Oceans of Wisdom

beyond ok the memo was right, the 3 sub-things that I still chuckle about are: - Avoid Mt Gox - I called the 2017 top in 2013 (7x to 70x from current prices in 3 to 5 years). Current price was $300. 70x was $21K which was basically the 2017 (4 years) top - use 2FA on your exchange account and your email

twitter was very geek thing then, very interesting platform for exploration

so there is a level of meta-awareness to my predictions about NFTs. there is a history of "things are obvious to me like 8-10 years before they become obvious to a decently large set of early adopters" so NFTs 2021 are BTC 2013 so ~2030 it should be 2021 crypto

in 6529 world, they will be

they should have been NFTs ;)

I think it should be very interesting to you for two reasons: 1. The memo aged well 2. You can see how I think about NFTs at a similar stage of maturity

**General Background** Read these four articles first (1)    By Jeremy Allaire (formerly of Macromedia, later CEO of Brightcove) who just founded a BTC merchant processing company with $9M of Series A funding from Accel Partners, General Catalyst Partners and Jim Breyer [http://www.circle.com/2013/10/30/circle-bitcoin-global-digital-currency/](http://www.circle.com/2013/10/30/circle-bitcoin-global-digital-currency/) (2)    By Albert Wenger, partner at Union Square Ventures that recently invested $5M in Coinbase, a BTC payment processor [http://www.usv.com/posts/bitcoin-as-protocol](http://www.usv.com/posts/bitcoin-as-protocol) (3)    By Naval Ravikant, one of the founders of AngelList [http://startupboy.com/2013/11/07/bitcoin-the-internet-of-money/](http://startupboy.com/2013/11/07/bitcoin-the-internet-of-money/)   (4)    By a Washington Post reporter   [http://www.washingtonpost.com/blogs/the-switch/wp/2013/11/08/everything-you-need-to-know-about-the-bitcoin-bubble/](http://www.washingtonpost.com/blogs/the-switch/wp/2013/11/08/everything-you-need-to-know-about-the-bitcoin-bubble/) If you read those 4 articles, you will get a pretty good overview of why BTC is interesting. **Quiz** What you should have learned from the above is that BTC has certain very interesting technical characteristics: (1)    “Programmable Money” – Can be used by digital applications natively to transact financial related items, up to and including any advanced financial instruments and, probably, applications we have not yet thought of because the transaction costs were never so low. (2)    “Distributed Ledger” – a public record, distributed over thousands / millions of machines, that is unalterable.   To the best of my knowledge, there is no prior equivalent to this.   One application of this public ledger is ‘currency’ but there will be more such as transaction confirmation, ownership verification of other assets and so on.   It allows you to make trusted statements, permanently without having to trust the record-keeping organization.   This is a big deal though for most commentators the least appreciated part of BTC. (3)    “Decentralized” – a peer to peer architecture where there is no central gatekeeper or bottleneck.   If a sweater merchant in Nairobi and an alpaca farmer in Peru decide to download the BTC client they can send each other BTCs with no risk that a risk manager at a centralized power (aka Paypal, Visa, etc) decides to shut them down.   This also does not exist outside of in-person cash-based transactions or hawala networks, as far as I know, and both of those have huge limitations relative to BTC. (4)    “Store of Value” – The initial users of BTC consider it a good store of value as BTCs are mathematically limited to 21M (divisible into 8 digits) and hard to confiscate.   These folks would consider it an alternative to gold and protection against debasement of fiat currencies.  #1, #2 and #3 are sure things to happen.   If you are a technologist, you should study BTC carefully because it is the most interesting protocol to emerge since the Twitter API and, IMO, it is more interesting than that and in fact something closer to web protocols for email and web browsing. #4 is a more complex story to be addressed below Regulatory point:  So far, they seem to be leaving it alone.   In developed markets, the exchanges have had to register as money transmission businesses (which is correct, IMO) but individual usage is unregulated (also correct, IMO). **What is the investment case for BTC?** There is a lot of hype about the price of Bitcoin. Background (1)    Just 2-3 years ago, it was less than $0.01 per bitcoin (2)    January 2013, it was still in the $10 range (3)    It spiked to $250 at the time of the Cyprus haircut (seriously, even though it has nothing to do with this) due to fears of other bank account confiscation (this would be the #4 ‘Store of Value’ point) (4)    It then crashed to $50 or so. (5)    The last month, it has run up from about $100 to the mid-$300 range (6)    It is extraordinarily volatile as trading volumes, even at the main exchanges are very low (say, $15M per day) and so vulnerable to large swings with even modest selling or buying.   Note that the volumes are 3x-4x what they were a few months ago   Pro-Case (1)    Working Capital Case:  As adoption rises, more money will be kept in BTC almost by definition, pushing prices up (2)    Transaction Case:  As more transactions are done in BTC, the money supply will rise to support them.   This is similar/related to #1. The closest analogy one can think of here is [all BTC] x [BTC price] = M1 money supply.   By that metric, at $4B or so, BTC is the size of a Mozambique or Tanzania.  Global M1 is about $30T so, by very rough analogy, one could imagine that a 1% of total money supply outcome could mean a $300B money supply or a close to 100x increase in price from here (3)    Store of Value Case:  The most common analogy is to gold.  There is about $5T of above ground gold (174,000 tons) that is being priced primarily as a store of value (while gold has some industrial utility, it obviously is priced well above the value of its industrial use).   Therefore, if even a small % of those reserves are moved to Bitcoin, then the value should increase from here particularly since BTC has superior transportability, spendability, etc   (4)    ‘Bubble / Time is Now’ Case:  Given the increase in current market acceptance about to happen now (top VCs moving into the space, greater public knowledge, Winklevosses buying up 1% of the money supply, Fortress co-CEO saying he put in money personally) and the highly limited supply of BTC, a speculative bubble could emerge now, far ahead of ultimate adoption.   Con Case (1)    It could be banned by governments (2)    It is too complex to get mass adoption (3)    The volatility will prevent mass adoption (4)    The security risks will prevent mass adoption (5)    No conceptually clear way to value BTC and no ‘intrinsic’ value (I think this is a nonsense – lots of valuable things have no/limited ‘intrinsic’ value) (6)    Big holders such as Satoshi (the founder) or the Winkelvii Brothers will sell into big growth Personal Opinion (1)    My personal opinion is that the investment case at the current valuation ($3-$4B) is binary.   (2)    Either BTC will fail completely for some reason or another, in which case prices will fall 90%+ from here or it will become adopted over the next 3-5 years in which case, prices could rise 10-100x from here.   (3)    Based on the very rough comparables above, a money supply value of $30B to $300B might be plausible in the upside case.  AKA 7x to 70x from where we are now, but over the course of several years.   Along the way, there will be massive bubbles and crashes. It seems to me that the ratio of “likelihood of this to work” vs “likelihood of this not to work” is higher than, say the 5%-10% that would make the expected value = zero.   Or, to put it more abstractly, there is a greater than even chance in my opinion that the expected value is positive.  So consider this to be highly speculative but possibly with a positive expected value.   (4)    Many commentators compare it to email circa 1990.   That is right based on level of user-friendliness, but given the much faster pace of adoption of new technologies today, I would say we are at Twitter, circa 2009.   Some geeks think it is the most amazing thing since sliced bread and the average human being thinks it is strange, pointless.   The geeks are right…   (5)    It does not seem crazy for someone to put some ‘very high risk’ money into BTC.   AKA, a small part of your overall portfolio so that if it is all lost, it is not a huge issue.  And, instead, if it rises 10x in value, then you will feel very smart and forward thinking.   Of course, along the way, it will have the volatility of a craps table in Las Vegas... In any case, I highly encourage everyone to buy at least 1 BTC just to understand the concept.   Whether Bitcoin succeeds or not, the future of electronic money will be something like Bitcoin.   Practical Items: OK, you want BTC, how do you get them? (1)    There are two major ‘exchanges’ right now where people can exchange regular $ for BTC a.       [www.Bitstamp.net](http://www.Bitstamp.net) (top EU exchange) – fastest way to get large amounts of money into BTC whether you are European or American.   Once you are verified, you can wire them any amount of money and trade in.   I am a little skeptical of them as a long-term wallet as it is not clear who the mgmt. team is b.       [www.coinbase.com](http://www.coinbase.com) (top US exchange):  Much slower buying process – you can only do 10 BTC at a time, but VC backed.  Probably a ‘safer’ wallet than Bitstamp.  For US bank account holders only. Either of the two can remit back to a US bank account within 1-2-3 days. c.       Mt. Gox should be avoided.  They did not handle their regulatory issues well and are having trouble redeeming dollars. (2)    Security is a huge issue / risk in BTC.   It is like cash.  Once it is gone, it is gone.  Security means one of the following things a.       You are using an online wallet (like Coinbase or Bitstamp) in which case you have significant counterparty risk as follows:                                                                i.      They turn out to be scoundrels and abscond with the money (happened to about 50% of the early stage exchanges.   Presumably less likely with something like Coinbase that is VC-backed)                                                              ii.      They get hacked, lose the money and can’t pay people back                                                            iii.      Someone gets your account credentials and absconds with the money.    At a minimum, you should use unique passwords and 2 factor authentication for your online wallet AND the email account associated with it.   This gives some level of protection from 2(a)(iii) b.       You are using a wallet on your computer.  Here you eliminate counterparty risk but then become responsible for your own operational security.   Things that could go wrong include:                                                                i.      Your HDD crashes and you don’t have backups                                                              ii.      Someone hacks your computer and steals your credentials                                                            iii.      ‘Best practice’ is cold storage on a never-been used before computer.   It probably is the safest method but is daunting to a non-technical user Tough to say what the best advice is here for a regular, non-technical user.  I would guess, put it in the most credible online wallets you know and spread it around a bit

This is November 2013

I think you will find it interesting

so circulate to some fellow Board members and some friends

I wrote a memo in Fall 2013 about BTC

so in here for now

but i am not ready to do so

at some point I might decide to tweet it

for now

keep it in here

as 6529

that I have never shared before

I am going to show you guys something

but it never seems obvious at the time

if it happens, in retrospect it will seem obvious

I will tell you this

will it be someday worth more than a BTC? 1. who knows? I don't know any future crypto prices 2. but under what conditions might it be? that the memes as art and/or the blockchain are important 3. will that happen? we will only know in retrospect

this feels fair right now to me

ok how far does this go? Nakamoto Freedom right now is 0.15 BTC or something

that it will be

it seems very straightforward that given it has meaning and it is 70,000x rarer

should a 1/300 OG Naka be worth more or less than 1 BTC

IMHO

like here is an easy question

there are so few of them!

the good NFTs will be the most valuable tokens in the world

yeah people are redacted. it is just like fungible coins. of course most of them are going to go to zero. there is no way that every 721/1155 will be up any more than every L1/erc-20 will be up

The NFTs that will do well will be one of two categories: 1. The obvious super-established / grails / collections / etc 2. The ones that managed to keep a community active I think collections with neither - they are not famous and the artist/creator has peaced out - are not coming back

most circa 2021-2022 stuff is dead and won't come back

it will be interesting to see how deep it will reach

punks are getting some attention too

and has been for a while

XCOPY is doing beautifully

there are some healthy trends in NFT market

beta testers get to see it :)

LOL

so I am literally in hiding

but I can't talk about Brain

what I want to talk about is Brain

because I do not know what to say

i don't know if you noticed, I stopped conferences and podcasts too

i will happily chew everyone's ear off about it

then once we have mainnet

I think in 2025 we go mainnet