PHILOSOPHY

First thing to understand. The blockchain is more than a way of verifying transactions on a ledger. It is fundamentally a way of verifying that an event happened. It is a way of establishing truth to the extent that it’s possible. The categories of verifiable truth will extend as we understand more about the world. Blockchain –> Neo-Enlightnment (maybe).

Economic context

Globalization was both inevitable and a good thing. While it led to massive disruption in the ways of life in many communities, it gave capital access to the most cost effective labor in the world. The good results: cheaper access to goods and services, a rise in the standard of living for the global poor with strengthened trade ties decreasing the potential for conflict among nations with differing ideologies. The bad results: economic instability as the middle classes in developed countries regress to the global middle class. Moreover, significant inequality as the owners of the new global infrastructure acquire a level of wealth that resembles feudalism.

Despite the destabilizing effects of a more efficient economy, the gains of matching capital with the most cost efficient labor can lead to more aggregate wealth (I have thought deeply about the many caveats here and welcome feedback). However, there remain barriers to matching the most cost effective capital with labor for ordinary people. I’ve identified 3 main ones. Startup capital, space and information. Startup capital meaning it costs a lot of money to build a factory in China, space meaning it is hard to evaluate a young company in Indonesia from Lincoln Nebraska, and information meaning the difficulty of even having investment context if the latter two issues are solved. “Labor” (in the Marxist sense) has mostly delegated these functions to investment managers. Hedge funds and investment banks are mostly an amalgam of a range of assets. And venture capital firms handle investments in early stage companies. Even more cumbersome are the securities regulations restricting who may pool resources to invest on behalf of others and the sophistication of investors who might participate in these pools (these restrictions are also often privately imposed for compliance reasons).

The advent of smart contracts via the blockchain addresses the startup capital problem, incentivizes young companies to address the space problem to some extent (companies have to give detailed analyses of their business models to raise the capital), but does very little to address the information problem (all of the other factors required to invest in companies) . Put otherwise, it’s now possible to invest in a Uzbeki mining startup via ethereum, understand that companies’ business model, however, it’s still difficult to understand the unique issues companies in Uzbekistan face and incredibly difficult to have context of what’s going on in the global mining industry. The information exists to evaluate these problems, however, they are typically very expensive and time consuming to access.

Finally, there is another class of problems that comes along with being able to invest in that early stage Uzbeki mining company via a smart contract. Gauging speculative value. In the blockchain space, instead of valuing assets mainly on the projected revenue of new products or services, increases in the value of companies are often related to their development timelines in relation to the projected evolution of the technologies in their sector. Actual revenue generation at this point, is of secondary importance (if at all). This often requires comparing the roadmaps companies have set out and approximating speculative value based on parameters that may be specific to that industry. Even worse, once those companies do mature, it’s likely that their speculative value may decrease. So unlike the dividend model with shares in a corporation, exit plans for investments in the crypto space are an essential part of making a profit.

This blog is an attempt to contextualize these moving parts so that the members of the community can get a closer approximation of the truth in dealing with this new reality. The goal of this project is to give members more than a superficial understanding of the technologies at play, while developing industrial, legal and market context. We will provide legal analysis, technical explanations of the technologies at play as well as our thoughts of the value of different projects.


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