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person with x-ray vision

Like X-Ray Vision for Crypto Investors

person with x-ray vision

What if you had a superpower — like X-ray vision — that let you see how many people logged into Facebook each day?

This X-ray vision could be used on any company. On any given day, you could see how many people:

  • ate at Chick-fil-A
  • shipped packages through UPS
  • made a purchase at Best Buy

In short: imagine if you could see the daily customers for any company, in real time.

Public companies sometimes share this data, but it’s usually buried in lengthy annual reports, scrubbed by the internal PR teams, and pretty much useless by the time investors get it.

This X-ray vision would let you see customers in real time. Can you imagine how powerful that would be?

You could compare companies against each other, watch for long-term trends, or how see supply chain shocks affect sales.

It would be an investor’s secret weapon.

With blockchain, of course, we have this X-ray vision. It’s called Daily Active Users, and today I’ll show you how to use this secret weapon to make even better crypto investments.

daily active users

More users = more value

In the world of crypto, users drive value.

network effect

This is because of network effects: the more users on a blockchain, the more developers. The more developers, the more apps. The more apps, the more users. And so on, in a virtuous circle.

Along the way, you get all kinds of second-order effects: better developer tools and education, increased brand recognition, more crypto exchanges supporting the ecosystem.

Just look at Ethereum and the recent success of the enormous ETHDenver event: once you get the snowball rolling, it starts to pick up speed. That’s network effects.

This is what network effects look like, in real life.

The #1 most important metric for a new blockchain investment is number of users. Not price. Not market cap. NUMBER OF USERS.

Say it with me: I will research the number of users before I make any crypto investments.

A terrific tool is Glassnode, where you can see real-time stats on the Daily Active Users for top tokens. It’s incredibly eye-opening.

You can’t fake Daily Active Users. (At least, not for long.) It’s like having X-ray vision: You strip away the hype, and get to see the blockchain completely naked.

There are a few ways to look at Daily Active Users:

  • Comparing across tokens
  • Trends over time
  • Users vs. price

Let’s take each of these in turn.

Method 1: Comparing DAU Across Tokens

Here’s a look at Daily Active Users of bitcoin (DAU = orange line):

daily active users

Now compare it with Ethereum (DAU = blue line):


The first thing I noticed was that bitcoin has 1M Daily Active Users, where Ethereum has only 500,000. Did you know that? I didn’t. With all the DeFi activity, I thought Ethereum had more users.

Now let’s compare it with a DeFi token like Aave:

ethereum active users

Here we have only about 500 active addresses a day. (You read that right.) Comparing Ethereum vs. Aave is like comparing Amazon vs. a local grocery store.

When I say “more users = more value,” I don’t mean that more users means higher price. You can see from these charts that price (the gray line) often moves in mysterious ways.

However, over the long term, users drive value, so user growth will generally correlate with higher token price (just as in a traditional company, customer growth will generally correlate with higher stock price).

So in plain English: if you see Daily Active Users growing over a period of several months, that’s a potential winning investment. If it’s on the decline over the same period of time, watch out.

Method 2: DAU Trends Over Time

You can see the health of a blockchain (like the health of a business) in real-time. Consider Balancer (BAL), which was the talk of the town a few years back. Auto-rebalancing portfolios! Say goodbye to fund managers!


Today the BAL token has somewhere around 100 Daily Active Users. That’s pretty bleak. Compare that with the Daily Active Users for Brave Attention Token (BAT), the token built into the Brave browser:

BAT growth over time

Here we see much healthier growth over time (though we should ask what happened in July 2021, and whether BAT will recover). Note also the regular spikes in usage, suggesting BAT is really being used to pump value at regular intervals, like a heartbeat.

If these two charts were your starting point as an investor, you could say that BAL is probably on its way out, and BAT just may be worth a deeper look. (For further research, you can then use a tool like our peer-reviewed Blockchain Investor Scorecard).

Method 3: DAU vs. Price

Finally, we can look at Daily Active Users vs. Price to see if they are moving in lockstep, like Polygon’s MATIC token:

matic token

Or if it’s more out of sync, like Uniswap’s UNI:


To be clear, price and users don’t need to be in perfect unison. If the price is below the number of users, it could be a great time to buy (look at November 2020 for Uniswap). But if the price remains high when the number of users is on the decline, that’s a warning flag (look at November 2021).

The Glassnode charts are helpful because they compare Daily Active Users and price by default. So if you see price below DAU, especially as DAU is growing, that’s potentially a crypto bargain.

Think of Users like Customers

It can be helpful to think about users of a blockchain like customers of a traditional company. The price of the token is like the price of the stock. The big difference is, in blockchain we have perfect, real-time information. With traditional companies, we don’t.

This “information asymmetry” is a big problem in traditional markets. If you’re a Facebook investor, you’d like to know if Facebook is losing customers. But you won’t find out until months after the fact, when the reports come out and the stock price takes a hit.

In blockchain, we can be watching our crypto investments and monitoring “customers” (users) in real time. We don’t need to obsess about daily price movements, but checking in every few months is a good rule of thumb. And of course DAU is extremely helpful when researching new investments.

Daily Active Users is like X-ray vision. It’s another investing superpower. Use it wisely.

Sir John Hargrave is a board member of the Boston Blockchain Association.

happy woman pointing to her laptop

How to Earn Interest with Crypto

happy woman pointing to her laptop

You’re familiar with the concept of interest: you put your money in the bank, the bank pays you for the use of that money. In the olden days of yore (the 1980s), you could earn over 10% interest by keeping your money in the bank, but today it’s less than 1%.

historical cd rates
Historical CD rates, courtesy Bankrate

So if inflation is running at 7%, then simple math shows us that .06% interest rate – 7% inflation = -6.94%. In other words, keeping your money in a traditional banking account means you’re slowly losing money: year by year, it’s being eaten away by inflation.

Holding your savings in cryptocurrency can offer much higher interest rates, allowing you to meet or beat inflation. In this article, I’ll explain the three common ways of earning interest (crypto sites call it “yield”), along with how to do it.

But first, some practical advice.

How to Tell Whether a Crypto Interest Rate is “Real”

You’ll see all kinds of crazy interest rates on crypto sites. 10% APY. 100% APY. (This means you’d double your money after a year.) We’ve even seen claims of 12,000% APY (for a limited time only).

Here are some simple rules of thumb.

  • If it seems too good to be true, it probably is. Sky-high interest rates (let’s say anything over 10%) are usually new projects trying to attract users. The APYs won’t last, and the projects are risky. Stay away.
  • The “yearly” APY is not actually locked in for a year. Because APYs are calculated real-time on supply and demand, tomorrow’s APY may be different. But this is the way traditional banks calculate it, even though it’s misleading.
What is APY in crypto? APY, or Average Percentage Yield, is a term borrowed from traditional banking. It refers to the amount of interest you’ll earn in a year, including compounding interest. Like banks, APYs can change at any time – but because crypto is more volatile, they can change radically.
  • With greater reward comes greater risk. We’ve listed only the most reputable sites below, which have a track record of safety. The rule of thumb is to look for more established platforms (several years in business) with plenty of users (several million).
  • Earning interest on crypto is legal, but unregulated. Because crypto is generally not regulated like banks, you always stand a small chance to lose your money. You may be better off just holding your bitcoin and Ethereum yourself, and letting them grow.
  • Your “interest” is often paid in another token. Imagine putting money into a Bank of America savings account and getting “BankBucks” in return. You can still redeem BankBucks for U.S. dollars (for a fee), but the price of BankBucks will go up or down, as if it were Bank of America stock. That’s crypto.
  • Fees are the silent killer. To participate in these crypto platforms, you’ll need to pay Ethereum “gas” fees (i.e., service charges). You will never hear crypto sites tell you about the fees, which can easily eat all your profits, and then some.
  • Your interest is taxable. Finally, depending on the platform you’re using, the tax obligations can be confusing. Rule of thumb: you’ll be taxed for any token bought and sold for a profit, as well as any interest income you received. (Here’s a crypto tax guide.)

So, with all this, is it worth it?

For small amounts of money (let’s say anything under $1,000), you might be better off just holding it in bitcoin or Ethereum, and letting them grow.

If you do decide to earn interest, then think long-term (5+ years). The outrageously expensive fees to move your money in and out, as well as the tax implications, mean that you’ve got to be really patient to make money with interest.

But if you’re willing to wait, you really can earn interest on cryptocurrency, at rates far more attractive than any bank. Here’s how.

interest rates vs defi rates
Current interest rates on top tokens (see our DeFi Interest Rates page)

Three Ways of Earning Interest on Crypto

1) Lending. This is the most common method of earning interest on your crypto investments: loaning your crypto to other people who can borrow it. You never see these people: it’s all handled through online lending platforms.

As an analogy, it’s like depositing money in a traditional savings account. The bank pools together money from customers and uses it for loans. The bank makes money through the interest from the loans, and some of that interest is paid back to customers.

how traditional interest works

Crypto lending platforms work essentially the same way: you’re putting money into a “lending pool,” which borrowers can use to take out loans. They pay back the loans with interest, which is distributed back to lenders.

Who’s borrowing this cryptocurrency? Mostly traders, who use the extra money to make bigger and riskier bets. However, this risk is generally not passed on to you, as the borrowers have to overcollateralize (or back up their loans with even more crypto), which will be automatically sold and paid back to you if they end up making a bad trade.

This may all sound like a house of cards, but so far it has worked surprisingly well. Even when crypto markets have had sudden crashes, the automated “circuit breakers” (also called “automatic liquidations”) will sell the collateral and pay back the lenders.

how crypto interest works
As the lender, you just keep earning interest. This all happens behind the scenes.

This doesn’t mean lending is entirely without risk: sometimes hackers will find bugs in the code. Again, the rule of thumb is to look for platforms with several years in business and several million users, which are good indicators of whether their platforms are ready for prime time.

How to do it: First, you need to buy cryptocurrency (we recommend Coinbase or Binance), then move it to a browser-based crypto wallet (we recommend MetaMask). You then navigate to a lending site (the most popular is Compound), and “lock up” your crypto as “collateral”:

supply markets
To loan your crypto, you just switch on the “Collateral” slider. It’s that easy.

You can withdraw your money at any time: unlike CDs, there is no lock-up period. Again, however, you will pay Ethereum fees when you deposit crypto, and when you withdraw crypto. You’ll see these fees before you approve the MetaMask transaction. (See our article on How to Avoid Crypto Fees.)

2) Staking. This is the second way of earning interest on your crypto investments, like storing your money in a savings account. In crypto platforms, the “staked” money helps keep the network running, by validating transactions and pays you interest in return.

As with lending, this “interest” is usually paid in the platform’s own token—and they want you to stake that token, too. For example, the crypto exchange Binance has its own Binance token (BNB), which you can stake in its platform (called “Vaults”). The revenues that Binance earns on its platform — when people make trades — are then distributed back to stakeholders: that’s your “interest,” paid in BNB.

my rewards page
Sample rates for staking with BNB. (Real-time stats here)

How to do it: For Binance, open an account on (US users use Binance.US), then buy BNB and store it in one of their Vaults. Full tutorial here.

If you’re interested in staking beyond Binance, see our curated list of Best Crypto Staking Yields.

3) Providing Liquidity. The third way of earning interest is for advanced users only. You need to be tech savvy, with more free time and a tolerance for risk. This is not a “set it and forget it” approach, but interest rates can be much higher.

Crypto exchange sites like Uniswap are called Automated Market Makers (AMMs). Think of the exchange kiosk at the airport that lets you swap dollars for, say, Euros:

currency exchange booth

Using an AMM, anyone can swap one token for another (say, ETH to USDC) instantly, within their browser. Of course, you can do this at an exchange like Binance, but with services like Uniswap, users are providing the funds (or “liquidity”) on the other side, rather than Binance. It’s peer-to-peer.

If you’re providing the funds for the trades (or “swaps”), then you are a Liquidity Provider (or “LP”). In essence, it’s like you’re the airport exchange kiosk.

As with lending, you’re never seeing the people making the swaps: you just lock up your crypto in Uniswap “pools”, and the platform handles everything behind the scenes. You receive a chunk of the service fees generated by the swaps.

The percentage at left is sample APYs you’ll earn from contributing to these lending pools. The number at right is how much money users have already locked up in these pools. 
(Real-time stats here)

Given that swapping one token for another is one of the most common use cases for crypto, there is a lot of money to be made here. But again, with more reward comes more risk, and there is one huge risk that is misleadingly called “impermanent loss.”

Important: See our guide on Impermanent Loss: What it Is and How to Avoid It.

Savvy Liquidity Providers, then, are not a “set it and forget it” type of crowd. They’re monitoring price movements and trying to get out while they’re still ahead—which in the wild world of cryptocurrency is easier said than done.

How to Do It: Uniswap has a good guide for getting started as a Liquidity Provider here.

liquidity provider vs trader
As a LP, you’re providing the crypto for the trade, and earning “interest.” (Courtesy Uniswap)

Yield Farming: Harder than Regular Farming

All these strategies are sometimes called “yield farming,” or hopping around from platform to platform, constantly chasing the highest interest rates. Between the research required, the sky-high fees, and the tax and accounting headaches, this is rarely worth it. It’s easier to stick with one interest-bearing platform for the long term.

People do “yield farming” in the traditional banking system, too. They’d move their money from bank to bank every few months, for another percentage point or two of interest. In the end, you have to ask if that’s really the road to wealth, or if your time could be better spent elsewhere.

(Note there are also platforms that will do the “yield farming” for you, with the promise that if you lock up your cryptocurrency, they’ll find the best rates automatically. The jury is out on whether this creates “taxable events” every time the platform buys and sells for you. Again, set it and forget it.)

Download Our Crypto Interest Rate Calculator

We’ve put together a crypto interest rate calculator, which can give you a rough estimate of how much you’ll really be earning with that too-good-to-be-true crypto APY. It figures in length of time, gas fees, and tax liabilities, with easy-reference numbers that you can customize. Blockchain Believers can download it here.

In summary: Crypto interest rates are real, and can pay much better than a bank – but beware of offers that seem too good to be true. Use established platforms with good reputations. Think long term. Don’t forget taxes and fees. Then, set it and forget it.


Related articles:

Holding a globe

Blockchain Investing with Impact

Nathan Cummings

Nathan Cummings was a grocery tycoon (you don’t hear those two words very often) who built Consolidated Foods, later known as The Sara Lee Corporation. You may know Sara Lee for their frozen cakes, but the company was much more, selling a wide variety of foods, beverages, and household products around the world.

Although he came from humble beginnings, the first child of Jewish Lithuanian immigrants, Cummings became a very rich man. As his wealth grew, he gave much of it away, becoming an avid philanthropist, especially in the arts. Later he established The Nathan Cummings Foundation, a philanthropic fund overseeing about $450 million in assets, which this week changed my life.

Inspired by a New York Times article called A Family Opens Up About its Investing Mistakes (great headline), I read The Nation Cummings Foundation report on their “mistakes” in transitioning their foundation to using 100% of their assets to achieve their mission of “creating a more just, vibrant, sustainable, and democratic society.”

In plain English, they said, “Instead of putting 5% of our fund into good-for-you investments, we’re going to go all in.”

This is what we call “impact investing,” or investing in companies and causes that will a) make money and b) have a measurable and beneficial social or environmental impact.

Both are important, so I’ll repeat it. Impact investments have to:

  1. a) make money (otherwise they’re a charitable contribution), and
  2. b) have a measurable benefit in “ESG”:*
  • Environmental: The investments must help the environment (or at least not actively harm it).
  • Social: The investments must treat workers fairly (or at least not actively violate human rights).
  • Governance: Management and the board must be transparent and honest (or at least not sus).

The usual investing wisdom is that if you want to b) have a measurable and beneficial impact, then you a) won’t make as much money. This was the giant leap of faith that The Nathan Cummings Foundation took when it went “all in,” going from 5% to 100% of its assets into impact investing.

The story of how they made this transition is a page-scroller. While the foundation had made gradual steps toward responsible investing, the big showdown came at a board meeting in 2017, where several generations of Cummings family members had to win over independent trustees – and each other – to get a majority vote to take the leap of faith into 100% impact investing.

I assume pie was served.

The drama is full of boardroom politics, family relationships, and risk-taking pioneers. They hired Lowell Weiss, the former editor of Atlantic Monthly and White House speechwriter, to write the story, which would make a great Netflix show (think Succession for the socially-conscious generation).

Perhaps most remarkably, The Nathan Cummings Foundation is practicing what they preach, opening up about what went well on their journey toward impact investing, and what they got wrong. In this column, I’ll outline a few of the ways their story changed my thinking, and how we might apply these lessons to the new world of blockchain investing.

Impact Investing: Three Big Takeaways

These three lessons were hard-won, and I greatly appreciate The Nathan Cummings Foundation taking the time to share them. They’ve impacted my thinking on impact investing — specifically, in our new world of blockchain.

1) You can make just as much money with impact investing, and maybe more. “Our new investment approach has not required any financial sacrifice,” the foundation reports. “None.”

The foundation created extensive models to show their new impact investing strategy provided stronger returns, even in the topsy-turvy economy of 2020, than their traditional strategy. They helped disprove the myth that impact investing is not a money-making proposition.

The reasons for this may be counterintuitive: it may be that companies that clean up their mess, pay employees more fairly, and limit executive compensation may be naturally stronger. They attract better people, which results in higher-quality goods and services, and more innovation. They may be better performers because they do the right thing, not because they cut corners.

As a simple example, U.S. automakers looked like reliable “blue chip stocks” for decades, until Tesla came along. Now they’re all playing catch-up to Tesla’s stock price. The mission of “making really great electric cars” looked like a money-losing proposition, until Tesla showed you can make just as much money with clean cars, maybe a lot more.

2) Impact investing takes work. As the foundation shifted to 100% impact investing, they interviewed a ridiculous number of fund managers, discovering that most of them dabbled in impact investing on the side, mainly to cater to a specific earthy-crunchy clientele. Few had impact investing in their DNA.

As they began to make decisions on how to reallocate the foundation’s considerable wealth, they had to pull out of a lot of existing investments, which was difficult and painful. (Imagine having those conversations.) Many of their investments will take years to wind down, drawing out the process even longer.

Then there was rigorous vetting and screening of all the potential investments they could make. What were the foundation’s core values? How would they evaluate investments — with hard numbers — across each of those values? (See their Appendix for their values, principles, and the specific questions they asked about potential investments.)

3) Impact investing needs better measurement metrics. How do we show whether companies are really delivering on our specific Environmental, Social, or Governance goals? It’s easy for a company to say they’re committed to diversity and inclusion; how do we measure whether they practice what they preach?

The report points out that there are several competing frameworks for measuring the “impact” of impact investing, but no industry standard. However, they suggest we have to start somewhere. As the great management guru Peter Drucker once said, “That which gets measured, gets managed.”

Thus, starting to intentionally measure the impact of our investments – whether through the United Nations Sustainability Development Goals, the Impact Management Project, or your own Excel spreadsheet – is the first step. Start by measuring what you can.

So how do these lessons apply to blockchain investors? Let’s look at them from the ESG perspective.

Holding a globe

First, the “E”: Environmental Impact of Blockchain

Let’s be honest: bitcoin uses a lot of energy. The mining rigs that keep the bitcoin network humming consume a vast amount of electricity — about the same as all the rest of the data centers worldwide.

That’s right: bitcoin uses as much power – and creates as much planet-warming greenhouse gas – as all those servers that run our spreadsheets, Netflix, and YouTube, combined. But just selling our bitcoin is not the answer, as most other crypto assets are similarly energy-intensive.

There are a few ways we can shift our blockchain investments to favor what’s better for the environment.

1) We can invest in mining farms run on renewable energy. In his new report, CoinDesk research associate George Kaloudis discusses bitcoin’s rapid movement to clean energy: about 40% of bitcoin mining is powered by renewable energy, versus 20% for overall energy consumption worldwide. Kaloudis makes the case that bitcoin could accelerate the global transition to renewable energy. If we end up with more solar farms and wind turbines because bitcoin miners (driven by investors) are demanding them, that’s a terrific outcome for the planet.

2) We can invest in blockchain platforms run on Proof of Stake. It’s like the difference between solar and coal: Proof of Stake is not just marginally more efficient than Proof of Work, it’s a totally different ballgame. Some PoS blockchain networks like Algorand are even pledging to be carbon negative: to give back more to the environment than they take out. That makes trading ALGO a lot better for the planet than trading ETH.

3) We can HODL instead of trading. Whenever you buy or sell bitcoin, it creates another entry in the shared digital ledger, which has a “domino effect” of replication across every bitcoin node worldwide. If you’re constantly trying to “buy the dip” and “take profit at the peak” (e.g., buy low and sell high), it’s not only bad investing strategy – no one can time the market over the long-term – it’s also bad for the planet. When we HODL, we help keep the planet CODL.

Holding a piggy bank and phone

Next, the “S”: Social Impact of Blockchain

A core argument that we constantly make about blockchain is that it’s helping to “bank the unbanked.”

Is it?

Last time I looked, those without access to the traditional financial system – which includes banking, lines of credit, mortgages, and so on – were not exactly investing in crypto. How would they? You still need to deposit the funds from somewhere, usually a bank.

We talk about redistributing wealth, but my observation is that blockchain wealth is just getting redistributed to the “whales” who already have most of the blockchain wealth. Even in the crypto/blockchain industry, the rich get richer.

We talk about building a new system of “financial inclusion,” but blockchain is still so hard to use – especially out on the fringes of DeFi – that I can’t imagine that more than 1% of the world can figure it out.

No doubt we are making blockchain more user-friendly, but most people still don’t have the time, technology, or talent to get into it. If you’re a single parent working for minimum wage and living paycheck to paycheck, buying bitcoin is hardly your solution.

Also, “blockchain investing” is still an oxymoron. For most people, it’s more like “blockchain gambling.” There’s a get-rich-quick mentality that leads to increasingly risky derivatives and crazy speculative bubbles.

Blockchain investors don’t want to “bank the unbanked.” They want to “make bank.”

What we can do to change this story? We can:

1) Invest in blockchain projects with low fees (preferably no fees). Anyone who talks about how blockchain will help the unbanked through lower fees just hasn’t used blockchain recently. When it costs $12 to make a $3 ETH transfer, we can legitimately ask what the hell is going on. Fees are the dirty secret of this industry, an insidious problem that needs the best and brightest minds of blockchain to solve. The best fee is zero.

2) Invest in blockchain projects that really are solving social problems. Binance Charity Foundation, which we cover in our book, is a nonprofit that allows investors to donate in cryptocurrency – which goes directly to recipients worldwide. This has a direct and tangible benefit of getting the unbanked to open crypto wallets, in order to receive the money. It also gives donors total transparency into where their donation is going, as it’s all recorded on the blockchain.

3) Avoid investing in “meme stocks” like GameStop and Dogecoin. These cater to unsophisticated investors who want to get rich quick, and Reddit preys on their ignorance by disguising it as “fun” to lose money.

Fists forming a heart shape

Finally, the “G”: Governance of Blockchain

Today the blockchain industry is mostly white, and mostly male. The problem is that leads to a lot of testosterone-fueled, risk-taking behavior — which is not good for investors, or for the industry as a whole.

Fortunately, there are many women getting involved in blockchain through groups like Global Women in Blockchain, but (in my experience) it is rare to see woman-led blockchain startups. It is rarer still to see blockchain projects led by people of color.

I serve on the board of the Boston Blockchain Association, and it’s a problem we’ve been actively working to solve. At first, our board was made up entirely of white males, but I am happy to report that we now have three smart and talented women on the board, and we are much better for it. Diversity can be achieved, but it must be intentional.

As investors, we can:

1) Look for women- and minority-led blockchain projects. Obviously we want to find investments with real value, but we must overcome unconscious biases that the most valuable projects will come from young white dudes.

2) Avoid projects without clearly identifiable founders. We continue to see new projects launched by anonymous teams, which does not bode well for governance down the road. If there’s no accountability at launch, good luck getting accountability later on.

3) For community-governed projects, get involved with the process. Many new DeFi projects have governance proposals issued by the community (Uniswap, for example). If investors don’t get involved, these projects can get biased toward the largest whales. If you own a token, try to be involved (or at least aware) of what’s happening behind the scenes, to be sure you still agree with it.

The Biggest Impact is the Idea of Impact

Perhaps the most enduring contribution The Nathan Cummings Foundation has made in this journey is the report itself. It’s not just the power of example, but it’s being willing to open up about their experience. This makes it easier for other people to join their journey, even if the journey wasn’t easy.

Compared to them, our job is much easier, because our industry is so much younger and smaller. It’s important that we begin to infuse these impact ideas into the industry now, to make them part of our blockchain DNA.

We can’t just pay lip service to these ideals, we have to actually do something. The ideas I’ve outlined above are a starting point, because we have to start somewhere. I hope you’ll join me in helping me put these ideas into action.

Together, we can inject these ideals into the blockchain bloodstream. Over time, this is how our investing can have world-changing impact.


* Note I am oversimplifying concepts like ESG, SRI, and impact investing (a more detailed description here). The lack of clear and consistent definitions between these is one of the issues highlighted in the Cummings Foundation report.

John Hargrave is a founding board member of the Boston Blockchain Association.

Burger and fries

Bitcoin vs. Burgernomics

Burger and fries

Here’s my routine. Each morning I begin my day with meditation and exercise, then fix up a bowl of Bob’s Red Mill while I scan The New York Times (to take the pulse of the world) and Reddit (to take the pulse of the Internet).

The Reddit community usually upvotes cute cat photos and funny GIFs (here’s one that will make you laugh). This week, however, the following post made it to the homepage of Reddit, where it quickly went viral (warning: language).

It’s a fair question.

This question ignited over 1,200 responses, including a surprisingly nuanced conversation about the value of gold. This is not the kind of crowd-pleaser that usually wins Reddit gold, but it is an important data point. Why?

Suddenly, the crowds are wondering about the value of money.

Until Coronavirus, we’ve lived with the idea that we have to work hard for our money. Money was scarce and difficult to earn. In response to the Coronavirus, governments are printing money, and giving it away for free.

We all have one question: wait, what?

“You’re telling me we could have been printing money all along?” we all ask ourselves. “So why am I working so hard?” There’s a cognitive dissonance: while we all appreciate the money, something about it doesn’t feel right.

Free money seems too good to be true. There must be a catch.

So we end up with the people questioning the value of the dollar, and (half-jokingly) proposing that McMoney might be more valuable, since at least it can be redeemed for food.

This is simple human psychology: we all know there’s no such thing as a free lunch. Suddenly we’ve all received a free lunch. Who will pay for the lunch?

Which brings us to data point #2: The Coin Shortage.

The US federal reserve

The Psychology Behind Coin Shortages

I recently snapped this photo at a pharmacy cash register, where I was buying allergy medicine (a valuable item) with my free money (printed out of thin air). I have researched why there is a coin shortage, and the usual answers blame the Coronavirus lockdown:

  • People aren’t spending coins in vending machines and laundromats.
  • People aren’t using as much cash to pay for small retail purchases.
  • People aren’t dumping their piggy banks into supermarket kiosks (like Coinstar).

I’ll add another explanation: perhaps people are hoarding coins.

Human psychology says that we all have a lot of FUD about the future: Fear, Uncertainty, and Doubt. If you’re the type of consumer who still pays for things in cash, you may well be hoarding that loose change, in the same way you may be hoarding toilet paper and SPAM … just in case.

Logically, if we really think money is losing its value, we’d spend it as quickly as possible, converting it into assets with “real” value (like gold). This is, of course, already happening:


Hoarding gold and hoarding coins, for most people, are two sides of the same coin (so to speak). Economically, they’re completely different (see the Reddit discussion), but they feel kind of the same.

Human psychology is often illogical. But it matters a lot, because moods drive markets. If we all believe something has value, it has value. If we lose our faith in it (say, we suddenly get a lot of it for free, with no strings attached), then the value plummets.

This can become a vicious spiral, leading — in the most extreme cases — to hyperinflation.

The Psychology of Hyperinflation

Hyperinflation, as we’ve covered in previous columns, is where an economy experiences rapidly escalating prices, along with rapidly depreciating currency. (Here’s a list of notable examples.)

During hyperinflation, mob mentality takes over: as soon as people get their paycheck, they rush to go buy things of real value (like Big Macs and allergy medicine) because next week these things could cost twice as much. This negative spiral is both economic and psychological: it is a self-fulfilling prophecy. (Counterintuitively, coins can become scarce.)

Two things are necessary for hyperinflation:

  • A huge increase in the money supply (check)
  • That is not supported by an increase in goods and services (check).

Common sense tells us that people have not been as productive during the Coronavirus. Most professionals are working from home, while trying to manage kids and their own anxieties. People aren’t traveling or networking, so deals aren’t getting done. Meanwhile, time-wasters like Netflix and videogames are on the rise. Also, there’s free money, so why work?

Here are the numbers to back up that common sense, brought to us just moments ago by the U.S. Bureau of Labor Statistics:

If charts could talk, this one would be saying, “Ay-yi-yi!”

It takes the bureau a while to compile the data, so we’re actually looking at numbers from April-June 2020, during the peak of the Coronavirus. You have to dig through the press release to find the numbers that matter, which is that business output is down 11% from a year ago, and down 38.7% from the first quarter of 2020. (For manufacturing, which is broken out separately, the numbers are even worse.)

In plain English, this means that people are not as productive. The bureau buried it in Table A-1 at the back of the report, so I’ve taken the liberty of highlighting the most important numbers:

Labor productivity

And here it is helpfully displayed as a graph, as it should have been by the government organization that prepared it:

Decline in US labor chart

Meanwhile, hourly compensation went the other way:

Increase in US hourly compensation

To summarize: the government is printing money, people aren’t productive, and they’re being paid more to do less. Meanwhile, people are questioning the value of money, even while they hold onto it.

Whenever we highlight a problem, we should try to offer a solution. Here’s mine.

The Solution: Reverse Psychology

I will tackle this from the human psychology perspective, because I believe that doesn’t get enough credit in most discussions about the economy.

The economy is, of course, a human invention: it is not a great law of the universe, like mathematics. Although economics uses math, it’s not math. Although we treat economics like a science, it’s not a science (at best, it’s a pseudoscience).

Because humans invented the economy — not nature — the economy is subject to human feelings. Because humans are emotional creatures, our anxieties and fears have real economic effects. When we all believe in something, the price rises, and when we no longer believe in it, the price falls.

When we all start hoarding coins because we’re afraid there’s going to be a coin shortage, guess what? There is a coin shortage.

As I say in my book: To make money, you’ve got to zig when everyone is zagging, and zag when everyone is zigging. You’ve got to use reverse psychology. So here’s what I’m doing:

  1. Diversify, diversify, diversify. The only thing we know for sure is that we don’t know anything for sure. So look for ways to diversify your savings, your 401(k), your business activities. Think a wide array of assets, in a wide array of countries: anything people will expect to “hold its value.”
  2. Invest in yourself. As we continually preach here at Bitcoin Market Journal, the best investment is in yourself. If you’re out of work, use this time to learn new skills. If you’re less productive than usual, work twice as hard on something that’s grabbing your interest.
  3. Consider buying digital assets. If you’re not already into bitcoin and altcoins, this is a great time to get started. We’re already seeing a great boom in bitcoin (from $7,300 before the Coronavirus to $11,500 today), and that may continue as people leave traditional money behind.

These are reverse psychology strategies. While people are holding onto coins, you’re using them to buy a diversified set of assets. When people are playing videogames and watching Netflix, you’re working hard, building your brain. While people are spending their free money, you’re investing it into bitcoin.

Most importantly, these strategies put you in control. Rather than sitting on your couch, nervously waiting for the other shoe to drop, you can be doing something that prepares you for what’s next – whatever that is.

Despite all the doom and gloom, I have a confession to make: I secretly kind of enjoy this time. It is incredibly difficult, to be sure, and I don’t wish suffering on anyone. But I see opportunity everywhere: a once-in-a-lifetime chance to rethink how we do things, to reshuffle the deck. Let’s use this time wisely.

The answer to the Reddit question, of course, is that even McMoney won’t hold its value if the underlying currency can’t be used to buy burger meat. (Burger meat, by the way, is 15% more expensive than last year.)

So what will hold its value? Your brain, for one. (Learn stuff.) Maybe real estate, maybe gold. (Diversify.) Maybe bitcoin. (Consider crypto.) Figure out where the crowds will start putting their money — but don’t follow the crowds. Lead them.

John Hargrave is a founding member of the BBA, and co-author of Blockchain Success Stories: Case Studies from the Leading Edge of Business.

Lego man sitting at a desk.

The $7.5 Billion Blockchain Investment

Lego man sitting at a desk.

The trend known as DeFi, or Decentralized Finance, is taking the blockchain world by storm. As of this writing, the total amount invested (or “locked”) in DeFi is about $7.5 billion, and growing. This is either a blockchain breakthrough, or a blockchain bubble. (Turns out, it’s both.)

I recently went in deep on DeFi. My goal was to see if there’s real value there, and to understand why people have bet $7.5 billion on its future. Is DeFi worth the investment? Read on to find out what I learned … and the easy way for ordinary people to invest.

What the DeFi

At a high level, DeFi (or Decentralized Finance) is a set of websites and apps where digital assets (like Ethereum) can be used to create new financial products like loans, index funds, and derivatives. That’s a mouthful to explain, so here’s a simple example.

In a traditional bank, let’s say you want to take out a loan to start out a new business. Applying for this loan will require hours of time and mountains of paperwork. You might have to put up your house as collateral – if you can’t pay back the loan, in other words, the bank can take your house. If you’re approved, the bank gives you the money, then you gradually pay back this loan (with interest).

This is what we call traditional or centralized finance – it’s managed by a central institution (a bank), which itself reports to a bigger central institution — what we literally call the “Central Bank.”

With a decentralized loan, this model gets flipped on its head: you’re borrowing not from banks, but from other users. You buy digital assets (like Ethereum), then use simple, one-click apps like Compound to take out a loan, using that Ethereum as collateral. Behind the scenes, the app finds lenders — not banks, but other investors who are earning interest by lending to you.

If you can’t pay back the loan – or the price of your original Ethereum drops suddenly – the app will sell your original Ethereum (just as the bank might seize your house). This is one reason DeFi apps are incredibly risky, and you should be prepared to lose 100% of your investment.

Centralized Finance Decentralized Finance
Run by banks Run by users
Slow and cumbersome Instant and fun
Relatively safe Highly risky

That said, there is definitely something important going on with DeFi, and it is actually the banks that should be afraid. The banks should be very afraid.

DeFi Step-by-Step

In a nutshell: most DeFi apps work on Ethereum. So the process is:

  • Buy some Ethereum (through a service like Coinbase);
  • Transfer that to a wallet (like MetaMask);
  • Connect the wallet to these services (here’s a list of the top DeFi apps).

Using these DeFi apps is like flying an alien spacecraft. The spaceship is so easy to steer that it flies with the power of your mind – but you have no idea how the technology works, and you might crash into the surface of Saturn.

On one hand, these apps are so easy to use that they make the banking system look like an outdated relic. This week, my traditional banking website was down (they never explained why), while Compound was giving real-time feedback on how much I was earning with my Ethereum loan.

On the other hand, the user manual for these apps is pretty much non-existent. This is bleeding-edge financial technology, so you are pretty much on your own to figure it out: you can either sit through long-winded YouTube instructional videos, or wade through difficult technical documentation.

Once you’re in, though, I must confess it is incredibly fun to watch the real-time numbers flowing around. It’s like you’re in a casino, because you’re not playing with “real” money, you’re playing with chips — but of course the chips represent real money, so ultimately your real wealth is on the line.

After hours of working on this process of converting and sending tokens, a few things became clear.

  • DeFi apps are really good at taking your money. It is creazy (or crazy easy) to send your Ethereum over to these apps – you don’t even need a username and password, they just hook up to your Metamask wallet and drain it directly.
  • DeFi apps are really good at charging fees. You pay these fees in the form of service fees, or “gas,” required to make transactions on the Ethereum network. Additionally, these apps generally tack on their own service fees. These fees are subtle and insidious: just to get in, you’ve already lost wealth.
  • This is all funny money. Until you convert it back into a stable store of value, you are earning an imaginary return on imaginary money. It’s a house of sand, or castles in the sky. So the $7.5 billion invested in DeFi is misleading: it’s not like $7.5 billion in U.S. dollars, but rather $7.5 billion of multi-layer money (which we will abbreviate as MLM).

Let me give you an example of MLM. Joan buys $100 worth of ETH, puts it into her MetaMask account, then deposits it into Compound, where she can buy an additional $50 worth of some other token — which she can then take over to another DeFi platform, and do the same thing. Again and again.

Financial assets built on top of other financial assets are nothing new: they’re called derivatives. But this “money built on money” — MLM, or multi-layered money — can be a house of cards: if the table shakes, the whole thing comes crashing down.

I’m pretty sure that after all the work I did on DeFi, I lost money. (It’s a research expense.) Still, there is something very interesting going on here: easy-to-use financial applications that are not being run by banks, but by individual users and software. Here are a few takeaways.

Financial asset dashboard
After all my hard work, I managed to earn a -6% interest rate (meaning I was giving away money).

5 DeFi Investing Principles

First, if you’re going to put money into DeFi applications, do not invest more than you are willing to lose 100%. These are early-stage applications, so they’re vulnerable to hackers. The entire market could crash overnight. Your parrot could eat your passwords. Ask yourself, “If I lost 100% of this money, would it be OK?”

That said, consider investing a little bit into DeFi. Even if it’s just $100, you’ll get your feet wet. The process of using these applications will teach you a lot. You’ll see the opportunities for this stuff: that someday soon we will be trading stocks, bonds, real estate, sports teams, pop stars, and everything else on these platforms.

Next, keep track of what you’re doing. It is so easy to throw money into these platforms that you can quickly lose track of what you own, how much you invested, and how much you’ve paid in fees. At minimum, keep an Excel sheet or Google sheet with each transaction, the platform, and the fees.

On that point, watch fees carefully. Fees are the silent killer. There’s no use earning 5% interest on your Ethereum if you’re paying 6% in fees to transfer it in and out. To reduce gas fees, for example, consider making transactions during night time hours, when the Ethereum network is not so congested.

Finally, be vigilant. Because we are dealing with MLM (multi-level money, similar to multi-level marketing), a sudden crash in the blockchain market can have a domino effect through the entire system. As Selena Gomez explained this concept in The Big Short:

With DeFi, we are building new layers of MLM, which in my view is not a good thing. It’s risky and dangerous. However, that MLM is funding a new generation of financial products, which will completely overhaul the current financial system, which in my view is a good thing.

Ultimately, the free flow of value is good – especially the free flow of value to where it is most needed. When we can get money to an entrepreneur in Mombasa, or a relative in Iceland, or schoolchildren in Beirut – instantly, and without financial gatekeepers – we will be on our way to a fairer world. Human progress will accelerate faster and faster.

Also, let’s be honest: banks are generally difficult, bureaucratic, and unfriendly. My bank holds all my money, but they never call me on my birthday. They tell me how friendly they are, but it takes forever to get someone on the phone. The banking industry is about due for a shake-up.

There is one super-simple way to invest in DeFi: invest in Ethereum. Nearly all of that $7.5 billion is invested in apps that are built on Ethereum. Like investing in the early days of Microsoft, when everyone was trying to figure out what an operating system was, Ethereum is quietly eating the banks.

Ethereum is emerging as the de facto standard for DeFi.

As I’ve said in previous columns, investing in Ethereum is not investing in a company. You don’t own shares of stock. But as the value of the Ethereum network continues to grow, the value of the Ethereum token (ETH) will likely continue to grow. When you buy Ethereum, you are betting on the future of Ethereum.

Today, that future looks brighter than ever.

You will hear plenty of get-rich-quick stories about DeFi in the months ahead, but that’s not our style. We’re here to help you build a lifetime of health, wealth, and happiness – by delivering value to where it is needed most.

Even though DeFi is an enormous bubble, even though it’s a massive MLM, this software-based, peer-to-peer model of finance is going to radically disrupt the traditional financial industry. So if you have a little money to spare, consider playing around with these apps – but remember, the simplest DeFi investment is to buy and hold Ethereum.

John Hargrave is a board member of the Boston Blockchain Association. Click here to join as a member.

Libra displayed on a phone.

Investing in Libra: How to Buy Into Facebook’s Digital Currency in 2020

Libra app displayed on a phone.

One year ago, Facebook announced its new cryptocurrency, called Libra. We gave them one year to decentralize it. One year later, we have an update – as well as some happy financial results, for those of you who invested.

That Escalated Slowly

The most surprising thing is how slowly the Libra project has moved forward. Facebook’s slogan, of course, is “move fast and break things,” but that doesn’t work when it comes to reshaping the global economy, where the project has been mired in scrutiny from regulators around the world.

The escalated slowly

First, I should be clear that it’s not a Facebook project: it’s technically owned by the Libra Association, a separate organization set up in Switzerland , which now includes 27 members: mostly tech companies like Uber and Spotify, plus VC firms like Andreessen Horowitz and Union Square Ventures.

But it started at Facebook.

That’s why regulators have raked Facebook over the coals. As I pointed out a year ago, Facebook has over 2.5 billion users — a third of the planet — and introducing a new digital currency would make Facebook a global economic superpower overnight. (Now, that’s thinking big.)

TL;DR: Regulators have put the brakes on the project, scaring off original Libra partners like PayPal, Mastercard, and Visa. In response to these concerns, Libra has posted a new version of its white paper to address some of these concerns — we’ll call this .

Libra 2.0: How it Works

Imagine that you have a Libra “wallet” – like a bank account – that you set up through Facebook. You can “load it up” with your own national currency, then use it to buy products and services on Facebook—as well as many other partners, like Lyft or Shopify.

But you might choose to keep your Libra in the wallet. It’s easier to transfer to friends and family (like Venmo). It’s easier to transfer internationally (like sending an email). It hides all the complexity of exchange rates and transfer fees – it’s just one currency, Libra.

But you might keep your money in Libra for other reasons. Maybe you get a better savings rate than your bank can give you. Maybe it’s easier to take out loans. Maybe it’s just a better experience than your bank. (In fact, maybe the bank itself starts to look old-fashioned and out of touch.)

As it stands today, then, Libra 2.0 looks more like a digital payment system built on a blockchain platform. This makes it more like a competitor to PayPal, but built on blockchain (and as we all know, blockchain is better).

Over the last year, the Libra Association made a few important changes to the original whitepaper:

1) Stablecoins. In the new roadmap, Libra uses stablecoins tied to specific currencies (like a US dollar coin), in addition to the “basket” of currencies they used in their original proposal. Importantly, these stablecoins are backed by “real” assets: they will only mint a Libra USD if they have a dollar backing it up. Instead of a dollar sign, these will be written with the Libra logo and then the currency:

Libra will become the “meta money.”

2) Increased compliance. How do you keep Libra from being used for money laundering? In plain English, you’ll be able to use Libra only by going through a “custodial wallet or exchange” (like a bitcoin bank), or a do-it-yourself “Unhosted Wallet” which will have some kind of automated KYC/AML built in. It will be hard to use this anonymously (which is an improvement over cash).

3) More tightly centralized. The original plan was to move Libra to a permissionless (i.e., open or decentralized) system within five years. Regulators said that a public blockchain would be too hard to track bad actors, so Libra has now abandoned those plans, and made it a private blockchain – with plans to vote more members into the private Libra Association at regular intervals.

In summary: Libra is becoming a kind of payment network, based on a private blockchain. It is backed by “real” currencies — they have money in the bank to back it up — but it will be far easier and cheaper to transfer money than today.

This is all a net positive, though it’s not decentralized, which is a big negative. Because without decentralization, who primarily benefits?


How to Invest in Libra: Invest in Facebook

You can’t buy Libra today, but you can buy Facebook stock. For those who bought Facebook stock (full disclosure: I did), here’s the performance over the last year:

Facebook stock performance

From $193 to $235: that’s an 18% increase in one year. In my view, it’s not too late to hop on the Libra bandwagon. In fact, the CoronaCrisis has only increased the need for speed in our financial system.

The big challenge is that Libra is still theoretical. Although they have a working prototype, and developers are running testnet transactions, no one is “using” Libra in a practical way. We don’t know how long that will be, but my bet is that once the financial dominoes start to fall, things will move quickly.

We need to upgrade our monetary systems. As the Fed prepares banks for the perfect economic storm that may be coming, there has never been a better time to upgrade our financial infrastructure. Depending on how bad things get, we ordinary investors may need to transfer money quickly and easily, anywhere in the world. We will want options.

I’m disappointed that it’s not decentralized, but there are always ways for prophets to profit. If you peer hard into the future, think about where things are going with Libra – and who’s likely to win at the end of this movie.

At the beginning, many people called the Libra project “Zuck Bucks,” as if it was Mark Zuckerberg’s personal money. But who do you trust to roll out a global digital currency more successfully: Mark and his team of Libra insiders, or the central banks?

P.S.: Be sure to check out our original guide, Facebook Coin: How to Invest in Libra, Facebook’s New Cryptocurrency.

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), (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.


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:


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? (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 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).

Stablecoins: What They Are and Why They Are Inevitable

“PROCEED AS IF SUCCESS IS INEVITABLE.” This quote is attributed to Anonymous, who penned a great many famous sayings. That dude was a genius.

I often use this quote when talking about blockchain industry. “Inevitable” is one of my favorite words, because it really does seem to me that in our Internet Age, blockchain—the Internet of Money—is inevitable.

In a recent interview, Patrick Harker, the president of the Federal Reserve Bank of Philadephia, said that stablecoins are “inevitable.” From his Wharton interview:

“Without getting into the details of bitcoin and Libra, I think there’s a real advantage in having a stablecoin. It’s hard to have a currency that’s bouncing around all the time, so when you go to Starbucks, you don’t know how many of whatever coins you’re going to have to use that day. Clearly, that is an area that will have an advantage over time.

That said – and it’s only my opinion, and I think I’m a minority opinion on this right now – I do think we, the central bank, and central banks around the world, need to seriously start thinking about central bank stablecoin currency.

In my view, it’s inevitable. Technology is evolving. We’re not going to stop that … I do think that it is inevitable, and we should start contemplating it now.”

He’s right: stablecoins are inevitable.

Stablecoins—blockchain-based digital currencies that maintain a stable value (unlike bitcoin, whose price changes daily)—are inevitable, for two reasons.

Why We Need Stablecoins: Reason 1

Tether name and icon displayed on a phone.

Changing money between “traditional” currencies (like dollars) and “digital” currencies (like bitcoin) is still slow and expensive.

“If we’re creating a new digital currency,” people often ask, “why should that digital currency be pegged to an existing currency, like the U.S. dollar? Why not just use dollars?”

The first reason is that it’s slow and expensive to change money from fiat to crypto. Here we have a real-world case study, with the booming success of the Tether stablecoin in China.

The legal status of cryptocurrencies in China is complicated, but the simple explanation is they’re legal to own, but difficult to purchase. This makes it impractical for high-volume users (like digital traders) to constantly be selling RMB and buying bitcoin, or vice versa.

What Chinese crypto traders do instead is store value in stablecoins. A trader might move all her money into stablecoins at night to catch some sleep – in the same way a bank puts all its loose cash in a vault at night. Traders know when they wake up in the morning, the stablecoin value will remain, well, stable.

As reported by CoinDesk, Tether (USDT) volume has surged to an all-time high, led by Chinese traders—who are not just a fringe use case, just the early adopters. So in a sense, Harker’s prediction that stablecoins are “inevitable” is actually understating the case: they’re already here.

Traders are on the leading edge of this economy, a sign of things to come. As digital assets get in the portfolios of more money managers, stablecoins like USDT are going to be not just an interesting innovation, but “the way things are done.” This, too, seems inevitable.

TL;DR: Exchanging money between fiat and crypto is slow and expensive; stablecoins provide a way to hold value in crypto, which is cheaper and easier than going back and forth.

Why We Need Stablecoins: Reason 2

Leather wallet with a gold coin.

One money for one world.

Despite today’s political rhetoric, most of us understand that we live in a global economy. What affects one country, in one way or the other, affects all countries.

This is why the economy is such a notoriously difficult thing to predict: every national economy affects every other national economy. It’s like a science experiment with 200 different variables, all constantly echoing and rippling back on each other, like raindrops on the smooth surface of a pond.

Occasionally someone will throw a rock into the pond (trade war!), and we can see how it echoes throughout the world economy. Lock this into your mind: the mental model of a global economy (a single pond), not a series of disconnected mini-economies (separate puddles).

In this view, why do we need different currencies? Money is moving around the globe, quite literally, at the speed of light. Changing money between Euros and dollars and renminbi is a vestige of a time before the Internet, when we had to communicate with telegrams, and make ocean voyages on steamships, when gentlemen wore bowler hats and ladies carried parasols.

In the words of President Harker:

Look, the vast majority of money in the world is digital right now. It’s central bank money and so it’s not a great leap. The difference is in creating this kind of a stablecoin approach. Again, I’m not sure how to do that. I’m not sure when we would do it. But at least we should start seriously thinking about it.

I really should be paying President Harker for all these great quotes, but the payment would have to be in stablecoins.

Harker tells an interesting story about a business leader who was considering moving his supply chain from China to Mexico, due to the current trade relations between the U.S. and China. When he heard that the U.S. might impose more tariffs on Mexico as well, he was “exasperated.”

We’re living in a global economy. What affects one of us affects all of us.

Stablecoins are needed now more than ever, because we need one money for one planet. We need a single currency for a single species. We need a global currency for a global economy.

As Harker says, the vast majority of money is already digital. It’s not paper money you hold in your wallet, it’s numbers shooting across the Internet. What’s different is that instead of constantly converting those numbers from one tribal system to another, we simply make a single system.

If instead of dollars and Euros, we used beads and stones, we could easily see how inefficient our system is. Our current systems are like beads and stones. We need a global standard that works across all tribes: “Earth Money” for the people of Earth.

A single stablecoin standard will open up trade, provide access for the unbanked, and unlock a new era of prosperity and wealth. With a blockchain-based “Earth Money,” we can create a digital currency for all Earthlings everywhere—and we all will benefit.

TL;DR: A stable, global, digital currency makes the flow of money easier and simpler—which will help our global economy thrive.

Taking the Lead

Person typing on a laptop computer.

Harker falls short of calling on the United States to take the lead. (That’s why he’s only president of the Philadelphia Central Bank.) This is where the culture of banking and finance makes odd bedfellows with the culture of technology.

I’ve often described blockchain as the Venn diagram of where finance (the suits) meets technology (the hoodies), and there are few people that understand both worlds. Blockchain is where the suits meet the hoodies.

In the technology hood, there is little room for second place. If you have the speed and vision of a Microsoft, you lead the PC software revolution. If you have the speed and vision of a Google, you lead the information revolution. If you have the speed and vision of an Uber, you lead the ride-sharing revolution.

In the tech world, if you wait for someone else to lead the technology — if you’re hesitant or unsure — you are frequently doomed to second place. This is because technology has network effects, as I explain in my book. In simple terms, it’s like a snowball that picks up speed until it’s too heavy and fast to stop.

Blockchains have network effects, big time. China is widely reported to be launching its own digital currency, which will likely siphon away all those Tether users as it becomes easier to trade between fiat and crypto. Among economic superpowers, China will likely get the snowball rolling.

Talk about inevitable: once China gets into the digital currency game, it seems inevitable that other major economic powers will follow. Because China will be the first, it is also likely China will also be the biggest (due to the snowball of network effects).

From there, it seems inevitable that each country will rush to mint its own blockchain-based digital currency, in the same way that everyone realized the value of the Internet in the 2000s. You can’t afford to be left out. But this is still only half the battle, as we want a global blockchain standard.

Here again, we can learn from blockchain projects to date. Those who form strong international coalitions — such as Hyperledger and Enterprise Ethereum Alliance — tend to get the snowball rolling, while those who “go it alone” tend to go nowhere.

What is needed is a strong international coalition of financial leaders to begin working on a universal stablecoin, one money for one world. The United States has an opportunity to take the lead, but so does every other country.

As to the country that takes the lead in establishing this universal stablecoin – this “Earth Money” – consider moving there. As Anonymous said, proceed as if success is inevitable.

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

How to Convert Bitcoin to Real Estate (With the Government’s Blessing)

Gold coin with bitcoin symbol.

Let me tell you a story about Wally Whale.

Wally bought 125 bitcoin back in the day, when the price was just $125. Those 125 bitcoin are now worth $1 million and Wally can’t handle the stress. He’s tired of HODLing a million dollars of bitcoin, which might be worth half a million one day and two million the next. He wants to diversify.

In other words, Wally would like to sell the bitcoin and reinvest the $984,000 profit in a more traditional, stable investment—say, real estate. But this means he will have to pay tax on the profit, which will be around $200,000. 

What if I told you there was a way to reinvest your bitcoin into real estate, completely tax-free, with the government’s blessing?

Because this works with new U.S. tax law, it is only applicable to U.S. investors. But for all the bitcoin skeptics out there, this is a perfectly legal, government-sanctioned way of transferring your bitcoin to something “real” – real estate.

Introducing the O-Zone Layer

The Tax Cuts and Jobs Act of 2017 was created to spur investment in economically distressed areas—to “spread the wealth” into regions that need more businesses and investors, by providing them with a huge tax advantage. They gave these areas the sexy name of “Opportunity Zones” (or the even sexier “O-Zones”), and the payoff is exciting. Stick with me to the finish.

Normally, if you sell any asset for a profit, the IRS takes a cut of that profit. If you bought Apple stock five years ago at $109, and you sell it today at $262, the IRS gets a cut of your $153 profit. This applies to any asset, whether it’s fine art, a classic car, or bitcoin. If you make a profit, you pay tax on the profit.

Under the new law, you don’t pay tax if you reinvest that profit back into one of these new “Opportunity Zones.” Let’s say you sell your Apple stock, then reinvest the $153 back into Parramore Oaks, an energy-efficient apartment building in Orlando, Florida. You roll over the entire $153, and you don’t pay tax.

This is what an O-Zone looks like (courtesy NCSHA).

If you keep your investment in the building for at least five years, then cash out, you get a 10% discount on the original tax you owe. If you keep your investment for at least seven years, you get a 15% discount.

Here’s the math: 

This tax advantage “expires” on December 31, 2026, so many investors are rushing to get into this deal before December 31, 2019, so they can take advantage of the full seven-year discount.

Let’s go back to Wally Whale, who has made a $984,000 profit on his original purchase of 125 bitcoin. He sells the bitcoin, rolls over the $984,000 tax-free into, say, the Teachers Village Fund, which invests in schoolteacher housing within Opportunity Zones in Newark, NJ.

If Wally cashes out of that investment after five years, he only then pays the tax, at a 10% discount. If he cashes out after seven years, he gets a 15% discount. He pockets his $800,000 and change—a jaw-dropping return on his original $15,000 bitcoin investment.

Obviously this works best for investors who are willing to be patient and do their homework (both things that we preach over and over at Bitcoin Market Journal), but it’s a terrific way of building wealth while helping build underserved communities. By converting digital assets into real estate, you’re moving blockchain into buildings, crypto into communities.

I had the opportunity to go visit one of these communities. I was impressed with what I saw.

An Example Opportunity Zone

Downtown Quincy.
Downtown Quincy, Massachusetts.

Quincy is one of the top 10 cities in Massachusetts, with easy access to Boston: it’s just a twenty-minute subway ride into Boston’s Blockchain District (formerly known as our Financial District). The Stop & Shop supermarket chain is headquartered there, as are major offices of State Street Corporation and Blue Cross Blue Shield. John Adams, the second president of the United States, grew up there. (Don’t hold that against them.)

Traditionally, Quincy was a manufacturing town, with granite quarries and shipbuilders. When those businesses dried up, Quincy went into a bit of a decline. In 2013, the median household income was about $62,000—well above the national average of $53,000 but well below the local average of $85,000.

The local government began investing heavily to attract businesses out of Boston and into Quincy, where rents were much more affordable. It invested in new housing, gentrified the downtown area, and attracted new restaurants and shops, creating what the Patriot Ledger newspaper (also headquartered in Quincy) called an economic boom.

The Hancock Adams Common in downtown Quincy.
The Hancock Adams Common in downtown Quincy.

Walking through Quincy, you don’t exactly feel like you’re in a wealthy suburb, but it’s not bad. We had a nice lunch at an upscale Japanese restaurant, then took a tour of a new co-working space called QUBIC (Quincy Business Innovation Center), located beneath a huge Citizens Bank branch (one of the conference rooms is literally an old bank vault). You can see Quincy profiting from the Boston boom.

The Bank of America building in Quincy Center.
The Bank of America building in Quincy Center.

Quincy is also home to these “Opportunity Zones.” So, if Wally Whale believes that Boston is growing (it is), and this growth is pushing out to the suburbs (it is), and Quincy is well-positioned geographically and politically to take advantage of that growth, then this is an Opportunity Zone well worth consideration.

Let’s say Wally sells the bitcoin, reinvests the profit in new real estate development in Quincy (it has to be either new construction, or “significant improvement” to an existing property), and sits on it tax-free for seven years, during which time it benefits from the Boston blockchain boom. Wally gets a more stable investment (real estate), helps build a local economy (Quincy), and enjoys his free money (tax discounts and deferrals).

The ancient alchemists sought to turn metal into gold: Wally is turning bitcoin into buildings.

Please note I am not endorsing any specific investment or city. I’m literally not selling you anything! I am using Quincy as an example of how an investor might think about 1) diversifying investments, 2) doing the homework, and 3) investing for the long term. I’m giving you ideas.

Now, what if we could take this approach to invest in not just one piece of real estate, but to an entire portfolio of properties? That’s our final piece of the puzzle.

The Bitcoin Real Estate Fund

Miniature model of a home with gold coins that have bitcoin symbols.

Imagine that Wally Whale can now reinvest his profit into a fund that has investments in buildings across the United States, strategically located in promising Opportunity Zones like Quincy. For example, the fund might invest in Ox Fibre Apartments, a historic warehouse in Maryland that’s been converted into residential units. Or The Tappan, a mixed-use building in Cleveland, OH with 95 apartments and a 2,000 square-foot bakery. Anywhere there’s the promise of future growth.

There are already over 150 of these Opportunity Zone Funds, many of which are open to anyone (not just accredited investors). In other words, anyone can cash out a bit of bitcoin, then reinvest it back into one of these funds, tax-free. You can convert bitcoin into buildings.

That’s why this law was passed: to attract investment to these underserved areas. The government doesn’t care where that money comes from. And by offering another place to park your money, you diversify your portfolio, always keeping no more than 2-10% in digital assets, as we explain in our Investor’s Manifesto.

The only thing that hasn’t been done yet is to formalize this with a name. While you can sell your bitcoin or cryptocurrency, then reinvest the profit into any of these funds, I’d love a fund called the “Bitcoin Real Estate Fund,” specifically targeted to investors like us.

In this hypothetical fund, we’ll invest in real estate projects in promising Opportunity Zones located near technology hubs like San Francisco, New York, and Boston – or in promising blockchain hotspots like Wyoming, Miami, and Puerto Rico. In a sense, we’re getting the best of both worlds: betting on the rise in technology, which will in turn lift the value of the surrounding real estate. Anyone can invest, but we’ll make it an easy “off-ramp” for people who want to cash out bitcoin and into real estate.

I am grateful to the Boston blockchain angel investor group Chain Reaction for explaining Opportunity Zones at an excellent Meetup, and for arranging the tour in Quincy. With this idea, we can literally power a new real estate revolution with bitcoin, in the places that need it most. That’s doing well and doing good.

We can convert bitcoin into buildings.

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How to Navigate the Bitcoin Rabbit Hole (with Downloadable PDF)


“I bought some bitcoin, then I fell down the rabbit hole.” Has that been your experience too?

In this article, you will learn how to navigate the bitcoin rabbit hole so that you can make sense of the opportunities that blockchain technology has to offer.

Navigating the Bitcoin Rabbit Hole

If I had a bitcoin for every time I’ve heard someone say that, I’d be as rich as Satoshi. The idea of a “rabbit hole” — a complex network of branching tunnels that take you ever deeper underground — is a recurring theme in blockchain. What starts as a passing interest ends up with us diving deep into cryptography fundamentals, or geeking out on the history of economics.

The more we get excited about this technology, the more we try to explain it to other people, the more our answers sound like Neil DeGrasse Tyson drunk at a party. Like Alice falling down the rabbit hole in Alice in Wonderland into a nonsense world of anthropomorphic creatures, or Neo taking the red pill in The Matrix, the rules of reality in blockchain get turned upside down and twisted topsy-turvy.

Over the past two or three years, we’ve been mapping the rabbit hole. Just like Morpheus training Neo to live in the Matrix, or Alice with a little GPS tracker, we’ve had our flashlights out, exploring every nook and niche of the rabbit den. We explain the strange creatures you’ll meet in this burrow, how to make sense of their logic, and how to stay safe.

Now, we’ve put everything into one easy-to-read overview: How to Build a Blockchain Ecosystem, which you can download at the bottom of this page for free!

Blockchain Ecosystem ebook cover.

What’s Inside

Based on our learnings over the last two or three years, How to Build a Healthy Blockchain Ecosystem explains all the pieces that need to be in place to make blockchain thrive. It’s a guide for investors, entrepreneurs, companies, government regulators — and you.

It’s got large-print, easy-to-read font, with plenty of eye candy like charts, graphs, and illustrations – perfect for your boss, your friends, and those with limited attention spans. We explain:

  • The four parts to a healthy blockchain ecosystem
  • How to start building each part, with practical examples
  • Valuable lessons learned from building our Boston blockchain ecosystem

Think of it like a fully-illuminated rabbit hole, with a tour guide. We’ve got the entrances and exits well-marked. There’s a gift shop at the end.

We’ve been writing a series of these pamphlets, printing them by the thousands, and handing them out at industry conferences — an idea that is as old as America. What we’re finding is that these little printed pieces are powerful, especially in the age of Twitter. This is counterintuitive, but like so many things in blockchain, up is down and black is white. Print is persuasive.

Slowly but surely, we’re creating a valuable body of work mapping out this new industry, so it’s no longer a “rabbit hole” but an “underground network.” We’re classifying the creatures, making sense of the madness. And in the process, we’re building the world that we want to live in.

Best of all, we’re making this new download available for free. Feel free to share it like rabbits!

Download the How to Build a Blockchain Ecosystem Report!
(For more big, bold, blockchainy ideas, apply to become a member of the BBA).
Author: Sir John Hargrave

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