Crypto is for the machines, not the humans

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This weekend I posted a tweet that ignited numerous interesting conversations.

For thousands of years, the world has revolved around physical assets — physical money, physical stocks, and physical contracts. These were incredibly important for the analog world, but the digital world finds them much less useful.

I want to take time today to explain what the tweet meant, why I think it is important, and how this trend will impact our daily lives. Before I do that, it is important to call out a few new properties of the global, truly digital world.

  • No borders — The physical world is divided into countries, with different governments running their own fiefdoms, that are segregated by imaginary lines (and physical barriers) on a map. These borders serve as the divider between different sets of rules, different governing organizations, and different networks. The digital world (the internet) acts as a single, global nation. A nation without borders that uses technology to remove the imaginary lines and physical barriers, while connecting billions of people around the world.

  • High degree of connectivity — Any individual in the analog world was previously limited by physical proximity. You could only meet with the people near you. You could usually only talk to the people within your country. And you had difficulty locating and synthesizing information about different locations or cultures. The advent of smartphones and the internet changed all of this. Anyone in the world can now talk to, meet with, or learn about, any individual, group, organization or location with a few taps of a button. This connectivity leads to faster, more efficient distribution of information and value.

  • Increased reliance on machines — Just 100 years ago, humans had very few touch points with “machines” in their daily lives. Today, we walk around with supercomputers in our pocket that help us communicate with others, navigate the physical world, learn anything, and entertain ourselves. Over time we have come to trust the machines more than we trust other humans. Whether it is using Google Maps instead of asking humans for directions or asking Siri a perplexing question, the machines have become an important part of our lives.

So what does all this have to do with Bitcoin and cryptoassets?

The new digital world is trying to use old technology (physical assets or their electronic representations), but that approach won’t scale. We already see issues with everything from settlement times to the inability to make micro-transactions. In fact, we are currently setting ourselves up for failure by trying to put a round peg in a square hole.

The digital world needs digitally native assets.

Take money for example — we need one global digital currency that is governed by machines, rather than an electronic currency that represents physical money and is governed by a small subset of the world’s population. Bitcoin is the perfect solution for the needs of the digital world. The decentralized digital currency is not controlled by any one group, it is fully transparent and predictable, and it is highly divisible. More importantly though, Bitcoin is compatible with the machines.

As machine-to-machine transactions increase globally, the need for faster settlement times, micro-transactions, and low fees will become more apparent. Bitcoin can be sent to anyone in the world, regardless of geographic location, within seconds, at almost no cost. The machines can’t do that with USD or any other fiat currency, so they’re going to opt to use the digital currency that suits their needs.

Bitcoin isn’t the only digitally native asset that you should be paying attention to though. Lets look at ownership of companies and organizations. Traditionally, stocks have not been available in fractional shares, they are incredibly difficult to transact across borders, and there is very little transparency of information to the underlying value. The speed and transparency of the digital world is demanding a new type of digitally native ownership.

A “smart security” (tokenized security) is a much better answer. The machines can transact these securities faster, more efficiently, across borders, and with greater levels of transparency. The securities are highly divisible and can empower an entirely new world of ownership. Rather than simply owning the equity in a large corporation like Apple, the machines will be able to offer ownership in individual divisions of a company, individual product lines, or even claims on cash flow of a single revenue stream.

All of this is possible because of the more efficient, more trusted ledger for accounting that is provided by blockchain technology. Simply, the machines are able to drastically improve our ability to move value across the world and keep track of who owns what. Additionally, assets aren’t the only thing that will be digitally native — the contractual agreements between parties will be heavily updated as well.

Today, most contracts are beaurocratic in nature, highly inefficient, and nearly impossible for machines to interface with. As smart contracts begin to become more popular, we will continue to push deeper into a digital world where there are greater efficiencies, less counterparty risk, and higher degrees of trust and transparency.

Ultimately, we are building a better world that will be able to service the demands of a global population. To be clear, it is not lost on me that much of this description sounds futuristic and frankly, a pipe dream. While progress appears slow on the surface, I actually think we are much closer to making this a reality than most realize.

Within the next decade, I anticipate majority of companies will use smart securities as the default corporate structure, a large percentage of countries will turn to digitally native currencies, and the machines will become much more efficient as they learn how to leverage assets and contracts built exclusively for a digital world.

There will be plenty of bumps in the road, including technical challenges, the need for regulation modernization, and a steep learning curve for users. This all feels inevitable to me though.

The machines are pulling humans into the future. We just need to realize our role is to ensure they have the assets and contracts necessary to help us improve the world.

I honestly can’t believe we get to wake up every day and play a role in something so exciting.


The “Off The Chain” podcast has been downloaded 600,000+ times in 160 countries. You can listen to the latest episode with Alex Gladstein, Chief Strategy Officer of Human Rights Foundation here: Click here for Off The Chain podcast


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Nothing in this email is intended to serve as financial advice. Do your own research.