Blockchain and Contrarians...

Lately I've been investing some time to understand Blockchain — what it is and what it isn't; how it works and what does it mean for the future; should I get involved with it or stay a million miles away. As part of my process I wanted to blog about it for a number of reasons: 

1. Help galvanize my thinking and understanding of Blockchain.
2. Work on my language so I could clearly articulate my thinking about Blockchain.
3. Stimulate discussion and feedback on the topic to help with my thinking.

And for my efforts my friend Phil Friedman posted a blog entitled, "Some important truths about cryptocurrencies". To my surprise (and great appreciation) Phil dedicated his post to me.

This piece was inspired by Graham Edwards, who may or may not agree with what I've said here, but who is always, as I see it, an authentic contrarian and more than willing to explore concepts and ideas openly and honestly. Thank you, Graham, for being a good sport.

I suppose this blog is a bait and switch because I don't really want to discuss Blockchain technology but re-enforce something much more important — the value of the Contrarian. Phil's dedication wasn't just a great compliment but an important reminder about what is needed to drive better understanding (as well as better decision-making).

con·trar·i·an [kənˈtre(ə)rēən] NOUN — a person who opposes or rejects popular opinion  ADJECTIVE — opposing or rejecting popular opinion; going against current practice or thinking:

There is a Truism that says if you want to make a good decision you really have to understand the situation. And to really understand a situation you have to look at it from as many perspectives as possible — and ask questions you probably haven't even thought of. As Phil says, "...explore concepts and ideas openly and honestly." 

I view the contrarian as a facilitator —

• They help prevent groupthink.
• They push back to ensure there is a discussion.
• They ask the questions that may not get asked (for many reasons)
• They offer a different perspective
• They ask the question, "Why is that person running in the opposite direction? What does she know that we don't"
• They know it's easier to agree — although they also know it doesn't really serve the discussion.

Contrarians are crucial for developing better understanding and better answers — and yes, maybe we can be a pain in the ass sometimes (but it's for your own good).

I suppose since Phil was nice enough to dedicate his blog to me I should use it to help with my continued understanding of Blockchain and it's partner in crime, cryptocurrency. In his blog, Phil had identified five cryptocurrency truths —

Truth #1: Crypto-currencies do not have any intrinsic value. Whatever value they have to an owner depends entirely on someone else wanting to buy them. Therefore, investing in such currencies amounts to nothing other than gambling on rising demand, whether that demand is rational or irrational.

I totally agree. As an intrinsic value investor myself I would never invest in any currency for that matter. If you can't calculate it's intrinsic value you simply can't determine if you are buying too high or too low. It's why Warren Buffet has very little interest in cryptocurrency (and my portfolio manager for that matter).

Truth #2: No single crypto-currency held by an investor will ever appreciate in "value" as long as the issuer of that currency continues to sell the currency at the same price or lower than that paid by the investor in question.

I also agree... in theory. In reality many markets are inefficient and allow for arbitrage opportunities. I was shocked when someone said they make $7,000 per month with retail arbitrage — they buy product on Craig's list and then turn around and sell it on eBay for a higher price.  

Truth #3: You cannot rely on the advice about investing in crypto-currencies from anyone who has already invested in them.

I agree. For me it's like the person who enthusiastically offers a "stock tip. I do believe they can offer insight as to how the "crypto-currency" ecosystem works, but I'm not taking investment advice from them.

Truth #4: Decentralized blockchain-based data-keeping was originally associated with Bitcoin crypto-currency as a means for imbuing the system with perceived credibility. 

This is where I think Phil and I look at Blockchain differently and maybe it's my issue over the term "perceived credibility". My understanding is because of blockchain the "double spend dilemma" was eliminated. And because of this, internet currency could be created without the concern of it being copied 1,000,000,000,000 times. Blockchain has created a "credible internet currency" — now what that currency value is, well that's another discussion. And although I agree crypto-currency doesn't have any intrinsic value, I do believe it can have associated value with whatever ecosystem it is part of. Much like paper money. 

And this is what excites me — something of value can now be created for our efforts in Internet ecosystems. 

Truth #5: Investing and trading in crypto-currencies is a zero-sum game.

All I can say is there will be many people that make money and there will be many people who lose money. What I can also say is cryptocurrency isn't going away anytime soon.

Again thanks to Phil for dedicating his blog post to me; thanks even more for your thoughts, perspectives, and way of thinking. It's the only way for me to better understand.

So is the way of the Contrarian. 

iamgpe

My understanding of Blockchain continues (at least I keep telling myself that)...

"My caution to all is get as much information as you can about this technology but look hard at what they are saying. I'm pretty sure there is a pony in here under all this manure."                                                                                                                                               — Jerry Fletcher

Jerry is a smart man so I have continued to get as much information as I can about Blockchain technology — not only to understand it for cocktail party banter but to determine if there is a place for me in all of it. 

As I continue to dig into the utility of Blockchain technology I've categorized it into three general areas for consideration —

1. Blockchain technology used in a centralized manner for data integrity and process efficiency — current trust institutions (such as banks) that want to be more efficient and effective with the integrity of their data management.
2. Blockchain technology used in a decentralized manner to disrupt current trust institutions and middlemen — challenging the way we do things, such as banking.
3. Blockchain technologies used in a decentralized manner to create new "ecosystems", as well as new value creation becasue of its activities — the creation of defined value where there was none before (represented through its cryptocurrency).

As I have mentioned before, I am not a very good futurist so there are probably many other areas of consideration.

I've also come to appreciate that if you're looking at Blockchain from a "decentralized perspective" you need to have some sort of "currency or token" involved — it is used as an incentive for the network (or "ecosystem") to ensure it works properly. A currency is required to support the efforts of the people in the network in a sustainable way, and ultimately will reflect the value associated with what is happening in the ecosystem. 

As I continue to search for the "pony" I have come to believe I'll align with the third consideration for two simple reasons — I don't have any coding skills to speak of that would help an established institution and I just don't have the energy to be very disruptive. Although strangely enough, I do have the energy to get involved with new ecosystems. Go figure. Maybe it's my marketing background, or my increased efforts with blogging, or my interests in personal branding or even my increased involvement with social media... I don't really know; whatever the reason though, it seems my place in all of this is leaning towards blockchain and it's utility with social media — and I suppose by extension, personal data and identity in the virtual world.

Because more than ever we are living in both the real and virtual world (with each becoming as real as the other) — and frankly, I want only one of me in each.

iamgpe

PS — As always let me know where I've gone off the rails.

Blockchain and recreational marijuana...

I was recently sitting across the table from an associate who is trying to raise money for a couple of ventures she's involved with and as part of the conversation she said (with a sigh), "If it doesn't have the word blockchain or marijuana in the title of the pitch deck no one cares. Blockchain and recreational marijuana is all anyone wants to talk about".

If you aren't aware, Canada is planning to legalize recreational marijuana July 1st of this year (although the Senate is already saying maybe August), and the speculation and preparation is at a fevered pitch — personally I think when it finally does become legal the shakeout from a business perspective will turn everything into one big hot mess. Blockchain though is something very different — although admittedly I was struggling to understand its potential other than the platform that allowed for the crazy speculation that surrounds bitcoin and its cryptocurrency cousins.

By nature I am not a "tech guy" and rarely an early adopter, but it became apparent after talking to other people (and the recent deal between the social media platform beBee and a blockchain company called Profede) I needed to have a deeper understanding of what blockchain is, and more importantly what blockchain can do.

I wanted to ensure that if I missed any opportunity it wasn't because I was too lazy to become more knowledgeable. 

I've done a fair bit of research so far and I'm just starting to glean the potential of blockchain, although I'm still blind to most of it — I definitely have come to understand why people say it's the next iteration of the Internet though. There will probably be a great many holes in my thinking about blockchain but I wanted to make an attempt at articulating what it is, and more importantly, what it can do. And I think it's best to start with the internet.

The thing about the internet as we know it today is everything can be copied... over, and over, and over again — and because of this the content of the internet has been "devalued" to a point it has no innate value, as well as virtually no level of trust associated with it. Is that beautiful photograph the original or the millionth copy?

Blockchain allows for both trust and value to be created on the internet.

Using very complicated math and a decentralized network of computers, a public ledger can be created that offers what I call "immutable uniqueness" — it allows for the creation of something that can not be copied and is verified (and policed) by a public, decentralized system of users. The need for a third party trust institution (such as a bank) to ensure a transaction is honest is no longer needed. This I understood right away, but frankly I didn't want to be caught up in the very big turf war that is brewing between the currently trust establishments and something so very disruptive.

What I didn't appreciate was blockchain also allows you to create "ecosystems" (economic systems, not ecological systems).

The bi-product of a system that offers "immutable uniqueness" is that it creates something which can be given "immutable value". And I suppose you might as well call it currency because it is inherently used as a reward for any effort in the ecosystem — bitcoin miners are rewarded for all their computer power, brains, and involvement with bitcoin. Blockchain enables ecosystems to be created which allow you, through your "efforts and involvement in that ecosystem" to create currency from the system that unto itself has value — much like a country's economy is reflected in the value of it's currency.

And one last concept that ties this all together — fiat currency.

Fiat currency is defined as a currency established as money by government regulation or law or an ecosystem, and is derived from the Latin fiat ("let it become", "it will become") — simply put, it's a currency that is worth what it is worth because we have decided to believe it is so. How else would you explain bitcoin having a value of $12,804 as I type this?

My biggest problem now is that I'm not imaginative enough to grasp all the ecosystems that blockchain will create — something that is now on my immediate to-do list.

iamgpe

PS: I may be looking at this all wrong, so any help in this regard would be appreciated.