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Bitcoin and cryptocurrencies on a Novogratz understanding

No, those of you who know Mike know that this is about the tame version of Mike Novogratz that you're ever going to get. He just came from his daughter's graduation at Princeton, so he dressed up. Um, I was expecting something a little edgier, so I went, I had the edgiest footwear in my closet that I could find. And, and, and look at you, you're a bore. Um, we are going to be talking about crypto. That was a great way of introducing this conversation at some point along the way. I'm going to give you in the audience the opportunity to ask questions of Mike. I hope, uh, I would imagine you've got some burning questions because what we're here to talk about but Mike is here to talk about is cryptocurrencies as an institutional asset. Before we begin, let's turn again to our survey. You have the, a little clicker on your chairs. I would appreciate it if all of you could participate. I've seen a lot of them sitting on the floor, so just pick it up, grab it, and answer this question. Cryptocurrencies will be a bigger than the internet. Be Disruptive, but mainly to traditional banking. See something like digital gold or d, a speculative fad with no intrinsic value whatsoever.

So we'll wait for a moment while those entries come in and the survey says, ah, the sceptics. So Mike, you've got some work to do. We're going to read you that survey after the 30 minutes. So I don't think it's a stretch for me to guess, Mike, that you would have voted for an on that list. You know, I would have been a minus. To be fair. I, I see

this crypto revolution as Internet three point. Oh, uh, I mean the Internet really did change everything about the way we live and I do think in 15 years we'll look back in the blockchain. Maloo changed a ton. I'm, is it better than the Internet? I don't know, but it's going to be pretty darn big.

 

A lot of crypto evangelism sounds like nonsense to traditional investors. You were and you are still a dyed in the wool macro guy, right? You worked at Goldman, you worked at fortress. How did you make the journey from bull street punter to true believer? Help people along that road.

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order now Sure. So crypto is a perfect asset to start with for a macro trader. It's a story, right? Macro traders love stories they love charged, they have momentum and they'd like to try to think they can see in the future. Um, and so when I first stumbled on crypto was when this was 2012, was still the fortress still at fortress, right in the middle of the European financial crises for years after the big financial crisis. Uh, I looked at it. I was like, what? At that point, if you remember, we had real serious investors thinking that hyperinflation was on the way. I remember Paul Singer from Elliot and investors, one of the great grades was wanting to put Ben Bernakie in jail for treason because he really thought he was going to inflate away the value of the dollar. Think about that for a second. And so you had this sense of nervousness around Fiat currencies.

You had this sense of distrust amongst the central banks and it quite frankly, the financial institutions in 2008 know we thought JP Morgan was going out of business. Lehman was going to lean in and go out of business and so it felt like an easy play in that there was this amazing new technology and there was this story that we could have a distributed trust, you wouldn't need to trust the center. And so I saw libertarians, anarchists, cipher punks and the people that were worried about inflation all deciding this would be, you know, a new, a new asset. And so I originally bought it thinking speculative load will go higher. And so I bought it for the money. We bought it. It was 96 bucks bitcoin coin and it went up to a thousand dollars pretty quick. And that was pretty cool. Uh, it took a little while for me to dig in and really understand a why it's going to be a lot bigger than a speculative asset.

And, and that raises an important question. There are people here, so they might've heard a little bit about, you've had to say about bitcoin already and, and crypto more broadly and blockchain, but they know where you come from, right? They know your background; they understand your financial dna. If it were as it were, um, do you really then I'll use that term again. Do you really understand how it all works? Works?

Yeah. I'm getting close to really understanding it. So listen, there's three parts of understanding this. So what's unique about Satoshi's breakthrough? His white paper, it's almost two different Nobel prizes, one of his computer science, uh, creating this idea of a distributed trust ledger, a blockchain itself. Uh, the computer science there is really advanced and, and right now one of the problems in blockchain is none of the block chains are fast enough, right? They haven't scaled fast enough. And as you get more people into this distributed system, it actually slows it down. And so there's all kinds of brilliant computer scientist working on fixing that scaling issue. There are a hundred different blockchains out there with 100 different ways that they're going to fix the scaling issue. A part of my thesis is that the assumption that they're going to fix it, and I, and I don't get that just willy nilly, I was literally just at Princeton talking to the head of computer science there in so many of the talented graduates are going into blockchain, you know, uh, all across the world. You're sucking in this talent working on this scaling. And so part of it was the computer science. The cooler part of it in lots of ways is this idea of token economics. It's using a token as an incentive mechanism to quickly create social networks where people are pulling in the same direction and that opens up all kinds of new business models that we hadn't had before. And so you put those two things together. It is a very powerful force.

The problem for anybody who even take some mild interest in this is that getting up to speed, getting to where you are now takes work, right? You started investing in Bitcoin in 2012 and 2013 and I know you got serious sort of in the early 2016 timeframe and here we are, it's mid-2018. You've been spending a lot of time on them and still you acknowledged that you don't quite get it all.

Well, one thing to remember that this is a third grader, right? The ethereum project, which was really the kind of leading project and kind of what I call blockchains right now. It's got a lot of competition, but it's the kind of. Certainly the market leader is three years old and so we're dealing with a toddler, a third grader, maybe tom or not a third grader. Um, and so, you know, when you try to hold to the standard of the phd students not going to work. And so a lot of this, well don't, you don't have to understand it.

Well, do you have to participate? I think you have to understand the big picture that there is a computer science breakthrough that's, that's changed the way we will all do databases, every single data or almost every single database. Fifteen years, 15 years from now will be a blockchain. Now they might be private blockchains where you're running them in your own company, but it's a more effective way of organizing data. The, the, the, the revolutionary stuff are these utility tokens or the token economics, and that really just takes a little bit of fleshing it out with your guys' business models. Is that business model makes sense? What's been interesting is because it was such a mania, and remember it was a 98 percent retail mania the last two and a half years, uh, institutions weren't in it that you didn't really need to understand how the, the, the tokens worked. People were buying in because they bought the hype. Uh, and so you had this market go way up and then crash. Uh, I'm pretty convinced for the next leg of this market which is coming, you're going to really have to understand how the tokens work and they work differently in every single different system.

I want to make one point, which is that sounds. And, and to some of you, it may seem like it's easy for Mike to look back on what happened in the second half of 2017 and say it was a retail mania. He and I spent much of time, much, much time talking during that period and he said at the time that it was a retail mania. So it's not like you're redefining history there. I'm on the subject of token economics. One of the barriers to, I'll call it crypto acceptance right now, is the dearth of use cases for token economics. And on the flip side, many of the use cases that have been proposed but haven't yet been implemented, sound like solutions in search of a problem.

Well, that's a little unfair. So to start with, it's my job to be a little to start with. I sent her the, the blockchains themselves are really these giant shared global supercomputers that are there to process data, uh, that you want on the database. None of them are fast in the for industrial strength yet, uh, we had one that just got started or is just starting literally as we speak, called IOS. It was a project that raise money for a year and that will probably be the first fast blockchain a, its critics say it's not as decentralized. There's some trade-off between how fast something can be today and how decentralized it is a, but we'll start seeing projects built and so up until now, projects like funfair, which is going to try to disrupt online casinos or has been just a story in the last month. There've been three or four projects that have literally just started, started their test cases. So funfair is one Gollum, which is a computer processing. A ICO is another, uh, think Auger is starting to do things. And so we're just at the very first step of seeing some of these disruptive business models come into, but they're really not going to be here for another 18 months.

Really? Yeah. It's going to take that long.

And so, you know, most likely, listen, we had a retail bubble that popped and now we have institutions that are marching slowly but surely towards acceptance markets always get way ahead of reality. That's just the way it works. This is such a powerful story and some of these potential disruptors are so powerful in such big industries that my gut feeling is institutional money is going to come in soon and markets are going to get way ahead of the reality. Again.

We'll get to that in a moment. Bought Round token economics part of the blockchain. If you look at potential applications for this technology, acknowledging that we're 18 months away from something real and viable, in which industries do you think crypto has the most promise as an enabling technology?

Anywhere where there's a social network, uh, with simple uber. I keep using uber as an example, right? What does Uber do? It matches drivers and riders. There's a social network, a peer to peer matching system drivers and riders and it sits in between and it provides a billing service and a map, a surge pricing and charges 25 to 30 percent like that is so ripe for decentralized system to come in and at least compete with Uber's not going to roll over and play dead. They're going to fight back. But you know, it's a perfect use case. A. and what's interesting is the way the token in a theoretical decentralized uber works, it's not equity, it literally is a future on what a ride would cost or how many rides can you get for one token. And so when drivers in and writers and engineers and speculators own that token, they all wanted to go the same direction as more and more people use that service as they take dupers instead of Uber's decentralized Uber, as they use that service and ridership grows more and more become speculators in that token. And so the token starts feeling like equity, even though it's not equity. Uh, it's a really interesting use case because here's a company, one of the fastest growing companies in the history of the world and an amazing company, lots of ways. Uber, it's changed the way we've all maneuverer around cities. And even before it goes public, there is a threat that's coming. And again, it's not coming this year. It's coming two to three, four years down the road before everything gets scale. But it's coming on 100 percent certain.

Even if investors, institutional investors get over the acceptance hump, they understand what crypto is, they understand how a blockchain works, they buy into this notion of tokenized economics. There's a whole other set of barriers to institutional ownership. Um, and we should talk about that. Custody is probably at the top of the list.

Yeah. Well, let's start with the fact that Bloomberg got over the fear of being in the crypto space. Like that's a big deal, right? You guys are a mainstream big, you know, giant financial market media company with a management committee that probably isn't as young as, you know, as me, you know, like most big management committees, you're older and in general or people have had a harder time understanding this, the shift, right? Even idea of digital gold makes a lot more sense to my 24-year-old and it does to my 84-year-old dad. Uh, and so we're seeing institutions make, make a move. Having this index is important. I was thinking about other places that started index the s and p 500 came out in 1962. And if you look at the price of stocks from 62 onwards, they kind of went straight up.

A Lehman had its first fixed income index and 72 and then the leaman Agg, I think it was like 82 a. and if you look at what happened in the fixed income markets from the mid-seventies, straight up, it's literally been one direction. I was at Goldman Sachs in 1992 when Goldman launched the Goldman Sachs Commodity Index. Up until then, people speculated in commodities, just speculating crypto, but no institutions had bought commodities as part of their portfolio. Goldman came out and said, hey, this should be part of your institutional portfolio. It's uncorrelated. These are the reasons. If you look at commodity prices from 1992 to 2008, manually, she owned a lot. And so this index, maybe we're six months early, maybe over two years early, but crypto will be an asset class. Institutions will move into it. Custody is coming. I'm speaking to or five major, a traditional custody player that are all working on figuring out how they're going to get involved.

There's been enough money made and enough and enough research done and the people moving into this industry that every institution, if there's been one surprise to me in the last eight months, it's what I go to the New York stock exchange or the Deutsche Bank or Goldman Sachs, they're senior people know so much more about crypto that I thought they would. They are doing their work and they're getting ready to pull the trigger. Uh, and so we are going to see announced in the next three to six months, three to nine months and institutional custody solution. Now, what's interesting is the custody solutions today actually are probably fine, but they're run by companies like Zapo in a bit go and kingdom trust. And generally, if you're sitting at the state of Wisconsin and you're going through that form, are you going to risk your career on something that says Zapo? No. Yeah. Actually want it to say, you know, state street. And so, ironically, we're going to need kind of a step back to go forward. We're going to need trusted custodians to hold these keys. But I'm telling you that's coming in. I'd be shocked if you don't see about your end, whether it's state street or Goldman Sachs.

My own hunch is it's going to be some consortium, right? Because the consortium gets you close enough and then the one from isn't bedding, the bedding, the ranch, because these. These are bare instruments. Someone robs the bank. Oh, that would suck.

Custody is only part of. It does a for these people and others who are thinking about crypto from an instance, from the standpoint of an institutional mind-set need. Again, I'll say a Goldman or a JP Morgan or Morgan Stanley or whomever, pick your established financial institution. Do they need an organization, a company like that to offer a full suite?

I think that's calming and so listen, we started a galaxy because I was like, let's help credentialed the space and let's get it in front of that wave. As a pure crypto company, you have less at risk than Goldman Sachs or Jefferies or even the second tier players, and so we thought that's our competitive edge. I was originally saying we're going to build the Goldman Sachs of the space and now I know this is going to get myself in trouble, but I was like, is actually more like Drexel. If you think about what Mike Milken and his guys did, they help credentialed junk bonds. High yield is an asset class. They were the proselytizers to traders, the bankers, and that's what we're trying to do. I tell you, the rest of the guys are coming. Goldman Sachs has set up a trading desk and they're starting to trade ends.

They will trade the coins themselves as soon as they get a custody solution. Uh, I know lots of the, what I'll call second tier, they'd hate to be called second tier, so that probably not the right word. Dollar, smaller investment banks are looking at raising money for crypto companies and they're trying to get around you. Isn't the right thing to know or. But they're all having that conversation. And so for me it's erased. Actually get established, get in business, hire world world-class guys and be in that, be in that business, does a huge regulatory overhang.

Uh, if, if I were an institution, I might ask myself why would I want to get in front of the FCC or the Doj right now?

No, it's a great question. Listen, I started by saying the first three years were 98 percent or 95 percent retail regulators don't come from retail. Their job is to protect retail, but regulators come from institutions. I, Jay Clayton worked at Sullivan and Cromwell. Uh, so they're talking to the guys they knew from the Goldman Sachs is from the JP Morgan’s, the mortgage desks, if they're regulating mortgages, they call their guy. And so they missed this completely because there was no one plaintiff. And so all of a sudden it's late last year and this goes from small market cap to all of a sudden the trillion dollars’ worth of market cap and you know, a Paris Hilton out there pitching coins a and everybody in the planet talking about it. Uh, the regulators got worried. I mean, it was interesting CNBC not to pick on CNBC and I think I can send them here.

They literally had a show where they were one by one walking people through how to buy the ripple, the Xrp coin, literally when it was trading at $3 and twenty cents, having moved from twenty cents eight weeks earlier from the day of that show, the thing plummeted, a lever short, it plummeted an all the way back to fifty cents. That was nonsense pete nonsense. But the regulators had to get involved and so they are getting involved and they're doing what they're supposed to be doing. The first thing is, wait a minute, let's calm things down. Let's go after fraud. Let's go after market manipulation. So the first two things, regulators going for fraud and market manipulation, and it's a good thing. Uh, the Department of Justice talked about market manipulation with these in an index is inflating their volume numbers. It's all true. And so we're going to knock out some of the crap from the system.

I actually think it's healthy. Uh, there are bigger decisions to make, you know, bitcoin as they've already kind of set is not a security. Okay, but a theory and they haven't, they haven't ruled on yet. I bet dimes, dimes to, to, to donuts, they will say three and probably was a security, but it's not anymore. Uh, and they're going to they're stuck because they weren't ahead. There is this group of Tokens that were issued probably 2,500 in total, but in reality, probably 200 that matter, uh, that are in this kind of regulatory, no man's land. And they got to figure out how to deal with that. Then they're working on that right now. My gut feeling is they're going to take it; they're going to take out a law firm. They're going to take out a token. They're going to take out some of the promoters of these things just to say, Dude's you got to play you got to play by the rules. But when we talk to them about the going forward in the future, they are very constructive at wanting to, to, to see this new innovative way of financing companies have of bringing liquidity and access to markets, to the general population that they never had.

We've made, or you've made pretty clear that you're a, and I've accused you of being a true believer, but you are at the same time you trade this stuff. So how do you reconcile those two halves? You rebrand on the one hand, the part of Mike Novogratz who says, I believe in this stuff, it's going to change the world to a degree, maybe not as much as the internet, but a lot. And then the other part of you that says that's a screaming short,

you know, gravity is still gravity and market rules still work. And so when you see things that overnight go from an idea to a billion-and-a-half-dollar market cap, you're like, these guys have only hired three people. Like that doesn't make sense to me. You know, he's probably doesn't make sense. Uh, and so it's using the same rules and understanding of market psychology that I learned over 30 years and applying them to this new market of ballet, of the charts. It's the ballet of the charts. It's also just being disciplined a listen. Sometimes you make mistakes. You know, I, I own a whole lot of theory and it started rallying a lot and I was like, this is kind of crazy and I started selling some maybe too early, but broadly, uh, it has benefited me and our organization, uh, to keep taking chips off the table to trade extensions and pullbacks, um, to really do work on which companies or which they're not really even companies, their ecosystems, which ecosystems do we believe have a shot of really growing and sucking people into them because for a token to work it needs to have participants and so we'll go long.
The ones we think are going to be able to build communities in short, the ones we think, well they're not going to be able to do that.

Let's talk about that for a moment. There are most of the tokens that you can see on coin market cap dot Com or would be utility tokens. Yes. Of those. And there's 23 there. There are lots, but they're 23 as of yesterday with a market cap of a billion dollars or more. How many of those survive?

So thinking that in a different way, there are hundred blockchains right now. So the right, there's things you can think of in three buckets that claim by itself because I really think it's going to be a lamp for a long time and it's going to be decentralized gold, but it will not be the blockchain that all the cool stuff gets built on personal opinion, but I'm pretty certain I'm right. Uh, then there's 100 block chains, these super computers that are going to process that. Everything's going to get built on top of. There's no need for 100 blockchains that will go down to five, three to five now, 4,000 in China alone. Uh, so let's say 69 Chinese, a three to five and those will probably be based on some difference in how centralized they are. A house, how secure do you need your project to be? Judy at 18 is bulletproof glass or 36-inch bulletproof glass, uh, in the market is going to sort that out. But you don't need 100. And so a lot of those will either go to zero or there'll be a merger, they'll, they'll combine. I'm not positive how that plays out, but it's going to be really interesting to me.

Your best guess right now. Which of the three to five?

I think a theory. I'm an Ios or are both really interesting projects. I think a telegram, which hasn't even started yet, is something you've got to watch, right? They raised $2,000,000,000. They have 210 million users a, they've got a world class CEO and his brother who's a world class engineer, uh, remember these blockchains are open source so they can say, you know, we're starting tomorrow and we're going to take the theory, the theory in blockchain and start from that. And they're collaborative. And so it really is, can you build a community? Well, they've already built a community of users and can they build a community of developers? And the question would be with the, with the $2,000,000,000, it gives them a shot. One of the reasons I think eos has a shot. They have a five to $6, billion-dollar word, chest, so these aren't like small little companies anymore. Like five to $6,000,000,000 in, in the ward chest gives you a lot of oomph to attract people to build your ecosystem. Is there one you're more most bullish on in the short run?

Yes. Yes. Yeah. You predicted Mike when we spoke back in September, the Crypto, and again, just to sort of keep things real here. We talked about this in an, in a sort of a big way for the first time back in September and at the time bitcoin was in the 4,000 neighbourhood and he predicted that crypto broadly speaking, was going to be going to be the biggest bubble of our lifetimes. Was that the December bubble or does that bubble have yet to have?

That was 96, uh, even not even 99. And so if you think about it second, say that again. That was 1996 Internet 19, not 1999 Internet. So here, let me just use some metrics. The total market cap in January, if you adding coins and private companies and everything else was probably a one point $2,000,000,000,000, right? Hold that thought. That's $2,018. The Internet bubble in 1999 got to 6 trillion before it crashed to 1 trillion. So take 1990 $9 I think. What about apartment in Toronto or New York or, or Tokyo cost in 1999 versus today, right? Probably two and a half to three x. uh, take the fact that this is a global revolution, right? In the Internet bubble. You only really could buy if you were. It was only a US thing. It was Richard US people participating in there, you know, upper middle class to rich us people participating. This is global. Their kids in Bangladesh, buying coins. It is monstrous in Tokyo and in Korea and in China and in India and in Russia. And so we've got a global market and global mania. And once institutions come in, that one and a half trillion is going to look small. This will feel like a bubble when we're 20 trillion and it's going there.

And a logo there and it won't go there right away. It'll go there because what's going to happen is one of these intrepid, you know, a pension funds, you know, Texas teachers stayed in Wisconsin, the Canadian pension. Somebody who is a market leader is going to say, you know what? We got custody. We got Goldman trading it. The story I believe Bloomberg's involved, they've got an index. I can track my performance against an and they're going to buy and all of a sudden the second guy buys. And then you hit the tipping point in the same Fomo that you saw in retail because people are going to be like, this is it. It is real technology. And they are going to try to disrupt almost every industry from cloud computing to Airbnb to uber for getting the other side of the token game, which are more less exciting but just as powerful securities tokens where we're going to fractualize art or we're going to, we're going to sell many shares and real estate. And so, uh, you know, there's just so many innovations that this opens up that are coming, that animal spirits will get the best of investors again and the market will get ahead of the reality.

So on that Uber optimistic note, Dubar optimistic note, if you prefer, should we open it up to a few questions left for a raise your hand. We'll get you a microphone right here. And if you don't mind, just identify yourself so that Mike knows who he's talking to. Yeah. Hi Elliot Drexler with global return asset management. I, full disclosure, don't any Crypto’s, but I follow it very closely. Read a lot about interactions with chat groups and so I sort of feel like I'm neck deep in the research. I still can't wrap my mind around how. And I'm asking you to explain how crypto are different from as an extreme example, use tennis shoes, the idea of being or a used couch. The idea being that it's really only worth what somebody else is willing to pay for it, whether that's in a closed network business system and how that is still going to replace a, a monetary currency. Considering the volatility that exists with Cryptos,

so I don't think it's going to replace monetary currency. Uh, I really think where you're going to see cryptos have it's big, big impact is taking out the rent takers. Right? So if you think about the uber example, Uber's or rent taker, if you think about the entire entertainment industry, right? I was giving us a talk to this conference of 80 and the biggest big wigs in the, in media. And I was thinking of my life. I was like, you know what, you guys sit between the talent and the consumer. Encrypt those coming after you. Uh, the guy asked me, he's like, why don't I invite you for this thing? You just insulted all my clients. I really think that's the where you're going to see the big disruption. A government can throw you in jail and they can find you and they're going to be very lows to lose control completely of their monetary policies and in there, in their currencies.

And so I think we're going to see regulation focus is on the currency side. Um, you know, privacy coins or something that regulators and banks are really, really dislike, not saying they will go away, right? But they're not going to be allowed to operate freely in the, the current, uh, regime. And I don't see that really changing, uh, but no regulators care about competition if we're going to go after airbnb in a decentralized version. And so I think sometimes the focus on currency is a little misled. Listen, goal doesn't necessarily have a lot of use cases other than, then a jewellery, but it's, it's worth something because we say it's worth something. A bitcoin can be worth something just like you're used tennis shoes because there's a, well in between, there's a limited supply. There's seems to be an unlimited supply of use tennis shoes because they make them every day.

Uh, but you've got a limited supply and people that are starting to say, Hey, there's a store of value. There are $600, million under 25 year olds in India. That's to America's a right. The world is young and growing fast. A young people are much more comfortable in a digital world than old people, right? They grew up in their phones. If you look at the League of legends super bowl that was played in the birds nest last year in Beijing, 80 million people watched it on TV. That's like more than the MBA games, sometimes a league of legends super bowl. And so this digital world is coming so fast. I use the example all the time and my, my irb people out, they said, you got to get a new example, but I liked this one. You know, when I gave my mom digital flowers for mother's Day, she slapped me. But when my daughter gets digital flowers from her boyfriend, she's like, oh, he loves me. It's a different world. And so the idea of digital gold is so much easier for a young person to understand that a guy with no hair or grey hair, um, but it's, that's coming. Uh, so I gave you two different answers to two different parts of the ecosystem questions. There's one over here yet. We'll go over here. For me, open. Very simple question. Seems like the barriers to start up a new bitcoin or a similar bitcoin seemed, seemed low. Is that your perception as well too? Well, the barriers to start a new like new idea has been low. Um, but they're getting higher because you can start something but it won't succeed without community. And so the barriers to building community are getting higher. And so quite frankly, we're looking at investing in, you know, tokens are ecosystems that have resource that have reputation and resource and, and participants. Uh, so you're going to see some big names in the next six months that you've all heard of moving into the token world or the blockchain world. And I think those projects are pretty interesting because they already have community and they have resource. Um, right now it would be really hard to start a new blockchain to compete against the other 90. There are some people doing it if you have enough reputation, if you have a, you know, a enough expertise and a brilliant idea, you'll still get funding.

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One thing that's really interesting is right now the queens are kind of going sideways, you know, it's up, it's down, it's down and literally just chop it around. But underneath the coins, people moving into the industry, it's a straight line up job applications, straight line up, uh, and private investing. The private rounds, straight line up. Part of that is that sand hill road, you know, the, the great venture capital Community of America really missed chapter one. Marc Andreessen, he was involved. Fred Wilson was involved, I'm sure some other people were involved in a smaller way, but broadly speaking they didn't participate and every deal now is getting funded by venture capitalists and so maybe it's Fomo that they missed the first round. Maybe they're seeing something. These guys are not stupid guys are some of the smartest investors, you know, if their generation, they are all now investing in this space. And so you, you actually have much more a firm price in the private rounds and you do publicly.

Hi, I'm Joe Rosen. I'm a professor at Manhattan College of business going former cio at hybrid capital many years ago. So you mentioned stupid, forgive the stupid question, I just don't understand how any kind of token crypto currency is going to disintermediate Airbnb, Uber, I don't follow the logic of where you're going to replace drivers. You can replace the company. Who, I mean, how's that going work? The Uber

just example of in a really simple world. So I hired a guy from high bridge and was also sceptical, uh, who was my cio. And so let's send me and Chris Ferraro, my guidance side. Let's Uber's got these 25 to 30 percent margins or they're charging that fee, let's go after Uber. So we get together and we put a business plan and we said, okay, we need money. We need $30,000,000 at least to, to hire the engineers to build the matching system to put this decentralized version of Uber on the blockchain. So we'd do an ICO, we sell some tokens and we raised this $30,000,000 because we hire someone like Eric who hypes it up for us. Uh, he's now moved to, he's now moved to investment banking. And so we build, we build on top of, let's say we pick the ethereum blockchain or the Ios blockchain.

We build a matching system on this blockchain. We say take some of the money. And we started advertising the same way uber did. Hey, use uber. Uh, we incent drivers. Uh, we give them some tokens, we give riders some tokens in. All of a sudden the project starts, now it's open source. And so the community of engineers, developers can try to make it better. There's a whole constitution, um, how you would change things. Those tokens represent a ride. It's a future sale of a ride. And so all of a sudden on day one, you go onto your phone, you're not going to pay in tokens in your mind it's going to be eight bucks instead of 12 bucks, it's going to be cheaper. So you to say, I'll take it and you'll have a nice app on your phone just like you do now. But it'll say dubar instead of Uber.

And maybe the first ride is going to cost eight bucks, which will be one token. And so you'll either by your token or you use your token, but it's eight bucks and it'll instantly converted, uh, as more and more people want to ride. The idea is that riders and drivers will hoard some of those tokens. They'll all function and speculators. You want to think about it. So if I've got a fixed supply of tokens and more and more people start hoarding, just little pieces of them, the price of the token goes higher, the price of it starts to feel like an equity. Hey, so, but that doesn't change the writer, the driver’s business model, he still has inputs, right? Gas, car payments, insurance, you know, those are his cost and his revenue are going to be. He gets paid in these tokens, which he instantly can convert to cash or he can convert some of it to cash and keeps them in tokens.

And so why does it work? Because all of a sudden the driver and the rider, they feel like owners. And so it's like an amway salesman. Salesforce, hey, use uber, don't use Uber. You have. Everyone in the system has a vested interest to get more people in the system and so you're using this token, create the social network and you do it fast and we and we see in small scale how this works and so this is the big experiment that you're going to, you're going to. See you're going to. See it, play out live time over the next two to four years, we're going to see some of these systems either work or not work, but we've seen big open scale projects work in the past and this is open scale with an incentive mechanism.

Mike, I'm afraid folks that we don't have time to continue. I know that we could, we could talk probably for another half hour and answer questions. I want to thank Mike Novogratz for being here, or rather the applause. Please.


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