I am amazed by the divide crypto projects have created among the billionaires. In a recently concluded conclave, Rakesh Jhunjhunwala said cryptocurrencies have no future

I have a thing for authority bias and if someone who is very smart and whom I respect takes a stance generally that would be a great starting position for me, if you are like me then I think this is something that you should fix.

Why?

First, let’s understand that as investors we have three edges

• Information edge – Your ability to get valuable information legally gives you an advantageous position on an investment
• Time edge – Your ability to invest long term and behave like an owner
• Analytical edge – Your ability to interpret the same information differently from others will give an insight which most would miss, Howard Mark, call its second-order thinking

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to develop the third edge one needs to be a fiercely independent thinker and this is where if authority bias messes with you. Respect everyone’s opinion but do your own research (DYOR) and find your own truths that’s the only way one can build conviction.

I am in the camp that believes – crypto projects have a future, they have real-world utility and they are here to stay for the foreseeable future, while I agree that no country which has its own sovereign currency will allow Bitcoin to become their sole legal tender, what many folks miss is that many crypto projects are not currencies they are akin to start-ups

As Chris Dixon puts it very eloquently tokens help overcome the bootstrap problem by adding financial utility when application utility is low

Source: Crypto Tokens: A Breakthrough in Open Network Design

Charlie Munger taught us, “Show me the incentive and I will show you the outcome”, the token system is probably the first time where incentives are balanced between creators and users

Let’s look at a simple example

A typical Telecommunication organization is structured like below

 

Let’s look at the incentives within this ecosystem

• Claim holders want to extract as much returns as possible
• Suppliers want to keep their Infrastructure proprietary so that they can best value for it while TELCO tries to scale and minimize costs. A huge cost is spent upfront to acquire a new network spectrum
• Customer care for service and don’t care about this internal working of TELCO
• TELCO wants to maximize revenue and keep costs low so that it can provide adequate returns to claim holders

Overall all ecosystem players are focussing on different incentives aligned to their role

 

Cryptocurrency turns this upside down by aligning some of the misaligned incentives

Let’s review a communication crypto project ecosystem called HELIUM

The helium HNT token drives the whole ecosystem it is made possible with open source software and nonproprietary hardware unlike a regular communication company

Tokenomics are central to drive growth in this ecosystem.

• The project is funded by Token HNT
• To send data on the Helium network, you pay with data credits at a flat rate per kb, and to get data credits, you need HNT.
• So as more devices enter the network (through suppliers), they create additional demand for HNT, helping sustain the token price. This also gives customers an incentive not just to use the network, but to help build it by deploying Hotspots of their own and become suppliers, thus earning the HNT they need to transact.
• As the practical value and operations of the network grow, so does the HNT price, so there’s a strong incentive to be an adopter.

In a nutshell, you can be claim holder, customer, and supplier all at the same time which is not possible in legacy communication company

 

For the first time in the internet economy instead of being just a consumer of technology, crypto projects are giving an opportunity to participate and get a cut of upside which is not possible today and that’s why I think RJ is partially wrong 😉

 

PS – I am invested in Helium (HNT)