution networks in the world, not only of physical goods (the stuff you get delivered to your door), but also of data (the stuff you get delivered to your computer).

I know, you thought Amazon had already conquered the world, but you haven’t seen anything yet.

  • Think about how com sales will grow, as they deliver millions of packages to people who are staying indoors, electing not to go to the store.
  • Think about how Amazon Prime will grow, as people see the opportunity to save on delivery by joining Amazon’s membership service.
  • Think about how Amazon Video will grow — like Netflix — as people rent more movies and get access to Amazon’s library of original content.
  • Think about how Amazon Web Services will grow with all the videoconferencing, streaming, and online meeting traffic. (For some context, both Netflix and Zoom use AWS.)
  • Even Whole Foods, Amazon’s grocery chain, may see a lift, as consumers opt for healthier food options (though the coming economic recession may mean a hit for higher-priced groceries).

The big question is: can Amazon handle the demand?

Year ended

Courtesy Amazon.com Annual Report

For years, Amazon has invested heavily in logistics and infrastructure. Think about the Amazon lockers in your neighborhood, the Amazon Web Services business (which owns about half of the cloud infrastructure market), the endless stream of Amazon packages you see delivered to your neighbors.

Amazon, perhaps more than anyone else, is positioned to profit. They’ve built the pipes that are going to bring us all the essential goods — both physical and virtual — over the coming months and years.

Health, Wealth, and Happiness

This is a time of rare opportunity.

While everyone is running around with their pants on fire, we can calmly assess the market and look for great buying opportunities – either as part of our Blockchain Believers Portfolio, or just as standalone investments.

These are not get-rich-quick opportunities; these are ideas for long-term investments. The full economic effects of the Coronavirus are going to have a “lag factor.” They’ll take a while. Things will likely get much worse before they get better. But eventually things will change: they always do.

Markets are moody. It’s their nature. But we can use reasoned analysis to profit from the market’s moods.

In putting our money into the companies that will help us get through the Coronavirus, we’re also doing something good: we’re investing our money where it’s needed. We’re putting our money to work. And we’re signaling long-term confidence in the stock market.

Of course, the easy way of holding stocks is to simply buy an index fund that tracks the entire stock market (such as VTSMX). But if you’re interested in finding a few winners — especially in times of rare opportunity like this one — then this gives you a few ideas to get started.

I wish you health. I wish you wealth. And above all, I wish you happiness.

(For more big, bold, blockchainy ideas, apply to become a member of the BBA).

Forest

How to Build a Healthy Blockchain Ecosystem

Woman walking on a downed tree trunk.

One of the many hats I wear is serving as a board member of the Boston Blockchain Association. This is an industry group that is dedicated to creating a healthy blockchain ecosystem — first in Boston, then the world.

It’s hard to do blockchain in a vacuum. Even though it’s a technology, all the real work gets done face-to-face — which is why our group meets every week, and holds public Meetups every month. This is where we make the connections to build a vibrant blockchain community.

Building a Blockchain Ecosystem

During a quarterly planning meeting, I realized that what we’ve been building could be drawn as a diagram:

Healthy blockchain ecosystem.

This diagram applies at the local level (your city or region), but it also applies at the national and the global level. For blockchain to thrive, we need the strong cooperation of four partners:

Education

The first need is simply explaining what blockchain is. Those of us who are passionate about this technology need to explain to the world what it can do, from your boss to your co-workers to your parents (feel free to use our report, What is Blockchain?).

The second need is to better educate our students. Most colleges don’t even have a blockchain curriculum yet, much less professors who understand the technology. We need a “roadmap” that teachers can follow, then we need people to “teach the teachers.”

One worthy organization is Blockchain Education Network, which has set up 60 local college chapters around the world. At one of our blockchain events, Erick Pinos and Mel Vera from BEN explained how they empower college students to start their own blockchain clubs by providing them with ready-made training programs, from “Blockchain 101” courses to “Build Your Own Bitcoin Mining Rig” activities.

Government

While a friendly regulatory environment helps (meaning government officials who understand and support the technology), a local government can do a lot to support blockchain, as the state of Wyoming has shown. It hasn’t waited for the national government to get its act together; it has acted now, by creating blockchain-friendly legislation to attract more industry resources and talent.

Because blockchain literally represents the future of money, an investment in the technology now is likely to pay handsome dividends in the future. Take the region of Zug, Switzerland, which made an early investment in blockchain (it was one of the first municipalities to accept payments in bitcoin): it’s now the fastest-growing tech hub in Europe.

Governments around the world would do well to remember: A bitcoin invested is a bitcoin earned.

Companies

In his excellent article How New York Become a Tech Town, journalist Steve Lohr tells how New York was playing catch-up to Silicon Valley during the early 2000s. A turning point came when the city (pre-fueled with government and educational support) lured Google to set up a New York office.

New York was playing to one of its strengths: the advertising business. Traditionally centered on Madison Avenue, the ad industry understood it needed to go digital. Google understood it needed a strong advertising infrastructure. Thus a partnership between New York and Google was born.

But you don’t have to be New York. As I’ve traveled around the world giving talks about this strategy, I always ask the audience, “What strengths does your city have?” There’s always an existing industry that can benefit from blockchain, and it’s the support of those companies that innovators must build.

Investors

Finally, a strong blockchain ecosystem needs a strong flow of capital (read: money). This is what enables new companies to try new things. Early investors help fuel the startups and entrepreneurs that help fuel the ecosystem.

This is what we saw during the ICO boom of 2017, as investors poured capital into the blockchain ecosystem, with the hope of getting a rich payout on the value of their “tokens” (which were essentially like shares of a blockchain project). That explosion of capital fueled an explosion of innovation.

Expectations were ahead of reality, and when the innovation failed to materialize as quickly as investors hoped, the market crashed. But smart investors (like you) continued to patiently watch the market, digging through opportunities until they struck gold.

Today, we see more sophisticated investors — angel investors, family offices, even some hedge funds — making bigger investments in blockchain, from seed funding to buying cryptocurrencies. These are paving the way for the big money: institutional investors.

Which Comes First: Chicken or Egg?

Blockchain word made from white blocks.

There’s a strange chicken-or-egg phenomenon at play: investors can’t wait until companies get on board, and government can’t wait until education gets on board. It all works together.

If you’re overwhelmed by this model, remember that it happens in baby steps. In Boston, we’ve been plugging away a little bit at a time on each of these four areas:

  • On the education front, we’ve pulled together professors and students from schools like MIT, Harvard, Boston College, Northeastern, and Babson to share curriculum and best practices.
  • We’ve had fruitful discussions with government officials, building support for blockchain development.
  • We’re lucky to have top-tier blockchain companies like Circle and Algorand headquartered here, as well as financial giants like Fidelity.
  • And we’ve built a strong network of investors, like New England Venture Capital Association and Chain Reaction, which focuses exclusively on blockchain startups.

For blockchain innovators, this is the model to use. For blockchain investors, this is the model to look for. Whether you’re building or finding the cities, regions, and nations that are likely to thrive and prosper in blockchain, it all starts with a healthy ecosystem.

(For more big, bold, blockchainy ideas, apply to become a member of the BBA).

Born is the USA

The SEC Safe Harbor Blockchain Proposal (+ Downloadable Guide)

Born in the USA

Big news on the blockchain front: The U.S. Securities and Exchange Commission has made a proposal that would allow blockchain projects to once again thrive.

Hester Peirce, the most forward-thinking SEC official on blockchain, put forth a proposal outlining a three-year “safe harbor” for new blockchain projects that would give them “run room” before worrying about securities law. Her proposal would also create “best practices” that new projects would need to follow, ensuring more rigor for project creators and more protection for investors.

You can read the full proposal here, but below we’ll explain the proposal in plain language, and why it benefits both blockchain investors and blockchain projects. First, let’s explain why it’s needed.

The ICO Boom

Blockchain project diagram

2017 was the year of the Initial Coin Offering. Entrepreneurs saw they could fund new blockchain projects by issuing “tokens” (i.e., blockchain-based units of value) that investors could buy and sell, as a startup company would issue shares of stock. Importantly, these were not shares of stock: you didn’t own a piece of the company, just a token.

As new digital exchanges emerged to trade these tokens, and the price of many tokens begin to reach stratospheric heights, this formed a hype cycle. Entrepreneurs saw an easy way to raise money for a new project; investors saw an easy way to make money, because so many token holders were getting rich. Fueled by a lot of hot air, the bubble began to rise.

In 2018, at the height of blockchain mania, regulators and lawyers began to indicate that maybe these tokens really were like stocks, and should fall under the same laws. And with that, the bubble popped.

The Crypto Winter of 2018

Blockchain project diagram

Blockchain innovation became a confusing morass of obscure securities laws overseen by poorly-informed lawyers. To make things worse, securities laws vary between countries. Imagine creating a website where only residents from certain countries could access the site. The model doesn’t work.

What’s more, blockchain evolves quickly. So a token may start out with one purpose (funding the project), then evolve into something else (becoming a payment for using the network).

In fact, this is what happened with Ethereum. Originally, ether was used to raise funds to create the Ethereum network (which is pretty clearly a security, like a stock). But then ether became the “payment” for using the Ethereum network, like the in-game currency that powers the network.

Because of this “regulatory uncertainty” (two words we hope to never hear again), the torrent of blockchain innovation slowed to a trickle, and that trickle slowed to a freeze. Thus followed the great Crypto Winter of 2018. Blockchain projects went into hibernation. Startups huddled together for warmth, foraging for food and enduring the bitter weather.

Then came Hester Peirce’s proposal.

The New Proposal

Blockchain project diagram

Like all good ideas, it seems obvious when you hear it. Allow U.S. blockchain projects to have a three-year safe harbor, at the end of which they will be classified as securities (or not).

In plain language, this means that entrepreneurs can launch new blockchain projects—with best practices in place, explained below—without worrying about whether their new token is a security. They can focus on building the network, building the community, building the blockchain.

Investors can buy into these new tokens, without worrying about whether they are breaking an outdated securities law. They can buy, sell, and trade these tokens for three years, after which their holdings will be classified as securities (or not).

In this three year “grace period,” a few things might happen.

The token might become a security. It might look like a stock, in which case the investors in the token would be investors in the project, and receive similar benefits as, say, a corporate shareholder.

The token might not be a security. Like Ethereum, it might become something more like an “in-game currency,” a means of payment for using the blockchain network, in which case it would still be tradeable via digital exchanges, but not legally classified as a security.

The project might not go anywhere. Most blockchain projects, like most startups, are not going to get traction. So early investors—like early investors of any company—might have tokens that are essentially worthless. This is the risk of being an early investor.

Peirce’s proposal elegantly solves a number of problems:

  • It allows blockchain innovation to flow again. New projects now have a way to raise meaningful financing—and some room to run.
  • It allows the U.S. to take the lead. By creating a three-year “sandbox” for innovation, the U.S. can get a rapid head start among major countries on building out its blockchain ecosystem.
  • It buys the SEC three years. The legal frameworks for clearly defining securities vs. non-securities won’t have to be decided for another three years.
  • It helps solve the chicken-or-egg problem. Blockchains are built around network effects. That means you need a lot of people using the token for it to have value—but if you’re limited in who can own the token, you can’t get a lot of people using it. This proposal allows entrepreneurs to “kickstart” the network with an early burst of investors, allowing entrepreneurs to begin building a community, thus solving the chicken-or-egg problem.
  • It begins to define blockchain best practices. Pierce also outlines some common-sense rules that new blockchain projects will need to follow:
    • SEC compliance. This is not “launch a crypto project from your bedroom.” Entrepreneurs will still need to follow the standard SEC legal framework for new offerings (think a Regulation D offering).
    • Team disclosures. Blockchain projects will need to list “the names and relevant experience, qualifications, attributes or skills” of the initial development team—all welcome details for users of our Blockchain Investor Scorecard.
    • Project transparency. Projects will need to be open source, with a publicly searchable transaction history, including disclosing how many tokens have been paid to founders. Importantly, the project website will need to explain how the “tokenomics” work, providing transparency on token supply and mechanics.

Download Our Guide to the SEC Proposal

With the help of our Boston-based blockchain community, we have put together a guide to Commissioner Peirce’s proposal, filling in some of the details and helping define whether a blockchain project is decentralized.

It is our pleasure to offer you our new guide, Born in the USA. Download it here.
S Korean flag

10 Reasons Why South Korea Is Leading Blockchain

South Korean flag.

In September 2019, Bitcoin Market Journal hosted a delegation of blockchain leaders from South Korea at our monthly Blockchain Investor Meetup (join our events here). When I visited South Korea earlier this year, I was struck by how far blockchain has evolved in this tech-forward country.

Whenever I see success, I try to reverse-engineer the factors that led to that success, so the rest of us can learn – and profit. Here’s what I found.

Navigating the next industrial revolution chart.

1. A shared national vision. Klaus Schwab, the founder of the World Economic Forum, coined the term “Fourth Industrial Revolution” to describe the period we’re living in now, where technologies like AI, IoT, and blockchain are changing the nature of what it means to be human.

In South Korea, the idea of the Fourth Industrial Revolution looms large. I saw a real unity around this idea, something like a sense of national destiny that South Korea would lead the world in this new age where humans begin to merge with machines.

World's most innovative economies

2. A culture of innovation. According to Bloomberg, South Korea leads the way in the world’s most innovative economies. While the country started off by reverse-engineering foreign technology, that rapidly led to improving on these technologies.

Today, the country is a global technology powerhouse, investing heavily in R&D and new patents. The terrific Samsung phone that’s in my pocket is just one proof point of the country’s commitment to technology innovation.

3. An emphasis on education. Higher education is an extremely serious issue in South Korean culture (some students would say too serious). It is a point of national pride, with the South Korean education system widely praised around the world.

The country’s enormous education budget is a big success factor in how it has risen from a war-torn country to a tech powerhouse: a highly-educated workforce means that South Korean workers are in high demand, especially in new technologies like blockchain.

4. A national blockchain curriculum. Building on this commitment to education, the South Korean government has invested 100 billion won (about $90 million) into blockchain-focused training, creating a pipeline of talent for the next decade.

Blockchain Technology.

This is a page out of New York’s playbook: during the 1990s, the city invested heavily in tech education, partnering with New York schools and universities to develop a technology curriculum, training workers to make it a global technology leader.

5. A forward-thinking government. A Korean proverb says, “If you don’t walk today, you will have to run tomorrow.” In other words, get started early.

To this end, the government of South Korea invests heavily in R&D and emerging technologies. This year alone, nearly $1 billion has been earmarked to spend on blockchain development, with the city of Seoul also developing a blockchain incubator with room for 200 companies.

6. Regulatory sandboxes. Busan, the second-largest city in South Korea, has been declared a “regulation-free zone” for blockchain startups, making it easier for entrepreneurs and investors to freely build blockchain businesses.

Government officials expect that $25 million in investment will follow, with everyone from Korean banks to Hyundai experimenting with blockchain projects. This type of “regulatory sandbox” is an emerging model in South Korea, and it allows innovation to flourish.

7. Seoul reward token. The city government of Seoul is creating a citizen reward token (we’ll call them S-coins) that can be redeemed for goods and services within the city. It’s like an “in-game currency” that will let you pay for your food, parking, or transportation with S-coins.

Importantly, Seoul does not plan to charge merchant commissions when citizens pay with S-coins. As a small business owner, it offers the convenience of credit card or mobile payments, but with zero fees. Officials hope this will make S-coin, and thus the city of Seoul, prosper.

8. Blockchain tax breaks. Another way the government encourages early-stage R&D is providing tax incentives for experimenting with new technologies. Businesses that develop blockchain technology can get a 20-40% tax deduction for their pioneering work.

Samsung stock information.

9. The Samsung effect. The technology giant has begun rolling out the first blockchain functionality in mainstream mobile phones, with crypto wallet functionality built into the S10.

More significantly, Samsung has put together a consortium of industry players to develop a blockchain-based mobile identity system. Imagine logging onto your smartphone with a fingerprint or face ID that is stored using blockchain technology. It’s happening.

10. A love of crypto assets. The great crypto boom of 2017 took the nation by storm, prompting the government to ban Initial Coin Offerings. Still, a large percentage of South Koreans have crypto holdings: an astonishing one-third of investors hold an average of $6,000 in digital assets.

It’s our observation that once investors own digital assets, they not only understand them better, but they fall down the rabbit hole. (Bitcoin is the gateway drug.) Expect more digital assets to come out of South Korea: Once you’ve got skin in the game, that changes the game.

To sum up: South Korea has a highly-educated and highly-experienced workforce, a deep technology infrastructure, and widespread government support. Blockchain is about to go Gangnam Style!

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Unconference

How to Run a Blockchain Unconference

Sticky notes.

A colleague from the insurance industry once told me about a conference that changed her life. Only it wasn’t a conference; it was an UNCONFERENCE.

What is an Unconference?

“Imagine all these executives from the insurance industry,” she said, and I tried to picture the wild parties that must ensue. “Except there’s no programming: the participants choose the topics!”

She breathlessly told me about how an “Unconference” works. Modeled after the Open Circle model, it’s a kind of open-source meeting driven by the participants:

  • First, participants suggest topics on sticky notes
  • Next, participants vote on topics using colored dots
  • Then, we break into small groups around top ideas, with each group having a “leader” for organizing the discussion, and a “scribe” for taking notes
  • Then, we reconvene as a larger group and read our notes

She said the Unconference was the most interesting insurance conference she had ever attended. I told her the bar for insurance conferences probably wasn’t that high. She insisted it was great.

When we tested a blockchain Unconference in Boston earlier this year, I saw she was right. The Unconference model really works, for reasons, I will discuss below (with downloadable notes). But first, let me tell you how we ended up doing an Unconference in Las Vegas.

Group of people at a conference.

The World Crypto Conference Unconference

In 2018, at the terrific World Crypto Con, we hosted a full day of training workshops. It was eight hours to fill, but I had the help of several colleagues, and we each took a workshop. It was a big success — I wrote about the experience at the end of my book Blockchain For Everyone — and this year the organizers asked us back again.

In 2019, though, my colleagues couldn’t make it.

I was alone. With eight hours to fill.

They say necessity is the mother of invention, but desperation is the grandmother of invention. I flashed back to the Unconference model. “Eureka!” I shouted. “In the spirit of blockchain, I shall decentralize our training workshops!”

In other words, I’d get the attendees to do it for me.

When the big day arrived this week, I was sweating marbles. The worst case would be that one other person would show up, and it would be me and some guy trying to hold an Unconference between the two of us.

So I was thrilled to see the conference room packed for our first session. This was 9:00 am, on the day before World Crypto Con, and the room was full and buzzing.

Even better, the people were engaged. Over eight hours, we held four amazing workshops, each led by the participants and exploring a variety of topics from “The Future of Bitcoin” to “Best Crypto Wallets” to “Finding Hidden Gems.” (Downloadable notes below.)

I received about a dozen compliments afterward on the workshops. “Thank you for organizing this!” people said. (Little did they realize I didn’t organize anything.)

Why do these Unconferences work? Same reason as blockchain: decentralization.

Group of people at a conference sitting at round tables.

Why Unconferences Work

  • They allow everyone to learn from each other – not just from a single speaker.
  • Participants get to choose topics they want to discuss.
  • They build connections between people.
  • They build connections between ideas.
  • They unlock all the brainpower in the room, from beginners to experts.
  • They create a sense of community and fun!

One of the coolest things, though, was getting a pulse on which blockchain topics are hot. You could easily see, with colored dots, which tokens and technologies were on everyone’s mind. It was a valuable way of seeing where the market is.

As each small group read their “takeaways” to the wider group, I took notes on the high-level learnings. So many people asked me for a copy of this master document that we’ve made it available to Bitcoin Market Journal. You can download it here!

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Capital building

The Dollar Defenders vs. The Bitcoin Believers: The Blockchain Battle on Capitol Hill

Capita hill.

What a time in history!

Whether it is the United States House talking about Satoshi Nakamoto or seeing the President tweeting about cryptocurrency, it feels like blockchain has finally gone mainstream. If we were surfers, it’s like we’ve all been on our surfboards for the past few years, just waiting for the perfect wave—and in 2019, it finally came rolling in.

We also witnessed U.S. Senate Banking Committee, as well as the House Banking Committee, grill Facebook executive David Marcus on the plans for Libra, the new digital money hatched at Facebook. Marcus endured hours of relentless interrogation, and he held up like a champ.

The government’s concerns boil down to one central problem: digital currencies threaten the global power of the U.S. dollar.

This is a new era in U.S. politics, with both parties coming together to either support or oppose digital currencies. Both the far left and far right believe in individual and personal freedom: they are largely bitcoin believers. Those who want to maintain the existing system – conservatives, liberals, and moderates – are largely opposed.

Finally, we have found a cause that unites our political parties. (Is there anything blockchain can’t do?)

Let’s divide United States politicians into two new “supergroups,” which we’ll call the Blockchain Believers (in support of decentralized digital currencies), and the Dollar Defenders (who want to maintain centralized control).

Here’s a sampling of their thoughts as they put the new Libra digital money under the microscope.

The Dollar Defenders (Opposed to Digital Money)

Congressman Blaine Luetkemeyer

It was Missouri Congressman Blaine Luetkemeyer (R-MO) who most clearly defended the status quo: “You said that the current [financial] system is not working … I think the current system IS working. The system right now works because it’s like traffic control.”

The key word in this sentence is “control.” Centralized governments want to control a centralized currency. The question is how centralized governments control a decentralized currency, which Libra ultimately aims to become.

Carolyn Maloney (D-NY) went so far as to say, “I don’t think you should launch Libra at all. The creation of a new currency is a core government function.” She was joined by her fellow Congresswoman Nydia Velázquez (D-NY), who said: “We want to make sure that companies [like Libra] … could not threaten the U.S. financial system.”

The two New York congresswomen called on Marcus to stop Libra until they could figure everything out. “This is not Silicon Valley,” Velázquez pointed out. “You cannot work out problems as you go.” (Did the United States work out all its problems before it launched?)

It was Congressman Brad Sherman (D-CA) who said it most clearly. “America’s power comes from the power of the dollar more than the power of our military … Cross-border transmission? Let’s do that, in dollars!”

In other words: defend the dollar.

The Blockchain Believers (Open to Digital Money)

Congressman Patrick McHenry

Patrick McHenry (R-NC) gave the most impassioned and intelligent response to Libra. “Washington must ensure that it’s not the place where innovation goes to die. Just because we may not understand a new technology proposal does not mean we should immediately call for its prohibition.” He pointed out that the genie is out of the bottle: “The reality is that whether Facebook is involved or not, change is here. Digital currencies exist. Blockchain technology is real.”

“We should not attempt to deter this innovation,” he went on. “And governments cannot stop this innovation. And those that try have already failed. Instead of a kneejerk reaction of banning something before it begins, my colleagues and I want to try to first understand it.”

Sean Duffy (R-WI) called Libra “absolutely brilliant. Innovative, creative … and pretty amazing.” He went even further, arguing that Libra should be open to everyone, just like a $20 bill. It should “behave like a fiat currency,” he proclaimed, holding up a $20 bill to make his point. “The freedom and liberty that comes with the $20 bill,” he went on, “I think you should offer the same freedom and liberty on your [Libra] network.”

Steve Stiver (R-OH) understood the promise of global money: “The value I see in this innovation is cross-border payments, because that’s so expensive today. About 60% of the world’s population lives in a country that does not have a stable currency.” (Not sure about his math there.) “Helping the unbanked and helping people with cross-border payments … I appreciate the innovation.”

Finally, it was French Hill (R-AR) who articulated the blockchain philosophy in just three words: “Trust, but verify.” He even held up a coffee mug with this slogan on it.

Trust but Verify

But it was Andy Barr (R-KY) who actually talked about financial inclusion, which is the problem that Libra is reportedly trying to solve. “I think we should presume that innovation is good, that it presents enormous opportunity for financial inclusion,” he concluded. “I think that the opportunity for financial inclusion with Project Libra is enormous and very positive.”

This is what our elected politicians should be doing: figuring out the biggest problems facing society, and discussing possible solutions. I can’t tell you whether Libra will actually become global money that helps the unbanked. But I can tell you that financial inclusion is a problem – one-fifth of the world is unbanked – and only global money will lead to global inclusion. One money for one world.

Trusting, but verifying. Now that you’ve verified their stances, which side do you trust?

(For more big, bold, blockchainy ideas, apply to become a member of the BBA).

Blockchain education

A Roadmap Toward Better Blockchain Education

Blockchain

My uncle, now in his 80’s, has been a lifelong value investor. In the style of Warren Buffet (whom he greatly admires), he invests for the long term, in good-quality companies whose stock is trading at a fair price.

Once we were talking about how to build personal wealth, and he impressed the importance of education. “If you weren’t born rich,” he said with a smile, “you better get educated.”

Or as a financial adviser once told me when I was considering graduate school, “The best investment you can make is in yourself.” Or as Benjamin Franklin once said, “An investment in knowledge pays the best interest.”

See a pattern?

Education is not just the key to building personal wealth – more skills to pay the bills – it’s also the key to building the blockchain industry.

I spent this week at Blockchain Expo in Silicon Valley, the largest blockchain conference in the world, and the one theme that kept coming up was education. I asked my colleague and fellow keynote speaker Mike Wise his single takeaway. He texted me back: “Education.”

SEC documents and brochures.

Blockchain education – not regulation – is the biggest challenge facing this industry today. Here’s why.

Blockchain Education for Investors

In 2019, I attended a talk by Jay Clayton, the head of the Securities and Exchange Commission, and I was impressed with the educational materials the SEC had brought with them. Written for investors, they explained the basics of saving and investing, in plain English.

It’s only a matter of time before the SEC begins publishing these materials for blockchain investing. (We’d love to help.) This series will explain what bitcoin and cryptocurrencies are all about, and where they fit in an overall investing portfolio. It will explain how to find good opportunities, stay away from low-quality investments, and diversify risk.

If this sounds familiar, it’s because we’ve already created it. [Download it here.] We use large, easy-to-read fonts, bright colors, and lots of eye candy to make sure that people actually read and retain the information. We’ve handed out over a thousand of these at trade shows; investors eat them up.

Blockchain Education for Government

In order for this industry to move forward, we’ve got to figure out how blockchain tokens are regulated. That requires the participation of government – but our leaders are a million miles up! They’re already expected to be experts on the economy, healthcare, housing – and now this geeky financial technology as well?

Those of us who understand this technology have to lead the way. It is our responsibility – it is our calling – to bring smart, common-sense ideas to the table so that we can have a starting point for discussion. (Not just waiting for regulators to “figure it out.”)

At a blockchain event, I heard Justin Schmidt from Goldman Sachs, who, in just a few succinct slides, explained economic systems, digital assets, and a few smart questions on how to think about these new blockchain investments. What are assets really presentation.

What are digital assets really presentation slide.

These kinds of easy-to-understand slides, framed around simple questions, are actually very difficult to do. We’ve got to make this stuff easy to understand, to reduce the complexity of regulation to a few powerful questions.

Blockchain Education for Businesses

This goes without saying. (I’m saying it anyway.) I’ve heard several people describe blockchain as a “solution in search of a problem,” when actually I think it’s a solution in search of a prophet. We need prophets not just to evangelize the technology, but to explain where it works and where it doesn’t.

It’s why my co-author Evan Karnoupakis and I have partnered with O’Reilly to develop all this great education for business leaders, like our What is Blockchain? primer, and our State of Blockchain report. We’ve made them short and easy to read, perfect for busy executives.

And we’re working on BLOCKCHAIN SUCCESS STORIES, the first book of real projects from real companies, to teach the world what these early pioneers have learned. We’ve just finished up the first handful of case studies, and we’re so excited to share them with you. Stay tuned.

Blockchain Education for Students

Developers, developers, developers. They’re the people who actually build this stuff, and we need more of them. We also need economists who understand blockchain token design, marketers who understand how to build blockchain communities, and user interface specialists who can make blockchain projects that are fun and usable.

Across this new industry, we need a huge, fast-flowing pipeline of talent, and to do that we need teachers. But first, we need teachers to teach the teachers. We need lesson plans for an industry that’s moving faster than lesson plans can be written.

We need more organizations like Blockchain Education Network, which is developing an open-source blockchain curriculum that can be easily launched at universities around the world – not only by faculty but by the students themselves. They’re taking the decentralized approach to teaching, which is paying dividends.

If an investment in yourself pays the best interest, an investment in teaching others pays dividends. That’s a lesson we can all remember.

(For more big, bold, blockchainy ideas, apply to become a member of the BBA).

 

Author: Sir John Hargrave

David Vorick of Sia

Blockchain Project Profile: Sia

Can a Boston-based company give the big tech companies a run for their money (and future cryptocurrencies) in the file storage space? David Vorick, Co-founder of Boston-based Sia is confident public blockchains will disrupt the space. David recently appeared at the Nasdaq MarketSite for this episode of The Business of Blockchain with Jane King.

Red, blue and white star candies.

The Principles of Blockchain

Red, blue and white star candies.

One of the things that attracted me to the blockchain revolution was its principles. I’m writing this article so we don’t forget them. It’s important for us to return to these principles, because they represent independence.

On January 3rd, 2009, Satoshi Nakomoto hardcoded this message into the Genesis Block of bitcoin:

“The Times 03/Jan/2009 Chancellor on brink of second bailout for banks”

That was the day’s headline from The London Times, as the government continued to bail out banks from the 2008 financial meltdown. That bailout represented a closed system between centralized institutions—banks and governments—that had both failed us.

Bitcoin represented a different model: a decentralized system, where the people owned the money. More than that, bitcoin was global money, beyond the reach of any government. Finally, it was private money, protected by cryptography.

The roots of bitcoin go much deeper, to the cypherpunk movement of the 1990s, epitomized in A Cypherpunk’s Manifesto by Eric Hughes. In just 860 tightly-crafted words, Hughes articulated a vision for a world in which privacy was a basic human right.

Privacy, he argued, was not secrecy: “A private matter is something one doesn’t want the whole world to know, but a secret matter is something one doesn’t want anybody to know.” We all have things we’d rather keep private (which is why we wear pants).

The cypherpunk movement, which thrived on mailing lists and message boards, attracted a motley crew of techno-libertarians, who generally valued “personal privacy and personal liberty above all other considerations.”

And the cypherpunk mailing list is where Satoshi Nakamoto first published his white paper for bitcoin.

Principle 1: Everyone Has Private Parts

The cypherpunks were introduced to the world by tech writer Steven Levy in a 1993 Wired magazine cover story titled Crypto Rebels:

“[They] hope for a world where an individual’s informational footprints — everything from an opinion on abortion to the medical record of an actual abortion — can be traced only if the individual involved chooses to reveal them. There is only one way this vision will materialize, and that is by widespread use of cryptography. Is this technologically possible? Definitely.”

I still have an original copy of this issue, which made a huge impact on me. I had never thought about privacy as being something worth fighting for—what did I have to hide? Eventually I realized that most of us want privacy around our medical history, financial background, personal issues, and on and on.

Most of us don’t want Alexa listening in on every personal conversation, broadcasting to anyone who can figure out how to hack in. Most of us don’t want the government peering into our bedroom through our webcam. All this happens, of course, because we have not claimed our right to privacy.

In fact, our privacy is under fire now more than ever. Social media sites like Facebook know everything about you—including algorithms to identify your face. Data brokers like Equifax are still hoarding your financial history, without your permission. And Alexa is listening.

While privacy can certainly be used to hide evil, it can also be used to champion good. The Federalist Papers were written by Alexander Hamilton, James Madison, and John Jay to encourage support for the United States Constitution—but published anonymously.

In other words, privacy is in the DNA of the United States of America.


Federalist on the new constitution.

Principle 2: Power to the Peeps

But the United States is a centralized institution. The founders of this country wisely tried to balance power by creating the executive, legislative, and judicial branches, which serve as a check on centralized control.

One thing got more and more centralized, however: money.

It’s not just a meme: according to Oxfam, the richest 1% have more than the other 99% of us. We need a better financial system, one that lets us send and receive money as simply as sending email. We need to get money to the 7 billion people on earth, including the 1.5 billion that are unbanked.

Money is power. So when everyone has access to money, everyone has access to power. Money for the people means power for the people.

This is why bitcoin is decentralized: a distributed network that anyone can join, making money that anyone can buy. The ultimate check on power is a distributed network, like the Internet. Just as no one “owns” the Internet, no one can “own” a decentralized currency like bitcoin. We all do.

Decentralization, like democracy, is a noble goal. But in the real world, someone has to write the code for bitcoin. Someone has to solve the problems of bitcoin: its poor scalability, rising fees, and outrageous energy consumption. Someone has to step up to “own” bitcoin.

Just as government is the tricky art of managing a democracy, governance is the tricky art of managing decentralized networks. The Internet has developed governing bodies, such as ICANN (which organizes domain names) and the Internet Engineering Task Force (a loosely organized body of smart people). Blockchain will need to do the same.

It’s this spirit of decentralization that we’re after. Open source software, consortiums like Hyperledger, and events like Unconferences capture the decentralized ethos of blockchain technology. (We should look skeptically at “permissioned” or “private” blockchains; why not just use a centralized database?)

The rule of thumb is: the more people we invite to the party, the better the party. (With the caveat that the party may need some bouncers.) What we want is a planetary party, a party for the planet.


Hands holding a model of earth.

Principle 3: Earthlings First

Bitcoin was envisioned as global currency for a global economy. One money for one world. It seems inevitable, doesn’t it?

We can still use our dollars and Euros and rupees, but these will eventually be subsumed by a blockchain-based global currency. Similarly, we can still be proud members of our tribe, but we must first identify with the human race.

We are Americans second, humans first. Britons second, humans first. Indians second, humans first.

This is a different story than we hear in today’s political climate, which is increasingly 2D, increasingly black and white: us vs. them, one party vs. the other, isolationists vs. immigrants.

With blockchain, we’re moving out of 2D into 3D. Living in the third dimension isn’t just about seeing things in shades of grey; it’s about unlocking another dimension of possibilities. Politicians are playing checkers; we’re playing chess.

Isn’t it ironic? Here we are, the decentralized blockchain community, wasting the last year waiting on permission from centralized government institutions like the SEC. Permission! Did the American colonists wait on permission from the King before declaring their independence?

Those early Americans thought in another dimension. They thought about something outside the 2D world of subjects and King. They thought about independence. They thought in 3D.

To think globally is to think about being a part of something much bigger than our country. That’s what’s happening now: a wave of human emotion, bound together by the Internet, financed by a new kind of global money.

Humans first. Earthlings first.


The Blockchain Investor's Manifesto cover.

The Fist of Justice

Our Blockchain Investor’s Manifesto has been distributed to thousands of blockchain conference attendees worldwide (you’ll get a copy when you sign up for our newsletter). We cannot print enough of them: people devour them like free cake in the office break room.

On the cover is this illustration of a fist. It is not a fist of violence, it is a fist of justice. A fist of solidarity, to bring wealth to where it is most needed, to open the floodgates of money around the world — and when the world prospers, so do we.

Money for everyone. Blockchain for everyone.

I’ll close with a funny story: I was stopped by an airport TSA agent for a random bag check. When he unzipped my luggage, a hundred of these manifestos sprang out. After he dried his pants, the TSA agent asked, “You’re into blockchain? I just started mining Ethereum.”

Even a centralized government is getting swept up in the wave of decentralization. No one can stop the wave of freedom that’s coming. All we can do is ride it.

(For more big, bold, blockchainy ideas, apply to become a member of the BBA).

Group of people sitting around a large table clapping.

Does Your Company Need Blockchain? The 5 Question Quiz

Group of people sitting around a large table clapping.

What are the human motivators to get companies to invest in blockchain? This question lies at the beating heart of blockchain. How do we get centralized institutions excited about a decentralized technology? In other words, why blockchain?

There are five good reasons for your company to adopt blockchain technology (with some help from MIT’s excellent brief Blockchain: How to Position Your Company for the Inevitable). Here they are.

Efficiency Improvements

The central question: where is your business slowed down by middlemen?

An obvious example is international payments. If you’ve wired money to another country, you know it’s slow and expensive. New blockchain companies like Ripple are making cross-border payments faster and easier—which is both an opportunity and a threat for old-school companies like Western Union.

Any time there are multiple parties involved with reconciling or validating transactions, that’s an opportunity for blockchain. As an analogy, think about the days when you had to manually sign for package delivery—now it’s handled behind the scenes, so everyone gets their packages sooner.

Efficiency improvements mean cost savings, which is a pretty good reason for companies to invest—but it’s hard to get the IT department excited about saving money, especially if they have to invest in the cost savings up front. Which brings us to reason #2.

New business models

The central question: which parts of your business can be decentralized and disintermediated?

An example will help. Steve Ballmer, Microsoft CEO during the 2000’s, was famously centralized: Microsoft software should work on Microsoft systems. When Satya Nadella became CEO in 2014, he radically opened up the company, with the goal of getting Microsoft on one billion devices (and he’s 80% of the way there).

Another example is Red Hat, which has made “enterprise ready” versions of popular open source software packages, like the Linux operating system. This business model offers the benefits of decentralization, with the security of centralization. (Your head of IT wants to know, “Who can I call for tech support at 3 a.m. when my blockchain breaks down?”)

Better products and services

The central question: How does this solve a real business problem, or better serve your customers?

As an example, Uber blew apart the taxi industry by delivering a much better customer experience: friendlier drivers, easier payment, faster rides. That required a certain amount of decentralization, allowing anyone to become a driver. But it required a “blockchain mindset.”

Another example is the company LO3 Energy, which is allowing Brooklyn residents to buy and sell solar electricity from their neighbors, bypassing the traditional utility companies. The obvious recommendation: electric companies should create independent business units (or buy these startups) to experiment with these models, or else it’s lights out. 

Hands.

Having a seat at the table

The central question: Would you prefer to drive your industry, or watch from the sidelines?

As an example, the Hyperledger consortium is a collection of big tech companies—from IBM to Intel, from American Express to Accenture—who are working together to develop enterprise blockchain solutions. If orange is the new black, then consortiums are the new companies.

We’re beginning to see blockchain consortiums for banking, insurance, healthcare, and so on. Let’s say you work in these industries, and you decide blockchain is not a priority. Meanwhile, these new industry groups grow in size and power, and the train leaves the station—leaving you running to catch up.

By joining (or leading) industry consortia now, you have a seat at the table. You have influence. The “blockchain mindset” is about collaboration, not going it alone. Collaboration, not competition.

Staying relevant

The central question: where will your business be in five years?

As an example, IBM continually reinvents itself by going after higher-value, more profitable markets. You may remember IBM once produced low-cost commodity PCs, but now it specializes in high-end consulting services. This is how IBM continually makes more money: by swimming upstream.

Technology moves fast. The only thing that companies can know for sure is that our world will look much different in five years. Blockchain offers the ability to stay relevant as the world moves from centralized services to decentralized systems. The time to experiment is now.

Why should your company invest in blockchain?

To recap, here are the five questions to ask:

  • Where is your business slowed down by middlemen?
  • How can these parts of the business be decentralized or disintermediated?
  • How will this solve a real business problem, or better serve your customers?
  • Would you prefer to drive your industry, or watch from the sidelines?
  • Where will your business be in five years?

The better our answers to these questions, the more companies will jump on board, and the more our blockchain investments will grow. Now we’ve got some answers.

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