#188 William Mougayar: Unpacking Initial Coin Offerings (ICO) and Token Sales

Transcript

[Music] this episode of epicenter is brought you by Jax Jax is the user-friendly wallet that works across all your devices and handles both bitcoins and either go to J a double X bio and embrace the future of cryptids : hi welcome to epicenter the show it talks about the technologies projects and startups decentralization and the global blockchain revolution my name is Sebastian cuiture and my name is Brian common thing we're here today with William Mugen Yarra William is somebody

he's already been on the show two years ago so some of you may remember him a for to link to the old episode in the show notes and he saw ODU many of you will already know he's doing lots of different things in this industry he's an investor he's invested in for example open Bazaar but also whole bunch of other projects he's been involved a few theorems in for a long time he's an author he's written a book called the business of blockchain I think or the business via business blogging and he's organizer of token summit recently there was a big conference in New York around IPOs token sales and some of these new developments there's also a blogger is written prolifically about these topics so he's really kind of all over and

especially around I think the token sales and and what's been called comes be called ICOC some ton of work writing thinking about that so thanks so much for coming and joining us today William hello everybody can you just share a little bit to people who don't know you so much like how did you originally become interested in this industry and what wouldn't you turn him in sure so I've been a technology for close to 35 years and was involved with the blockchain in 2013 when at the time it was Bitcoin and I was lucky that Vitalik lived in the same

city that I am and at that time I met him and he came familiarized with the human project and since then it was very obvious to me that this was going to be an important phenomena as important as the internet was 22 years ago so I became very focused in terms of trying to understand it to learn it and to be very close to those that were very much at the forefront of this new technology so I became associated with the etherium project and others as well and started to invest and research and advise companies in the space because of the potential that I saw and so it's been

close to three and a half years basically a very intensive work in this space and I write a lot as well in my blog on my blog as well and he recently wrote a book can you share a bit about you know what's the book about how is the reception been true we haven't been together since the book came out which was almost a year ago so I wrote the book in the first half of 2016 and the reason why I wrote it because I wanted to explain the blockchain and business terms to a mass audience as you know the blockchain the way it started and the weights today is by and large is very much of a technical phenomena so a lot

of the discussions were very much of a technical nature and there was nothing then that was attempting to explain it to a business audience so that was really my impetus in my motivation for writing the business part chain because I wanted to explain it in more ways than one and it is a very encompassing subject it is not easy to wrap your head around it it has many facets it has many implications and I wanted to write it in a business I wanted to write something in a business language and I did that and the book came out was the first book that came out on that topic that explained it and since then the book has been translated in eight languages what was interesting is that the first three

languages were Chinese Japanese and Korean and that told me that the interest coming from the Asian countries whether it was very serious so this also told me that the phenomena is very global there isn't one country that is doing better than another there are a number of countries overall worldwide that are all advancing their technology implementations and everything around blockchain is very much of an international nature kind of a phenomena I have the book in English and also in French because it was translated in French recently and we've got a couple of copies in the office and whenever

like a new recruit comes in and maybe then like especially the people on the business team that haven't maybe like been involved in in the blockchain space so much you know there was sort of coming into it you know we always sort of point to that as one of the reference manuals to learning how you know blockchains sort of change the paradigm and it's been really helpful for at least you know two people in the team that the habits you know like on their desk and often go back to it thank you it's true I was embarrassed last month to launch the French version of the book and I think you were one of the first ones to

receive the French version you saw before I did yeah yeah I know you're you're well they're someone who works with you had sent me a copy and unfortunately I forgot to bring the book with me to the signing but lots of see you it's not another time to get it save to kind of signed so let's let's jump into to to the core topic today and and that is I cos at the moment there are seems every week at least one or two new icos coming out and we've had a lot of a lot of projects on the show that of why not gone on to do I cos you know it's come with some I guess I guess I'd say mixed reaction and a lot of people

obviously are interested in learning about these projects and so the innovative a trio of these projects that's certainly what I'm interested in on the other side there's a lot of we're getting a lot of sort of like I would say negative feedback but we're getting some feedback from people that I guess are concerned that were giving a platform to project that perhaps are damaging to the community or the ecosystem as a whole or perhaps not legitimate or there are these sort of things so there's been mixed reaction at least from our from our side but but you know taking a step back and looking at you know what has been happening and there's just the enormous amounts of

money that had been raised in these last two to three months and give us your analysis of this ico rush sure I think the way I see things right now is that it's going to continue and accelerate for the rest of the year about a month or two ago I predicted that we would end the year at about a thousand I SEOs total and at least a billion dollars in terms of the money raised and I think we're way we are really on track to maybe even exceed that number we are pretty close now to having one a day this week I saw about four or five that were announced or either in progress and

right now when you hear of one it makes the headline but fairly soon when it's going to be very difficult to track all of them because it's going to be it's like another startup that has raised some money so if anything this phenomena is going to continue to accelerate for the reminder the remainder of the of this year 2017 and I would say we're probably still in the early early stages of it we haven't seen a peak yet we haven't seen the the middle part of it yet even I mean it seems to me also what's great is not just as more and

more of these projects doing IPOs but also if you look at like the amount of money raised in how much time it is raised it's just getting crazy and creating crazy and it's like every week there's a new record that is a new and you know like when needed the cosmos fundraiser which was at the beginning of April you know with 17 million in 28 minutes which was at the time kind of like a record but since then this one like five six projects that have done like much more money in less time in a oh it's it's no time at all this is and then of course now we have with something like Bank or which was just hate the largest crowdfunding campaign ever right in bigger than the dog bigger than anything that's ever happened and it just seems

to keep going like that right I mean I don't think it's probably going to be mood projects are going to be even bigger than banker laughing yeah well actually this is concerning to me and I tweeted about this recently it seems to me that these kinds of records are the new vanity metrics of the token era back in the Internet era they used to be vanity metrics that didn't really mean a whole lot and some of these companies now that are raising ICO money token sales they seem to be more interested in breaking another record and taking another headline whether it is that they raise more money than the previous company or whether they raised it faster whether they had a high the highest

market cap on the first day of being listed like yesterday we saw iota claiming to have a valuation of one and a half billion dollars on the first day of being listed so these kinds of records I think when you look back are going to be meaningless really people are confusing success being raising money to success being having a company having a product having users having customers and being successful in the marketplace in really proving that what you have dreamt about and the vision yet that you have can be executed upon and can come to reality and that is really

what matters what's going to matter in the months and years following the initial SEO the initial SEO the initial token sale is just that is just raising money on a promise of something that you still have to deliver on and right now the whole market is running on a lot of optimism everything everybody is taking the best-case scenario that everybody is going to be successful everybody is painting a very rosy picture everybody it has a great white paper and a great vision and the products are not even developed yet I'm applauding them for raising money there's nothing wrong with that because

money is going to be funding this innovation but what really is going to matter is is the team's delivering on their visions and delivering on the promises to the marketplace I think that's a that's a very very valid point I mean the the people look at these vanity metrics and of course it's always interesting and sort of fun to throw them around I I kind of like when I'm in speaking with you know like people that are not necessarily in this space I kind like throwing out there oh yeah this company just raised 36 million into you know in 30 seconds or whatever you see your eyes light up people really understand you know what that means but

it's a reality and it's kind of it's kind of fun to do that but I mean you know and you're right you're right about the fact that they need we need to have companies that can execute on this and if you just look at those like regular startups right like out of a hundred startup whatever like 90 some will probably fail or like not execute on their vision that that metric was probably true as well for these companies all it's possible a lot of people lose a lot of money or that these founders perhaps you know take off with that money and themselves become enriched personally what do you think the future holds for in if we look at things like realistically speaking

exactly I mean what has become easier is raising money yes but what has not become easier what has not changed is the difficulty level of developing a company the the laws of a start-up evolution of how startups start how they evolve how they bring a product to the market how they get users how they iterate on the product and how they how they solidify their position in the marketplace that has not changed the physics laws or the laws the natural laws of startup growth have not changed and they will not change just because you can raise a lot of money doesn't

mean that your chances of success are going to be greater if anything is the opposite the traditional VC wisdom is if you have less money to start with you will be more careful with how you use it and you will make better decisions and you will make the better decisions overall so I'm a bit worried right now when suddenly a team of two or twelve people I have in front of them fifteen twenty thirty and recently we've seen one hundred and fifty million dollars at the fingertips and what they will do with it there is is really putting a lot

of faith in in them doing the right thing and doing it at the right time so nothing has changed in terms of the difficulty levels of bringing a product market and people keep looking back at Bitcoin and aetherium as a success story and they want to emulate it and they say well it's going to helium did it but you should not forget a serum has been added for three and a half years and there was a lot of blood sweat and tears in the etherion project especially in the early days it was not a straight line to the top from the early days there was a lot of hard work there was towards some mistakes that were made and each mistake

was recovered there were iterations I shouldn't say mistakes but pure iteration small mistakes all startups makes mistakes and obviously if you have a lot of money you can cover a lot of your mistakes because it gives you more time correct them so maybe that's the silver lining that these companies have but it's it's kind of a bit unconventional do you think that you can raise once and then fly on your own for the rest so we should see what happens in a year or two from the time that these companies raise money and we should see what kinds of progress is being made in the

marketplace and then that truly is going to become the measure of success potentially with them let's take a short break to talk about the I prize a competitions being run by the energy innovation hub the I prize is all about the machine economy the rapidly evolving relationship between humans and machines with huge technological revolutions coming like blockchain and artificial intelligence some crazy changes new developments are ahead of us like autonomous driving self-organizing supply chains DNA replicating robots and so much more if you're doing work around these areas the AI prize is your chance to do like Elon Musk and take it to the next level

it's a competition that's being run until July 28th starts can apply in three different categories and have a chance to win up to 250,000 euros and seed funding even if you just have an idea you can apply as an individual and get a stipend office basement in Berlin and mentorship to grow your idea so whether you're just mulling over or world-changing idea in your basement that built your first prototype or found your company you can participate and make it to the great finale in Berlin on September 28th so go to epicenter rock TV slash I prize that's i PRI Z II to learn more about the competition and how you can apply we'd like to thank energy and the AI prize for their support of epicenter so let's just play this out a

little bit so you mentioned that you don't think we are you know at peak yet it's going to accelerate more projects are you going to start doing ICA so how do you see that playing out like how far is that going to go what what kind of counter forces are going to happen and you know what is this whole environment going to look like a year two years from now I think we are still in a honeymoon period right now we're the entrepreneurs and the icos and the startups that are raising this amount of money are being given the benefit of the doubt in terms of being successful there was a lot of free money around because one of the money that's going into this

new wave of companies that are being funded it's coming from money that was already appreciated in the crypto capital space so if you look at the whole market in the market capitalization a number about a year ago we were about a twenty billion dollars and today year after we are a hundred and ten million dollars so about ninety billion dollars were made somehow out of almost out of thin air there is that much value that just became available became created in the last year and a lot of that money is being recycled into these new projects when you look at

these new projects that more than two-thirds if you 2007 five percent of the money coming in is crypto money that has been recycled from other projects so this is positive because it's funding innovation and there's going to be a long time before we're going to come back and say well now what have you done so a lot of these companies that are raising right now I think they can run for a year before we can start to ask some hard questions as to the progress so the smart companies need to have more transparency going forward in terms of letting everybody know what they are doing and where they are about a month

ago I wrote a blog post saying that these cycles that these companies ICO companies go through after launch they go into what I call a darkness period where we don't really know where they are at it's very difficult to get the real metrics coming out of these companies before really being able to pause and say well here there are customers here there are users so if you think of this in a quadrant where you start at the launch and then you go into the darkness and then you transition into a period where you go into the reality and very few companies are in that reality quadrant and the companies that are in

the reality quadrant are companies like steam it like storage sia bitcoin aetherium of course z cash and maybe has left a handful but there are very few and far in between these are companies as you can point to and say well here we have customers here they have a website they have an application most others they go from launch to darkness and that darkness could be one or two years so that's really what's going on right now what's going to play out it's difficult to kind of predict exactly but I said recently that we need to see a few more failures before things start to come down to reality right now 30x is the new

3x 100x is the new 10x so definitely there is something that is not real here and I remember back in the calm era when the crash happened there was a period where we thought that the sky was the limit we thought that everything was going to the moon and this is when it started to crash because the moon is not something that you can put a ladder on and reach but once you have that feeling it can go on for so long before reality sets and usually that take it takes about an amount of time before we start

to realize that things are not wheel here so all I'm doing here is just pouring a little bit of cold water and be as a person I'm not going to change anything I'm not going to be able to change what's going to happen entrepreneurs are going to run with it companies are going to run with it I suppose we'll be raised and tokens will be sold at valuations that are unrealistic perhaps before we start to realize well maybe this didn't make sense in certain parts and in a way it's okay because we don't know what the boundaries are and the only way to know boundaries is to touch them and to go

over the limit and then to hurt yourself and then you realize well this is the boundary this world's just doesn't work and right now we're still experimenting we don't even know what the perfect token sale characteristic is there are many variations and many opinions as to what is the ideal one and we can talk about that in a few minutes so there are lots of lots of experiments being being made right now and we're making it up as we go more or less but there are certain ways that are a little bit unusual and once in a while we are seeing them and like the bank or example and the IATA example again we keep going

back to those and we can talk about others and we each one is a learning lesson there are things you can emulate from what these companies are doing and there are things that you should not emulate from what these companies are doing yeah I mean just one thing to add here that I think is also an important factor which is that you know a lot of these projects have so much money that they don't yet they don't need to go back and and sort of justify what they've done to get more money right which is the sort of VC dynamic you have so you know they may be kind of an exaggerated VCE maybe valuations are too high but then you know two years later they have to come back and say like you know is the attraction but then you have projects that you know we did a podcast

of Gollum like the other week and when they did their crowdfunding campaign it was kind of reasonable right there is like nine million or something or 10 million but now because of the e3 appreciation and because of the appreciation one is talking they have like more than 100 million right in assets and there's a lot of projects like that and or you know starting to be significant number of projects like that today have infinite runway almost so that makes it also tricky right because they didn't have to that they can really build for stuff for a long time before they so that day of reckoning it's not clear when that's coming through and it should come in a different way then we

need more money we have no more money unless they unless some of these companies are really reckless and they spend all the money then it becomes obvious that they they cannot go anywhere but theoretically they can go on forever I mean almost forever they can go on for five to seven years and not ask for more money and look like they are working on something and I've seen companies traditionally speaking that have raised a lot of money before the token era and then can go on for two three four five four years with a semblance of doing things but they are not progressing in reality but the public should be asking we should be asking I will be asking questions here

from now to these companies that have raised a lot of money and we'll have to see what they do the market because at the end of the day you can fake so many things but you cannot fake having customers you cannot figure out the users you cannot say traction you cannot fake a number of things that have to be visible and you can tell a story for so long until you have to work to show that there is something real out there you mentioned before at the bank or cartel maybe we can dive into that just a little bit woody what did they do what do you think they did well and what you don't like about what they did well I

wrote a blog post on it yesterday without going into a lot of the details what they did very well is they they orchestrated the marketing campaign extremely well and so they communicated everything they were doing that was impacting the sale they were it was clear they wanted to maximize and the number of token being sold and they achieved that and maybe they over achieved it so you could argue that and say well why do you need so much money and why has a hidden cap I'm not a say in favor of hitting caps there was another thing that they they did not disclose the cap they had mine until asked her until three quarters of the way into the sale and he said later they

had a hidden cap of 250,000 ethers or as they ended it at 400,000 either which exceeded the Dow raised of 150 million dollars so I don't have any evidence but you could argue that one of the internal goals was to overpass the Dow again to get another headline saying that people were the highest race in the token era maybe it's coincidental maybe it's not but they did eclipse the Dow by three million dollars and they got that headline now they are saying that they need that much money for their reserve system to work fine but we're still

questioning I'm not the only one that's questioning the fact that this was a fairly greedy way of getting money from the crowd and 150 million dollars is a lot of money that could fund maybe 15 to 50 startups you don't need that much money to start something traditionally speaking companies are raising one to five million dollars you can do a lot with ten million dollars so I'm going to give them the benefit of the doubt I don't want to pick on them for too long but let's see what they do with it that's that's really the more important thing but every time you have one of these we learn we learn something so

with the bank ordeal we're saying don't do a aka uncapped race it's not a good idea when we got the bat the basic attention token the brace token it was all done in in 15 or 30 seconds and 30 or 30 seconds so there what we learned there is is is to not not do something like that where only the sophisticated investor we'll know how to pull the trigger faster than the average consumer there are funds that have developed what is called a sniper wallet and then if you've heard that term before

a sniper wallet is a technology that goes and Snipes these crowd sales faster than others and they are the advantage because they have developed that technology but it's not fair for the consumers that are sitting on their computer and maybe had to wake up at 4 a.m. or whenever the start of the sale is and hit on the on their Buy button from the wallet send money and then before they knew it they're going to be the last in the queue because somebody has figured out that they gave another high level of gas that that's how some of the bad token buyers got in is they raised the limit on the gas and they got in front of the line because the

priority of the transactions were was ahead of others so what we learned there is to limit the gas on the gas limit that's something that banker did and what they did they lowered it too low and it threw it made it provided a logjam in the transaction queue because all of these transactions were has a low gas limit and they were lining up and that's we did another kind of bottleneck so I'm not in favor of sales where you have an hour or three hours to do it because the block chains are not I'm not ready to take that much transaction volume the etherion blockchain was choking at that particular time I did a test during that time I sent some ether

from one place to another and it took hours and hours before it was confirmed it took close to nine hours until everything got caught up on that same day so we don't need to create the sense of urgency nothing good happens when you rush things why just one hour why three hours why not go with two weeks and one week and have a more orderly kind of a token raise when they wear the cap is known where you allow a lot of token orders to buy into your sale if you believe in distribution if you

believe that users are going to lift up your application and then help you to make some headway in the market if you believe that you want to empower developers and users at large to use your application why not maximize the token sale for distribution as opposed to making a quick buck very fast and then closing it after three hours and then and then not caring whether there was chaos in between or not only that that's that's a great point I mean we can point at a number of crowd sales that depending on the on the model ran into similar problems so you mentioned the fact that

during the bank or sale of course it's sort of like a DDoS attack on the network I tried to send some ether as well and wasn't able to just straight-up couldn't send and and and they are also some crowd sales like like the be a secret sale were in my opinion just you know it it is undemocratic you there's there's no other way to put it and it's just there's no fair and equal distribution of of these tokens in you you wrote a blog post recently exposing your thoughts on bank or and and in here you you say that permission lists doesn't need absurdness or recklessness

and this sort of appears to be what we're pointing at here is absurdness and reckless recklessness with the way that these crowd sales are conducted what do you think are some of the ways that we can mitigate some of this absurdness people are pushing the limits because just because it's possible i mean they could have raised even more they could have opened this one other two hours and maybe raise another hundred million probably what can we do I mean we can point at it we can people like me and others I've written on it maybe indirectly like Fred Wilson I was a bit more direct and called them out whereas Fred today prescribed a set of

generic practices for token sales and his partner Albert Wenger also has written about that topic I think that's one way of doing it is pouring some cold water on it we can't wait for disasters to happen necessarily one area that I think we can do better as a as an industry is right now there is no standard way of reporting on these filings if you want to if you if interested in one of those filings you have to read each one of the terms and I've read more than a dozen of them and they are from six pages to twenty four pages each and they go

through a lengthy amount of describing the issuance process what they are issuing how many tokens the value and how they are distributing them and there is no standard which means that everyone is describing their token sale in a very different way so it leaves a lot of uncertainty to the reader and to the investor to the consumer to try to interpret these terms and to find out what is missing and what is not missing and in my analysis of these close to a dozen of them there are holes in most of them and there are things that people don't say and you have to kind of figure

out what what is not said and what is meant and how much leeway they have so what would be valuable is to have some kind of standard way of at least reporting on it so instead of each company having 12 different ways of announcing a sale what if there was one standard way and within that standard way they can have their own parameters but at least we'd be looking at this from a more standardised aspect and this is a project that I'm working on right now actually that will be announced in the in the coming days where it's going to provide more transparency and more standardized ways

to file for these token offerings in a way that would benefit the consumers that would benefit the investors and they will allow them to compare these offerings in a more comprehensive way and not having to decipher them and only they are suit one a suit reader will figure out what's missing and and what's not missing in those sales because they're all over the place right now so the William I'm really curious well you know what are some of the things that you like that people do in crowd that you would like to see and and I'm empirically I would also be interested

in your comment on on your to crowd sales that are coming up that are taking doing some different novel things one is the ipfs which is going to do the file coin cry tail soon and they're doing that via this new platform called coin list which is associated angel so which which is already being used to record crowd funding equity crowdfunding for startups but you nan the crypto space and that's going to be limited to accredited investors right so most people are not going to be able to participate and then the other one is the civic crowd here which is Winnie Lingam startup and they're basically doing some kind of kyc of of investors where you're going to have to you know

at least authenticate at your person with a phone number and an email address and so what do you think of those approaches do you think those will become more prevalent you like the direction they're going well these are more sensible examples that are not going to create chaos at least and in the case of civic they've announced that about three-quarters of of the sellin out is going to be filled in the presale stage meaning that and they said it's already filled in that regard so this was done with the KYC process and it's a more orderly process in the case of ipfs and then Falcone coin list

as you said is an accredited vehicle so there it's limited even more and the idea here is that anybody that invests should be prepared to lose their money and that's usually thinking of investors accredited investors are mature enough that they only invest on the premise that they could lose all of the money and it wouldn't be fair to subject consumers to the same risks that investors that can afford to lose their money are facing you know accredited investor it just means you have more than 1 million in like liquid assets right and I mean I don't see how the

risk with the ipfs or 5 coin crowd funding campaign is going to be all that different from bank or or any of these other projects right so the risk isn't really that different and but it's limited so is that consistent but wouldn't you then say all of them should be limited to accredited investors do you think some of them make sense but others should be open well in the case of ipfs and Falcone we have been at it for a number of years now applications that are running on ipfs today and so I would have put them at the same level as Bank or also Michael said they've been working on their system for a year and

so on but ipfs is a lot more real and Falcone is a lot more real there are users you can point at them you can point out applications that are using IP FS so the main thing here and I've been writing about this as well is the linkage between the token utility and the usage of the token to the actual application or to the protocol specifically that's underlying it so at the end of the day the reason why you have to talk in it's not just that the token is a funding mechanism although at the surface it appears to be a very efficient funding mechanism because you have money you have tokens you just convert them and you have little dollars in the bank but

in the long term the real value underlying this as and I said this when I open the token summit I said we're not here to talk about the price of tokens and the value of e and the actual market mechanics of speculating on them we're here to talk about the business models that the tokens enable so the old conference token summit that I ran in New York two weeks ago was focused on discussing in detail what are the business models what are the utility aspects the usages and the value and the features of the tokens can have in the context of a business model in the

context of what will it do to the user what will it do to the developer is it a is that he use is it a right is it giving the usage is it a right to do something with the application is it at all is it a value exchange unit is it an internal currency is it a way to earn money as well to earn value so with file coin and and ipfs they are related because Falcone is the monetizable way of storing of sort of storage that the ipfs applications are going to be using

so there is there is a relationship there with the civic the Civic application there is a relationship between the the token itself and the identity and the role of the showing your identity and proving your identity is going to have and the role of the token is going to facilitate that process so the more I see real linkages the more I get excited the more I see value especially if it's working already like the case of steam it for example the stupid wallet is part of the logged in experience so if you are a user on Steam it and you log in and you're already in

the steam it application right in there there is a drop-down menu that says wallet so your wallet is in there as part of user experience every time you if you create a a poster content or if you upload it or if you write a comment automatically even money is taking out of your wallet or money is deposited in your wallet and you don't even think about it you it just happens in the background but the token deceiveth the steam token is part of the application and we need to see more of those kinds of applications or the token is very intrinsic and very much an atomic unit of the application itself and maybe the

user doesn't know or doesn't touch the token but they touch the actual application and and automatically something happens with the transfer of token value back and forth and and that's that's that gets me more excited and and that's what we should be looking for and asking these companies is what is the token linkage to your application or to your protocol specifically let's take a short break to talk about Jack Jack's is your wallet you complete user interface to cover all your blocks you need I've been using it nice and loving and checks suppose a lot of different cryptocurrencies suppose Bitcoin Easter like corn if you're in class say gives

me cash or Karev and you're adding name or keep the responding to users needs I was Jack the nice thing is that you can manage all of those coins within a single wallet and you are in control of your own private keys they're not on their server and there's a single 12 third seed that you can use to back up your wallet all your coins and sync them across different devices talk about devices they're on pretty much any device that you can think of you can get it on PC Mac Linux you can get on smartphones like Android and Apple and iPhone you can get it on tablet so in there even browser extensions for Chrome and Firefox and on top of that in Jack's you can actually change

diffuculty currencies for each other because they've integrated a shape-shift and more partnerships and integrations are coming down the line in 2017 that are going to make Jack even better so Jack's is really making blockchain and cryptocurrencies accessible for the masses easy to use for the masses make sure you sure to get your own Jack's wallets at Jack's at i/o or you can get it from any of the app stores you are using we'd like to thank Jack's for their support of epicenter we mentioned steam it are there are some other interesting uses or kind of combinations between products and tokens that you're currently seeing well on the consumer end I think it would be

interesting to find out what happens with poker there's an application called token that conveys has just released they released a bit of version of there's another equivalent one called status status is going via nico route it shows me fairly soon that's my understanding so this will be in the flavor of consumer applications as it will be on your smartphone specifically and I've said this before and what I'm seeing here is that the money that we have in our pockets and the money that exists in our bank accounts that's

getting competition some cryptocurrency it's getting competition from cryptocurrency in in the apps in apps that would be in our smartphones or in wallets that are in our smartphones so if you're one of the kind of leading early adopters you have some cryptocurrency and in wallets or in exchanges but soon you will have them in the apps I'm a user of seemeth I have value I have a bit of money that has some value in the steam it in my steam it steam it app and analyze value so so we're going to see more of those emerging I'm

hopeful that a consumer app like token whose status will eventually have millions of users because the token is a very efficient way to send and receive money or send and receive value with with a very low transaction fee and almost close to zero so one of the use cases that token the app token I'm talking about is a showing showcasing on there a beta version is the ability to send money between consumers as easily as you can send a text message so imagine you're sending money as easy as just sending a text

message and you say I want to send one either from to you to fabian or to to sebastian and that it happens in seconds at a very very low transaction fee and very efficiently and nobody is in the middle of that it's not like venmo it's not like PayPal it's not like doing a transfer with a bank because there's nobody in the middle you're just doing it on the blockchain and Kobes is just a very lightweight intermediary and I think there's a lot of value in having a see this kind of alternate way of sending and receiving money so people ask me so why is this going to replace

what we currently have and and my answer is that you cannot compare you cannot compare to the current system that we have because you will fail every time when you compare it this is a new a new system this is a new alternative system that is being created here there is still lots of friction between the current world that we have and the cryptocurrency world every time you want to go in and out of it there is friction that's why the versions are not taking off on accepting Bitcoin or or cata currency because the credit card works very well cash works very well it debit card works very well magneri place that but if you enter a new system where cryptocurrency is a

native unit and the only way to transact value is with cryptocurrency or with tokens then you don't know anything else and then you say wallet this is efficient and the analogy I give is remember a few years ago when we started to build the cellular network cellular phones took off everywhere in the world but we didn't use the landline to do that right we had to build towers so it was a totally new infrastructure we built the tower in towers infrastructure to to have the cellular system happen anywhere in the world when when the web came along we didn't use the mainframes

before the web the mainframes were the prevalent computing platform we didn't use the mainframes to power the web and the internet it was a bunch of servants client-server technology is what took over the web so it was a new infrastructure so think of this whole what we are enabling here and where we are building a new infrastructure totally that almost doesn't have any regards or doesn't care almost about the current infrastructure the current way of dealing with my this is a new way of dealing with value so every application that is raising a token they should have more tighter tighter linkages between what users can

do with their application and what users hold in terms of tokens because that's what's going to make the whole thing fly that's what's going to make everything work in a way that is a kind of give-and-take because if you want a real good economy to work you need people to buy things you need people to sell things you need people to earn things you need people to also be able to spend it and and in a way this is all about creating a new economy we can call it the token economy or the blockchain economy but this is about the creation of something new that didn't exist

before so we have to enable transactional activity in this new economy and that's very important so I want to come back maybe to the to the applications up I mean I'm going to have a somewhat contrarian viewpoint here because I see a I'm not super optimistic at the moment that we're going to find native killer apps where people just regular you know like your parents your friends at school like people that are not like techies or interested in startups or or interested in blockchain using this this type of technology every day like they're using Facebook and so

one of the things you mentioned is that so credit cards are easy and I think for the for most people that's the case on onboarding with credit cards with competing applications like Lidia PayPal or whatnot Delia story venmo in the u.s. is made incredibly easy by the fact that these companies are are regulated and and and and it's easy to use a credit card to onboard and I think that applications native sort of blockchain applications that are trying to apply this new model to existing use cases like stay at status or or or token and I love what status is doing but I think

that if we take those examples so they're their attack they're sort of going into the messaging space that space is already extremely fragmented and where there are incumbents that have enormous networks affect network effects Facebook whatsapp WeChat and I think that it would be more likely that a company like Facebook has that would have success by integrating some sort of token then it is for a startup in the blockchain space to have you know ten

million users in in the space I'm not sure about that for Facebook to adopt a token model they would have to disrupt their advertising model which works very well so Facebook is going to be facing the innovators dilemma class I mean just for payment I'm talking about sort of not not replacing the Facebook's business model but let's say Facebook says okay in whatsapp now we can do you can do payments and you can send tokens and whatsapp and you can build applications using this whatsapp token then maybe they do an ICO or something like that right possibly they would have to do it in on the blockchain and not using a payment processor in the background and giving the illusion of a

peer-to-peer where there was a processor in the middle right but even even then then you're still going to have the friction the friction with onboarding because you when you want to get money in you're still going to need to use a credit card and currently the way that setup is there needs to be some sort of a kyt done and people are not - I'm not gonna do that I mean what if but but if you don't have to do that what if you earned what if you earn that those tokens from other means I did recently a TEDx talk where it was about the future of work as it relates to tokens and in the future you will be earning more tokens then we are earning tokens today by do by doing what I call active work

or passive work so again I go back to steam it as an example you will be earning real money and what if you've earned it earned it by just doing something or by sharing your data for example that could be a passive way of earning money what if you're sharing some of your disk drive like storage over a final coin or a SIA and you're earning money I mean tokens because you're sharing your drive using your computing cycles and use that money the next day - in your token wallet so we're going to have that new economy it's not going to be that I bought these lockers with $10 many dollars I mean I get those and I love those use cases like those use

cases getting excited personally Mia but I think that it it remains a very it for the most part I think it will will remain a very nice thing that will attract people that are interested in sort of innovative type of technologies you know sort of techies but I don't see mmm any of my friends that you know have college degrees work at startups even investing time in trying to make a little bit of money on the side by renting their disk space or selling their data or like doing a like a gig or something like a five-minute

gig or something let me weigh in on this I think a few points are important here so first of all the point that you know existing companies to kind of integrate tokens and stuff I don't think that's going to be really the case in the same way because if you if you're going to do a token sale or if you're gonna have a you really need to figure out how that token is going to be at the core center of the business model and that's just something fundamentally different you can't just like plug that in in the end but you have from the ground up to something new and I don't think existing big players are going to be able to do that because you know as William pointed out right they have two existing models existing processes existing business models and you can't just plug that in

at the end and I think that's very I think that scenario is very unlikely when I want to say that a like yeah presented scenario it's super unlikely that would that would happen I think and let's use that as a competitive advantage like what kick is doing because kick does not have it does not have an advertising model right now so for them a cake is going to be issuing a new currency called kin ki N and to empower their users and they have millions of users so we are going to start to see more and more non-blocking companies adopt the token model in as much as it can empower their users in as much as they can

usages and utility and value for their for their users in terms of that token whether it's the creation of something when they earn it or where they can spend it so it could be a great currency inside these apps that already exists today that did not have previously a model or they could monetize and I just want to point out or another thing that that Sabathia said and you know which is this point that okay I don't see like regular people like adopting this and I think if you think so first of all I mean I have noticed just in the last few months the number of people that I sort of know that aren't in this industry

that are getting interested that want to buy Bitcoin in ether and of course it's much driven by the speculation and by the you know that value increases here but there's an enormous amount of influx in people and you know seeing this across the board you know coin basis at capacity the hearing meetup here is like 200 RSVPs when the topic is like you know like client and something some things that people will not understand you know as a regular meetup are an epicenter you know downloads have been going through the roof like crazy yeah it's just all over right you're seeing the explosion and and I think the other thing that's important here is when you are able to build really disincentive thing as a core part of the product you know like steam it has done it right but

you can you participate on there and and you you profit from the network's growth I think that's enormous ly powerful and and you will be able to build social networks any kind of network effects will work you know extremely well with tokens and I think we will absolutely see you know mass participation in those kind of projects very very soon yeah with steam it steam it is is a great example of a success right where I think I would point to as here's an example where we've created value of I guess nothing out of out of content I guess but where people are coming into the system and they're gaining value

from that and and they've been pretty successful at bringing in people from outside the blockchain space or the Bitcoin space or whatever like the non bit corners but it's still a pretty niche type of thing and with regards to your first point Brian I think a lot of the influx right now is just speculation I think that a lot of the people that probably know that we've seen come on as new subscribers to the podcast yeah they're interested in the technology but I think like myself when I first got interested in this technology it was driven by potentially you know like a mean to make some money through this speculative speculation which was which

was Bitcoin at the time I think that that's driving a lot of the interest is not how can I use this to you know make my life better or and do new types of things or whatever I think a lot of people are coming in because they're looking at it as a way to make some money well some of these new applications are going to be as easy to use as the wats app and the Facebook's and what we see today so that's why when I saw the early versions of token and status I am encouraged because these are very easy to use applications that anybody can use and they won't even know they are interacting with the blockchain because there's nothing geeky about

these applications same thing with steam it if you can publish something on Reddit you can publish something on steam it with the same ease with the same way and you don't really see the blockchain in the technical sense so we're going to see more and more of these kinds of applications that are hiding all the complexity behind and and just working well on the user interface and user experience yeah I think so but I I think like even you mentioned reddit I mean even read it even though it has millions of users ask 10 people they don't read it is a lot of people don't know it reddit is it remains a sort of you know internet culture type of social network

that is known by like a certain subset of people and it has nowhere near the notoriety I think in the sort of general population is something like Facebook so I'm not saying that no room for tokens to have a place as a valid way to construct new use cases new business model etc but I think for the majority of consumers you know regular people it it will remain well I read about yeah read it is at the moment the number four ranked exercise in the US so yeah but yeah I mean but no you I mean in in the US that's a good egg literally

seven I regularly tell people about reddit and have no idea with and like educational so maybe it's the people on hanging out with but I wanted to come back to one one thing about crowd sales so Sebastian I will also talk about it a little bit before the show and and I'd be really curious about your opinion here William so to me you know it seems like this is such a massive disruption of you know venture capital so how do you see that do you think venture capital is going to survive as it is today how will be changed by that in what our venture capital is thinking about what's happening here are they worried are they scared how it is dealing with this the

depends on on who it is we're talking about there's a number of scenarios that are going on right now there are some VC that have been very early with this and I've seen it before others and I already am participated in in companies that are going to have tokens or maybe they invested in funds that are interesting and tokens and here I can name you SV or andreessen horowitz as examples so and you can count them maybe on one hand those that I've seen this earlier than others and are already in it there's another segment and these are the traditional blockchain types of investors that were very early with

Bitcoin and they're also now realizing that there has to be a play with tokens so here we have the blockchain capital and the pantera that are also going to be playing with a token based and then the third segment is the VCS that are very interested and some of them I tended to talk on summit and interacted with me and they have maybe done one or two participation Xin token sales and they would be maybe the next ones to kind of start to get interested and then you have the rest and maybe the rest is maybe 95 percent of the VC that have been totally not touched by

anything to do with tokens right now and maybe that number is 98 percent they have one limitation which is their current LP a limited partnership agreement and most of them prevent them from investing in in this type of currency which is cryptocurrency so that's that's the reality VCS are bound by the limited partnership agreements that they sign when they raise money which says they can do certain things and not other things and the cryptocurrency item was not part of the vocabulary and two years ago or three years ago so what's happening either these visas have to raise new funds with

new terms or they are going back to the LPS and trying to change some of the terms to allow them to invest in in those tokens in or at least in it's something that will become a token and many of them are just waiting and and not wanting to get involved for another year or at least to see what's going to happen and that's fine as well because there will be opportunities suppose there is a crash one day I don't know when that might be maybe there is no crash but when things become a little bit more clear when things become a bit more reasonable when things become maybe a post crash period perhaps there will

be opportunities to make money as well in a second stage of this evolution in the same way as if you look back to the internet we had the dot-com crash 99 to 2000 2001 there was still kind of happening and then we had a dry period for two three years and then 2004 and forward everything started to happen again and then we have been on a very strong trajectory since then so the same thing could happen and we had new players come in in 2004 either those that survived the crash or new ones that came along were able to raise new money and did well and assuming very well so that's what might happen with with reese's

going forward but do you think they will be able to adapt I mean because one of the things also about meeseeks is they have this advantage which is they have access to these companies that you know I is a regular you know regular people have very difficult access to investing in startups but beetee's can but but this is different right here like very normal people can invest so all of a sudden you kind of have this level playing field so I wondering do you think that model can can survive I'm sure it's going to survive but the question would is is it being threatened yes it is being threatened is it's being disrupted a little bit so like anything

it's not going to change everybody what's going to happen we're going to see new players come along and I new funds I just focus on cryptocurrency and they will play the roles of disease and we're seeing that already we're going to see some VCS create new funds that just focus on that particular segment so it's in your asset class basically clip to it currency clip to assets it's in your asset class and we're going to see new even accelerators we have one called co-founded have an advisor to them as a disclaimer who is kind of think of them as a as a TechStars or there as a Y

Combinator and their model is is a token model so they help emerging startups start and grow but go the I single route and so we're seeing those emerge and so we're going to see basically new players we're going to see existing players take new roles and we're going to see some old players that will not change and that will continue to go the traditional route and and this this will not die overnight some of these funds have a 10-year horizon so if you just raise the recent fun two years ago you still have

another seven or eight years to spend that money and and you will spend it gradually so this will be an evolving space in the Volvic way that the way it will change cool yeah I mean absolutely agree it's certainly going to be a long long process but there I think it's going to be very interesting to see what happens to venture capital and I mean of course we also have to the chance that they have these kind of crowdsource venture capital right which is happening to some extent that you have even with something like shape-shift in prison right where you can have on chain asset management and then you know maybe you can follow different people managing assets there's going to be so much innovation and change happening in this space it's going to be it's going to be very very interesting to see that so

words to my positions earlier like I I agree that there's a lot of innovation coming and and I'm super excited about it but after being in the space for so many years you know we've been just we we've been waiting for these killer apps right and they're they're taking a long time to come in and and I think that yeah I think I hear if you're Brian that it's it it's it's a long road until we get to anything that's near what we might imagine as a you know successful company today like Facebook type users or or Google or some like that sure of course I mean use a gigantic companies

but we have to first get wrap it here right which is crowdfunding I mean this is a killer app right it's it's raining Network but a peer network to absolute capacity breaking records changing how startups approaching it so you know you may we may like it though you may not like it you may think it's irrational we may think it's leading to crazy things but it is a killer app that I would agree with yes well we thanks so much for coming on we ran quite long but I think it was super interesting talking to you and hearing a bit about your you know the important work you're doing in the perspective and ease in this insane industry and all the latest developments so thanks so much for Liam thank you bye bye

and of course to our listeners we're going to have links to some of the blog posts Williams written on his blog sort of management dot orc there's a lot of interesting articles on there so link to that also to his book so you can you can check that out and and yeah and the token summit website too I'm sure they're going to have another another interesting conference coming up and I think the last one had a lot of interest surrounded and I'm sure this can turn into a good conference here is we also have a YouTube channel where all of the sessions of the talk of summit are being published now excellent yeah so we're going to link to that as well so people

can check out the YouTube site so thanks so much to our listeners for tuning in once again we're going to be back next week with another episode and if you want to support the show you can do so by leaving us an I to interview that helping people find the show and makes us very happy so thanks so much and we look for [Music] [Music]