marketingmonk 3Speak Podcast: Recent Episodes
Chris Coney
Listen and watch the latest videos from marketingmonk. Hosted by 3Speak.tv. The free speech video platform on the HIVE blockchain.
https://3speak.tv/watch?v=marketingmonk/znyxjvav
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This was inspired by a true story.
A few nights ago I was sat with a friend of mine who wanted to invest $3,000 into the Bumper Finance token since it was close to it's all time low.
This can be considered an Undiscovered Crypto since the only place you can buy it is Uniswap.
Now he had a bunch of USDT on Binance and wanted to use $3,000 of that to buy BUMP tokens.
The first problem was that the average fee on the Ethereum network at the time was around $35 and he only had $26 worth of Ethereum in his MetaMask wallet.
So we were faced with the possibility of having to buy some ETH with his Tether, withdraw that to the wallet to pay fees…
And then withdraw the Tether to the wallet so we could trade it on Uniswap.
That plan quickly fell apart when we realised that if we bought $100 worth of Ethereum and withdrew it to the wallet to pay fees, the exchange was going to charge us a $35 Ethereum transaction fee to withdraw it.
That would turn that $100 worth of Ethereum into $65 before we’d even done the swap.
Then we’d be looking at another $35 Ethereum transaction fee to withdraw the $3,000 worth of Tether.
That would have been $70 in Ethereum transaction fees before we’d even done the trade (which would incur another hefty Ethereum transaction fee).
So we went back to first principles.
We asked, what is the end result we are going for here?
BUMP was trading around 8 cents at the time so we were looking to buy about 37,000 tokens.
The next question we asked was “what is the fewest number of steps to achieve that?”
Because of course, the fewer the steps, the less we’ll spend on fees.
Now, like with every problem, if you invest the time to precisely craft the question, the answer becomes obvious.
So what we ended up doing was taking $3,100 worth of Tether and buying Ethereum with it on the centralised exchange.
Then we withdrew all that Ethereum in one transaction to the wallet.
Now, transaction fees on Ethereum are only estimates because you don’t know what the total fee is until the transaction is complete.
I liken this to only being able to estimate the cost of fuel for a car journey. Until you get there, you don’t know precisely how much fuel you’re going to burn.
The same goes for Ethereum since, (in both cases) stuff happens along the way that affects the cost.
When the transaction withdrawing the Ethereum from the exchange was confirmed we only spent $6, so that was great.
But in any case, in one step, we now had $3,000 worth of value moved into his MetaMask wallet, but using Ethereum as a temporary store of value.
Remember that we bought $3,100 worth of Ethereum with his Tether, so we were expecting that extra $100 to get cut by the withdrawal fee to $65.
But since that transaction only ended up costing $6, we had $94 worth of, (let’s call it) “fee paying Ethereum” added to the wallet balance.
So let’s do an inventory here because the secret to this is keeping track of what is happening in your head since it’s not obvious looking at the numbers.
At this point in the process if we just look at the MetaMask balance it said the only asset we had in there was $3,120 worth of Ethereum.
But he and I knew mentally, that balance was actually sub-divided into 3 categories:
The $26 worth of Ethereum that was in there at the start
The $94 worth of Ethereum that we bought with Tether and withdrew from the exchange
The $3,000 worth of Ethereum that we bought with Tether and withdrew from the exchange in the same transaction
So now we were ready to do the Uniswap transaction, which was a piece of cake.
We went to Uniswap
We selected Ethereum as the asset we wanted to swap…
BUMP as the asset we wanted to receive…
The transaction fee on that was $43 worth of Ethereum…
And within 30 seconds, the transaction confirmed and the BUMP tokens appeared in his wallet.
Mission accomplished.
One of the main points here is to demonstrate how you can enhance your returns just by being a bit smarter with your money movements.
$35 saved on a transaction fee is the best return you’ll ever make because it’s like making a trade with no downside risk and a guaranteed profit of $35.
I’d take that trade every day.
And those opportunities are there all the time. It just requires a bit of know-how.
So to tie this back into the title.
Do you see now what I mean by using certain crypto assets as a “value transfer mechanism?”
In this case, we simply used the ETH asset to store our $3,000 worth of value for a few minutes while we moved it to where we wanted it.
The fact that ETH is a volatile asset doesn’t really affect us because we only held it for a short period of time.
But don’t get stuck on Ethereum, this is a principle you can apply to any network.
https://3speak.tv/watch?v=marketingmonk/sabhxquz
Start your formal crypto education for free and earn tokens at https://cryptoversity.com/
Take a look at this:
Have you ever noticed that when you point the finger to blame someone for something (finger 2) there are three times as many fingers pointing back at you? (fingers 3, 4 and 5).
Now consider this tweet I just read by a U.S. Senator:
"Giant grocery store chains force high food prices onto American families while rewarding executives & investors with lavish bonuses and stock buybacks. I'm demanding they answer for putting corporate profits over consumers and workers during the pandemic."
Sen. Warren on Twitter
When I read this I applied my finger pointing model.
Instead of looking in the direction that they were pointing finger 2, I looked the other way in the direction that fingers 3, 4 and 5 were pointing.
https://twitter.com/ChrisConeyInt/status/1476572816380207109
As I pointed out in this tweet quoting Sen. Warren; price is nothing but the relationship between the value of the money and the value of an item.
Due to the laws of supply and demand, if demand for bread suddenly doubled, bread has suddenly become twice as valuable, people are willing to exchange twice as many dollars for it and the 'price' is simply a reflection of that.
But notice that 'price' does not really exist as a concept on its own. Price is the relationship between two items of value that are exchanged for one another.
And so, back to my tweet in reply to Sen. Warren. It is the unprecedented printing of new dollars that has dramatically increased the supply of dollars. And it is changing that side of the equation that naturally and automatically changes the thing that measures the relationship between dollars and food... 'the price'.
So we saw that ‘giant grocery retailers’ are to blame for the price gouging.
My question is why blame the retailer? What if they had to raise their prices because their wholesalers raised their prices?
And what if the wholesalers raised their prices because the transportation companies raised their prices?
And what if the transportation companies raised their prices because the price of fuel increased?
And what if the fuel companies raised prices because their labour cost rose in line with a rise in the minimum wage laws imposed by the government?
Now to be clear, this is not a commentary or a judgement on whether the government should or should not do any of these things.
All I’m doing here is tying together the logical daisy chain of cause and effect so the real source of the problem can be identified.
If you apply a solution to something that is not the real cause of your problem, don’t be surprised if it doesn’t get solved.
Going back to the Tweet I quoted at the start, the "greedy corporations" argument actually has a very specific belief at the base of it.
It's the belief that businesses should turn themselves into a public service in a crisis.
That is, if there is a crisis and their costs of doing business rise, they should simply eat that by taking it out of their own profits.
Well firstly, there are private companies that do that, they are called insurance companies…
Second, there always seems to be one crisis or another…
And third, the problem with food retailing in particular (according to the research that I've seen) operates on a profit margin of just 2.5%.
That doesn't leave much room for absorbing any shocks to their cost of doing business. But the politicians don't seem to care about that. That is one of those inconvenient truths.
So should private companies turn themselves into a public service in a crisis? Well no, because it's the government's job to provide public services, that's what the huge tax revenues are for. So for them to say that's not enough is really to betray a lack of resourcefulness.
Misallocation of capital is one thing governments are famous for and why so many people begrudge paying taxes, they feel like they are not getting value for money when they pay taxes.
The reason everything original comes out of the private sector is because of the entrepreneurial spirit. The raw creativity that figures out how to do a lot with a little, whether that be starting a business with $1,000 and turning it into $1b, or whether it's starting to tinker with electronics in the garage and then building Apple computers.
So I've said the private sector should not become the public sector, so should the public sector become the private sector?
Well no, neither extreme is good.
But perhaps the whole debate itself is on too low a level because it all exists within the meta problem that everything seems to come back to, the lack of sound money.
A sound money system makes it far easier to draw lines of responsibility and accountability. And I suspect that is why governments don't want a sound money system, because then they would be accountable to a force higher than themselves.
Bitcoin
And that ultimately brings us to Bitcoin.
https://3speak.tv/watch?v=marketingmonk/fnoratam
Start your formal crypto education for free and earn tokens at https://cryptoversity.com/
I thought it was about time I addressed this concept directly.
I’ve referred to the concept a number of times but haven’t actually dealt with it on it’s own.
So this is essentially a model that is a work in progress, as most of crypto is.
The model is based upon my thesis that, the “further away” you go from base assets like Bitcoin and Ethereum, the more your risk profile increases.
While the risk level might go up in lock step, the reward may not always be a perfect reflection of the risk level.
The “sweet spot” as I’ve previously referred to it, is when there is a risk to reward ratio that is more heavily weighted on the reward end.
So let’s get into the model and my proposed levels.
I’ve created a very basic illustration using the model to help explain it.
I’m suggesting that there are 4 logical levels of risk.
We know that crypto investing is already a high risk asset class, but I’m not coming from the perspective of a general investor here. I’m starting (and staying within) the realm of crypto.
I’d say that Bitcoin is the reserve asset in crypto.
You personally may measure your returns from dollars to dollars, but many seasoned crypto investors measure their returns from Bitcoin to Bitcoin.
This is based on the premise that Bitcoin will expand from being the crypto reserve asset to being the global reserve asset.
So from that point of view, it makes more sense to accumulate BTC than USD. But that is a personal preference.
If we say that Bitcoin is the reserve asset, that effectively makes it “cash” putting it at the risk level of 0. No gains, no loss, just preservation of purchasing power due to Bitcoin’s limited supply.
If you own 210,000 BTC, you will always have 1% of the BTC supply. Not so with a fiat currency because it’s elastic money. Your share of the whole changes all the time.
Now let’s say we want to invest to make more Bitcoin.
We then progress to risk level 1 which, in my illustration are some base layer smart contract platforms such as Ethereum and Cosmos.
When I say base layer, they are networks that you can build apps on, but they are also networks that you can build other networks on.
Before we go there though, let’s make sure we establish risk level 1.
I have zero risk if I sit in Bitcoin as cash and as I trade some of that in for a level 1 asset like Ethereum or Cosmos the risk that I am taking is that I get less BTC back when I sell.
The intention however is to get back more BTC than I invested.
I’ll say this again. The reason many crypto investors choose to measure their wealth in BTC is because it’s the only objective measurement. Unless you have something that is absolutely scarce, how do you know if you are accumulating or losing wealth?
That’s why when I give examples I say things like “if you owned 1% of the Bitcoin supply, you would always own 1% of the Bitcoin supply”.
That is a totally objective measure. If you go from 1% of the Bitcoin supply to 1.1% then you know your wealth has increased.
By contrast, if you own 1% of the dollar supply and increase that to 1.1%, that doesn’t tell you much. You need to do another calculation to figure out if your net purchasing power has increased or not.
So back to the model then.
I left off saying that Ethereum and Cosmos were base layer networks that can be used as a platform to build apps, or as a platform upon which to build other networks.
Let’s take Cosmos as an example.
ThorChain and the Terra Luna blockchains are networks that are built on Cosmos.
Cosmos has its own ATOM token, so in my model here, the ATOM token would be on risk level 1. It’s one “step” away from bitcoin.
Then we have ThorChain with its native token RUNE and Terra with its native token LUNA.
Since these are built on a network that is already at risk level 1, I consider these risk level 2 since they are 2 “steps” away from Bitcoin.
The same goes for Polygon. I consider this also to be a level 2 since it’s built on a level 1 asset like Ethereum.
I’ll come back to Uniswap in a moment.
Expanding beyond Polygon then we have specific apps built on that platform like QuickSwap or Sunflower Farmz.
They get labelled risk level 3 since they are built on top of a risk level 2.
And then finally, I’m considering a risk level 4, which would be anything built on a risk level 3.
If Sunflower Farmz is a level 3 then in-game NFT items are even further out and I’d consider those risk level 4.
It would be no surprise that the age and the market cap of an asset has a lot to do with it moving through the logical levels of risk.
Almost all crypto assets start out as micro-caps, like Sunflower Farmz. Tiny, tiny market cap.
I was going to say, as they grow they go down the risk levels but I’m not sure that is the case.
https://3speak.tv/watch?v=marketingmonk/mqzzqilt
Start your formal crypto education for free and earn tokens at https://cryptoversity.com/
This episode is actually based on a question that was submitted to me by someone who looked at enrolling in my DeFi Masterclass, so I thought I’d break this out into a fuller explanation.
Let’s take an up to date example based on my direct experience.
In March of 2021 I decided to do a Michael Saylor and take some of the spare cash I had and put it into crypto.
Michael Saylor does this with his company Microstrategy, and he does it exclusively with Bitcoin.
I decided that I would take a bit more risk and put the cash into Ethereum.
Now we can debate whether Ethereum is in fact a higher risk investment than Bitcoin in another episode, suffice to say that I thought so at the time.
Turns out that was a good decision because between the 1st of March 2021 and the time I’m recording this, Bitcoin was only up 3.6%.
In that same time period, Ethereum is up 168%.
So my investment is worth about 2.5 times what it was when I started.
Right off the bat there I have a capital gain.
I could now sell that investment, subtract the tax free allowance we get in the UK and then pay the capital gains tax on the difference.
So let’s put some hard numbers on that.
In the UK, each year, we are allowed to make the first £12,300 of capital gains tax free.
Then anything in excess of that incurs capital gains tax of 20%.
Now I’m not an accountant so this is to the best of my knowledge and should not be taken as professional advice, because it isn’t.
So far this is all pretty straightforward, the next part is where it gets a bit more complex.
So I have option 1 as I’ve just laid out, which is to sell my investment, pay the tax and call it a day.
But I haven’t actually done that yet.
Instead I am thinking about putting the Ethereum I bought on deposit with a platform like Nexo.
If I’m willing to lock up the Ethereum for 1 month at a time they’ll pay me 8%.
Bear in mind the interest is paid in the asset I deposited. So it’s 8% on the Ethereum balance and has nothing to do with the dollar value.
Now since Nexo is paying me interest, the way to account for this changes completely.
Firstly, this new income is no longer a capital gain, it’s income.
And in the UK, I’d have to account for that income at the cash value, at the moment it was paid to me.
Nexo pays interest daily, which sounds great from an investment perspective, but from a tax and record keeping perspective, it’s a nightmare.
If I deposit 1 Ethereum on Nexo at 8%...
That right now is a $3,820 asset earning 0.02% interest per day.
That works out to $0.76 per day.
But it’s not 76 cents, it’s 0.0002 ETH.
But the taxman doesn’t care about that. As far as they are concerned I received 76 cents of income on that day, which I need to account for as income, and pay income tax on.
The only way to stay in sync with the tax accounting, would be to swap the 0.0002 ETH I earn each day into British Pounds.
Only then would I have the exact amount of cash to match the income I need to report.
What this does mean though is that I have completely scuppered the possibility of compound interest, since my ETH balance never increases.
Now this might be OK because I’ve turned my investment into a cash flowing asset, and still have the possibility of it continuing to increase in capital value.
If that happens and the interest rate remains the same, the income from that investment will also rise.
It will also fall as the value of Ethereum falls as well though.
Taking the interest out immediately in order to match the tax records is arguably the safest approach since I’m guaranteed to have enough cash to cover the tax bill.
I could, however, take more risk and allow the two to go out of sync.
Here’s what I mean by that.
Let’s say I swing completely to the other end of the extreme and let all my interest pile up day after day increasing my Ethereum balance.
Not only do I then benefit from compound interest, but the capital value of the Ethereum I earn in interest also has the chance to go up.
Now that does get complicated from a tax point of view.
Because the interest is paid daily, each transaction has to be tracked separately.
So I need to record the transaction for the purposes of income tax, but I also need to track the capital value of each interest payment in case I make a capital gain… on the Ethereum I earned as interest.
That means I might end up paying both income tax and capital gains tax on that Ethereum interest payment.
With this riskier approach, at the end of the year when it comes time to pay the tax bill, my account value may be much higher.
First because I earned compound interest, and second because the interest I earned also gained in value with Ethereum rising.
But investment gains are a double edged sword. The more you make, the more you pay.
https://3speak.tv/watch?v=marketingmonk/lkdemqgz
Start your formal crypto education for free and earn tokens at https://cryptoversity.com/
Why this is important to investors
In my view, this is important to investors for a couple of reasons.
It’s akin to assessing the credibility of the management team in charge of a publicly traded company.
In that scenario, part of your decision on whether to buy the stock is whether you have faith in the management team to make good decisions and steer the company in a positive direction, which ultimately has a positive impact on the share price.
Through what I’m going to cover today, hopefully you’ll see how decisions of a superior quality can be gotten from decentralized governance and thus how crypto projects with these kinds of governance systems should have a higher success rate and greater longevity.
The key to decentralized governance lies in its flexibility.
By that I mean, the greater the number of people a decision is spread across the better, that’s the basis of democracy for example.
By contrast, there are plenty of companies that have failed or been out innovated because a small group of executives just couldn’t keep up with the times.
Isn’t this the same as shareholder voting rights?
Now I know what you’re going to say…
“Isn’t this the same as a stock with voting rights?”
In some ways yes, but blockchain technology facilitates stakeholder voting in a way that has significantly less friction and allows a wider range of people to participate.
So how does decentralized governance work?
Now like I always say, “There is nothing new under the sun”.
Modern coin offerings are just a blend of two concepts, IPOs and crowdfunding.
With traditional crowdfunding, you propose a product, get the funding upfront to make the product, and then deliver the product to the funders upon completion.
The benefits being that it’s low risk for both sides, and you get to test the market to see if there is sufficient demand.
If the project doesn’t get enough funding, then maybe the product wouldn’t have sold anyway.
Then an IPO is where you buy a share in a company in the hope that it will take that cash and use it to grow the company enough to increase the share price beyond what you paid for it.
Now when you blend these two together, you get modern coin offerings.
How do modern coin offerings work?
With a modern coin offering we have the benefit of tokenizing the ecosystem surrounding the product.
A founding team proposes a new product, gathers funding from the crowd and then uses that money to create the product.
The incentive for the crowd of funders is that they get project tokens in exchange.
Those tokens typically have one or both of the following features:
You can only pay for the product with the native token
You can use the token to vote on how the product should develop
Generally speaking, and in my opinion, a project needs both.
Forcing people to pay for the product with the native token, that is the value anchor. The token value is effectively backed by demand for the product.
To put that into perspective, the ultimate value anchor for the US dollar is the fact that the US government will only accept payment for taxes in that currency.
But the US dollar isn’t related to your voting rights. Your right to vote in the US governmental system comes from your US citizenship and your individuality.
And herein lies a topic of huge debate in crypto and decentralized governance.
Proof of person
Almost all decentralized governance systems ruling crypto projects today are proof of stake systems.
That means your voting power is typically equal to the number of tokens you have. Thus you can prove how much you have at stake by your wallet balance and should therefore have more influence over the product.
The problem is those tokens can be bought on the open market.
Does that mean you can effectively buy the vote? Well yes and no.
Yes you can buy more tokens to increase your voting power, but if you wanted to take over the majority of the tokens, buying them up on the market would push the price towards infinity, making each token progressively more expensive.
That doesn’t stop someone accumulating tokens over time though.
The other problem is the sybil attack.
That’s where I setup 1,000 Ethereum wallets to make myself appear to be 1,000 different voters.
Because it costs nothing for me to create a new Ethereum wallet, I can create as many as I like.
Now if there are tokens involved the wallets do me no good, but I can use those 1,000 wallets to spread my tokens out and still appear to be 1,000 different voters.
You could consider this the downside to being able to create a wallet with no ID requirements.
But how is decentralised governance superior though?
Now back to my suggestion earlier about decentralized governance producing superior outcomes.
https://3speak.tv/watch?v=marketingmonk/qwbiglij
Start your formal crypto education for free and earn tokens at https://cryptoversity.com/
Talking points
Let’s start here. I made this point in a recent episode about blockchain based social networks.
We know that Metcalf’s law exists, the idea that the value of any network is the number of participants squared.
That’s why Facebook has an effective monopoly. The value is in the size of their network and the number of connections.
That’s why the Internet is the dominant global network. How are you going to get enough people to switch to your new Internet? It’s unlikely.
In the episode on blockchain based social networks though I spoke about how Metcalf’s law is still establishing itself in the world of blockchain based social media.
First off, in the blockchain world, there are general purpose networks and then there are special purpose networks.
So there isn’t yet one network to rule them all with a dominant network value according to Metcalf’s law.
More than that, the special purpose area of social media blockchains, there are multiple candidates within that.
So this brings us onto today’s topic of multi-chain decentralised apps.
My take is that app developers are fully aware of the circumstances I just laid out and are trying to avoid their success depending on picking the winning network.
The current trend seems to be towards multi-chain apps, that is apps that run on multiple networks simultaneously.
However, and here’s a question, doesn’t each app have a special unique instance of itself on each network?
Take Aave for example, you could say that is a multi-chain app because it runs on Ethereum, Polygon and Avalanche, but the list of assets and the liquidity are not shared.
Not sure what the solution to that is.
I saw talk the other day about a tool that would allow you to migrate your liquidity from one Aave instance to another.
At the moment I’d have to use an external bridge to move my assets from Ethereum Aave to Polygon Aave.
That makes me think that MetaMask really needs to integrate such a feature.
What are some other examples of multi-chain apps?
How many chains do we need?
Doesn’t Metcalf’s law dictate that over time the number of chains will be reduced?
Even if a special purpose chain has amazing tech, it may lose out to Metcalf’s law based on network value imbued by the users.
Tell the Rob Miles story of “How hard does a hoover need to suck?” If the user doesn’t perceive the value, it doesn’t have value.
What are the benefits of multi-chain apps to the users and investors?
For token holders it reduces the risk of being outcompeted by better performing apps on other networks.
For users it means the apps come to them.
If you just want to stick to using the Polygon network, you can.
What’s an investor to do in the light of multichain apps?
You’d think it a safer bet to buy the network token, rather than trying to pick a winning app
When it comes to multichain apps however, the power dynamic is reversed since the app is what is attracting the user and the network is simply providing the infrastructure.
Is this eventually going to turn the networks into a commodity?
https://3speak.tv/watch?v=marketingmonk/qkojxwbt
Start your formal crypto education for free and earn tokens at https://cryptoversity.com/
Let’s start off with the most obvious point here, the idea of paying players to play completely flips the gaming world on its head
So the first question investors might have is, how is it possible to pay people to play games?
Where does the money come from?
Normally a company would develop a game, you’d pay $50 for it and your ‘return’ would be the enjoyment of playing it
The same for MMOs, you pay a monthly subscription to access what a gaming company created
How has gaming managed to transition to play to earn?
I suspect one of the parties in the old model are having their share of profits reduced (like the Basic Attention Token ad model)
How do the game developers fund themselves?
How does the founding company stay profitable?
What are some examples of current popular play to earn blockchain games? https://playtoearn.net/blockchaingames
Do they all use the same economic model? (i.e. paying players out of token inflation for example)
Axie infinity
That unreleased space game everyone is hyped about (Star Atlas?)
Zed Run (i.e. earn by winning money off other players, meaning the money comes from outside the game economy)
I can tell we are in the early stages of this just looking at the names of some of the games. Any game that includes the name of the technology like “Blockchain Kitties” is an example of what I’m talking about.
I personally would not include the name of the technology, in the same way we don’t really have companies called .com anymore. It’s just Amazon.
What are the different types of games?
e.g. see playtoearn.net (breeding, collectable etc)
Simple hyper casual games like Farmville etc.
MMOs / role playing games
In game economy or external economy (selling NFT skins outside the game vs an internal game economy)?
Real estate games
Interactive collectables (Splinterlands card game). Reminds me of Star Trek CCG from the 1990’s.
VR / AR games
This sector is closely related to the NFT sector isn’t it? BECAUSE blockchain technology enables digital scarcity, we can truly make an in-game item unique AND allow it to move and trade outside the game.
And there is almost an finite scope for collaboration
I’m thinking about how Epic Games do one brand deal after another to bring skins from every franchise into the world of Fortnite
Marvel characters
Football players
Why not play in Fortnite as your favourite Bored Ape?
Is there an opportunity for investors here?
If so, what is it?
The problem I can see is the same with all of crypto, just complete overwhelm at the number of opportunities.
Should they play the games?
Should they invest in the games?
How do you keep up with such an explosive pace of innovation?
https://3speak.tv/watch?v=marketingmonk/rjqfrizk
Start your formal crypto education for free and earn tokens at https://cryptoversity.com/
At the highest level of abstraction we have web2 and web3, that’s the interactive web and the decentralised web.
Within each of those you have a network
In Web2 you have just one main network, the Internet
In Web3 you have many different networks vying for dominance, which adds an extra layer of complexity when investing before we are not 100% sure which network (or group of networks will dominate)
Then within the networks you have a number of apps
Facebook, Twitter and YouTube in Web2
And for Web3 is depends on which network we are talking about, because each has multiple apps on it
This is where the investing thesis is similar to what I laid out in the episode on Metaverse investing
There is picking the winning network, and then there is picking the winning apps on those networks
For the benefits of this episode I’m going to use the Web3 network that I am personally most bullish on and that is the HIVE, which is a blockchain that has been specifically designed to serve developers who want to build decentralised social networking apps
The equivalent of Facebook or Instagram on the HIVE network is an app called Ecency or PeakD.
The Twitter equivalent is called DBuzz.
And the YouTube equivalent is called 3Speak.
The HIVE blockchain also hosts Splinterlands which is one of the most used blockchain games in the world with a quarter of a million users logging on each day.
What is the investment case? Why are users going to trend towards using decentralised social networks?
There are a few reasons I think this will happen.
Privacy.
If you’ve watched documentaries like The Social Dilemma, you’ll be aware of how the use of algorhymns to increase user engagement and boost ad revenue has gone too far.
Blockchain based social networks like HIVE have an element of transparency built in (a) because the content is hosted on a blockchain and (b) because the code tends to be open source so everyone knows what it’s doing under the hood.
Ownership over content and audience.
If you build a business using a Facebook page, your business is at the mercy of a large corporation that may choose to change their policy on a whim.
It’s not so easy to move a Facebook based business elsewhere. You could move an online store easily enough to another host, but not a social media based business because Facebook owns your list of followers.
With HIVE you own your own account at the network level, just like a Bitcoin or Ethereum wallet.
All your HIVE tokens, account data, and your followers are then stored in that account and are shared with any app you choose to log into.
That means you truly own your account, your content and your followers. If one social media app is no longer to your liking, you just log out, log into a different one and all your hard work is right where you left off.
Rewards.
The HIVE blockchain creates a certain number of new tokens each day, which makes the system inflationary.
Those new tokens are distributed 7 days in areas based on which users created the most valuable content (as voted by the community).
So when the rules are transparent, and you get paid for your posts, there’s a strong incentive to spend your time socialising on HIVE than on Facebook.
What is the investment strategy then?
Well I’ve spent this episode talking about HIVE because it’s the one that showed the most promise to me after my initial round of research and tests.
I then did a deep dive into HIVE and have now made it the place where I post a mirror of all my public content
One copy on YouTube, one copy on 3Speak
My investment strategy in HIVE is a little different to most investors because I happen to be a creator.
That means I have invested my time and energy in creating content that has earned me a number of HIVE tokens.
To be clear my HIVE account dates all the way back to May 2016 so it has taken HIVE a long time to start getting traction.
But that’s what I’d expect considering it’s such a radically new concept.
So if you look at how HIVE has performed in 2021 you’ll see it’s performance has been pretty spectacular, going from around 11 cents to an all time high of $2.98, a 27x increase.
While I can’t give specific investment advice, the best way for investors to safely allocate to any asset is to accumulate it over time, when it is undervalued
And that can be calculated by looking at the assets overall trading range from highest to lowest.
Don’t get stuck on HIVE though just because I mentioned it, the opportunity to become the dominant social media blockchain is so huge, there are many vying for that crown.
So the safest strategy of all would be to get a small allocation in a few different social media blockchains so you have an even higher chance of having a position in the one that wins out.
https://3speak.tv/watch?v=marketingmonk/xgqzssgn
Start your formal crypto education for free and earn tokens at https://cryptoversity.com/
What is the general difference between a centralised and a decentralized stablecoin?
Name some cen. and decen. ones.
USDC from Circle / Coinbase
USDT from Bitfinex
MakerDAO and DAI stablecoin
UST Terra Stablecoin
Why do we have so many?
What are stablecoins generally good for? Why don’t we just use the fiat currency we have in our banks?
The current model. Why 1:1 stablecoins are doomed to fail and why they are so dangerous
CBDS's banning private 1:1 stablecoins like USDc, USDT and so on. (breaking the attached crypto economy)
Negative interest rates driving 1:1 stablecoins into fractional reserve. (breaking the 1:1 business model, eg no euro stablecoins)
Infinite number printing buying rare precious numbers to control the markets (market manipulation)
Governments freezing bank accounts of 1:1 backed coins to destroy the wider crypto economy. (breaking the attached crypto economy)
Mismanagement of funds by 1:1 companies and threat of a Lehman brothers 2.0 (Fractional reserves and going full circle "pardon the pun")
Lack of Transparency in these centralised tokens (how decentralised stablecoins fix this)
How regulators can not keep up with real solutions
How decentralised stablecoins like Maker DAO and what we are building are a solution because they transparently and provably backing each stablecoin at above reserve locked by cryptography by millions of people rather than 1 central bank or central company.
The Standard DAO
We are building the ultimate next gen suite of decentralised stablecoins called The Standard DAO to combat these dangers. Basically a next gen version of Maker DAI. Key upgrades are
Native second layer to ZK validity proofs on ETH (Starknet)
Hard and soft asset collateral (gold through trusted nodes and crypto)
Auto locked collateral trades to less volatile assets when close to liquidation
Prediction market governance to solve DAO governance apathy.
Multi coin output starting with Standard EURO (sEURO), then sGBP, sYEN, sAUD, sUSD, and so on until we a decentralised mirror to all fiat currencies.
https://3speak.tv/watch?v=marketingmonk/qvcessls
Start your formal crypto education for free and earn tokens at https://cryptoversity.com/
Ways to time the top
- Different ta/fa/sentiment analysis ppl are using
- Google searches
- Number of days after halving (halving to peak analysis)
- Pi cycle
- 2 year moving average
- Bitcoin Rainbow bands
- Unrealised profit and loss vs actual Bitcoin price
- Puell multiple
- MVRV Z-Score
- RHODL Ratio
- Reserve Risk
- Woobull’s indicators (on-chain data)
- Hyperinflation fears
- Stablecoin regulation fears
- Maybe mention our model
- Weiss timing model (pure price data)
- Talk about how difficult it is to time it
- Usual mistakes people make like buying in denial phase or in bear trap
- Aka dead cat bounce or relief rally
- Talk about the most mentioned targets for BTC and ETH
- Plan B’s stock to flow model for Bitcoin
- Has us at $107k
- Cross-asset model has us at $255k
- WCP has a price target for ETH of at least $10k
- Since the top cannot be time exactly (analysis), what about an exit plan (strategy)?
- Scaling out i.e. selling into strength and lading out
- Can be done subjectively as data comes in
- Can be done objectively by placing limit orders at various price levels then walking away
https://3speak.tv/watch?v=marketingmonk/lmdeynin
Start your formal crypto education for free and earn tokens at https://cryptoversity.com/
If you have actually used DeFi to a moderate level you will have no doubt encountered the following problem…
You find a nice fat yield over on some DeFi app and decide you want a piece of it
You have dollars or pounds in your bank account
You have to figure out how to get the money from A to B where it can start earning some money
The problem is that the very best DeFi yields tend to be on the more exotic networks which are harder to get to.
So you are faced with a puzzle you have to solve before you even do anything. And the puzzle is, how to route your money from A to B efficiently.
Sometimes this involves moving your money multiple times and moving it across multiple networks.
That has down downsides
It takes time
It costs money
I personally find myself desperately trying to avoid my money touching the Ethereum network these days, simply because of the high fees.
Unless the DeFi app I want to use runs exclusively on Ethereum, I’d rather avoid it.
So this is what I mean when I say “Efficiently” routine your money around DeFi.
We want to do it in as few steps as possible, and with as few fees as possible.
At time of recording, if I want to do a simple transaction on Ethereum right now the fee is $32 worth of ETH.
That isn’t actually too bad right now, but it very much depends on the amounts you are dealing with.
Even if we consider a minimum transaction value of $1,000… $32 is a 3.2% transaction fee.
Of course that drops as we go up in value, it’s 1.6% of a $2,000 transaction
This is hinting at that concept I mentioned called transaction liquidity.
That is a situation where the value of your assets vs the transaction fee reduces the viability (or profitability) of that transaction
If I have a DeFi portfolio that is well diversified, I might have many different positions in many different assets
When it comes time to close that portfolio and take profit, I have to do a transaction (and incur the fee for each one)
That might end up costing me hundreds of dollars in fees. Those are gains I made but will never see. They are also gains I can’t re-invest.
If I were moving a larger quantity of a single asset, say $20,000 worth, the $32 fee I mentioned works out to 0.16% of the transaction value
So when I put it like that it doesn't sound so bad, but there’s more to it, even for the $20,000 investor
The second transaction fee problem comes when you want to harvest your gains
For example, Marko just put out a recommendation to Crypto Yield Hunter subscribers that pays 30% APR.
On $20,000 that earns you $16.43 cents per day
Well if that yield farm were on Ethereum, and fees were $32 per transaction, you can’t afford to harvest and compound your gains daily can you?
In 30 days you’d earn $493, but again at $32 fees that’s 6.4%
Although to be fair, that’s you only giving up 6.4% of the interest you earned in 30 days. You’re not giving up 6.4% of your balance
30% APR is 2.46% every 30 days, so our return after fees ends up being 2.3%, not a huge difference really.
The best case scenario though is when we have a no compromise solution in which we get to keep all the returns we make
This is where smart routing comes into play
This is basically figuring out the most efficient route before you submit any transactions
If you are in a situation that I described at the beginning where you start out with dollars or pounds, then using an exchange that allows withdrawals to your target DeFi network is the way to go
That way you only do 4 transactions.
One from your bank to the exchange
One to convert your money into your desired crypto asset or stablecoin
One to withdraw your crypto assets or stablecoins to your DeFi wallet
And then finally one transaction to deposit your money with the yield farm that pay you the rate
To that end, Coinbase are supposed to be launching support for the Polygon network but as far as I can see from within my own Coinbase account, that still hasn’t officially launched.
[start winding down]
What we need is an online resource that lists all the various centralised exchanges and which networks each one supports for deposits and withdrawals.
That would make our routing job so much easier.
I don’t know if such a resource exists right now but I put out a request for one on Twitter, so if you know of one, please let me know so I can spread the word about it
https://3speak.tv/watch?v=marketingmonk/xafzdbte
Start your formal crypto education for free and earn tokens at https://cryptoversity.com/
Intro
You’ve probably heard by now that executives at Facebook announced that the company is rebranding as Meta Platforms.
Going forward, all their business activities will be bound to the Metaverse, the alternative digital reality that exists online.
So what has this got to do with making money as a crypto investor?
Well back to my basic tenet that economic activity is human activity.
Wherever human activity goes, so goes economic activity.
For example, as soon as global lockdowns started coming in, I knew that was going to tank the economy, simply by restricting human activity. It was simple cause and effect. I even made a video about it so I’m on record saying that.
But that’s not really the point of this episode. The point here is to discuss how human activity is going to be moving increasingly into the Metaverse and how economic activity is going to automatically go with it.
Talking points
One distinction with the metaverse is its interconnectedness
Early video games were self-contained realities. One game universe did not have any relation to another game universe.
Then we moved to big centralised virtual worlds with massive multiplayer online games like Fortnite, Eve, World Of Warcraft etc
That was the same game world but it joined together the experiences of thousands of different players within that game
While they are huge universes in their own right, they are still centrally controlled and ruled with almost all of the economic value being captured by the software company who built it
There have been attempts to create secondary marketplaces for in-game items but these often prove unpopular with the game developers because they see it as a loss of economic value
Then there is the Steam gaming platform which allowed many independent game studios to build a business, but there are many instances where Steam has removed certain games from its platform and damaged or destroyed those businesses.
Now we move to the world of decentralized gaming where the developers and the players are equals. The players can truly own their own items, participate in governing the game and even be developers themselves.
Some group of developers may start the project but when governance is de-centralised their power gets diluted or removed.
The next stage after that (which we haven’t quite got to yet) is when these games start connecting to each other. That is the world in which you could potentially transfer an in-game item like a sword into a completely different game and use it there.
This is likely the world that Facebook are now preparing for.
That piece where you fully own your in-game items and then are able to transfer them to different games has only really become possible thanks to crypto and blockchain technology.
So what has this got to do with Facebook?
Researchers at Bloomberg Intelligence expect that by 2026, the total addressable market for metaverse products and services could reach $800 billion.
These virtual worlds are the next social networks
If people increasingly socialise in these virtual worlds instead of scrolling through Facebook, Facebook has a problem
If your revenue model is advertising (which Facebook’s currently is), then you are relying on a large group of people pointing their attention at the platform you display those ads on (currently Facebook)
Facebook must now see the writing on the wall in terms of attention turning away from Facebook.com
They are so certain this is the way it’s going to go, they haven’t just started a new arm of Facebook to cover this new trend, they have wholesale rebranded their entire organisation (they previously acquired Oculus).
The Oculus play is likely an earlier version of what they have done with the re-brand. Back then they saw the trend and wanted to get a foot in the door, now they are full body walking through the door.
So where is the investment opportunity?
There are several different levels of opportunity that represent different risk / reward profiles.
Invest in the stock of companies like Facebook or Globant
Invest in Bitcoin or Ethereum
Invest in the token that relates to whichever platform has the most metaverse activity on it
Invest in the token that relates to an individual game
Invest in specific virtual items within an individual game (like NFT artworks)
As you go up those levels, reward potential increases but so does risk.
There is also an optimal level there, somewhere between investing in the most popular network and investing in tokens that relate to the most popular game.
Or a hybrid play like YGG
I think UDC is the best choice in terms of research if you want to be kept informed about the latest Metaverse investment opportunities.
https://3speak.tv/watch?v=marketingmonk/nvpmnpoc
Start your formal crypto education for free at https://cryptoversity.com/
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Text contents:
So I’ve been thinking about this question of when to switch to a crypto income strategy.
Crypto bull markets are great and all but profits in those market conditions are based on capital gains. You buy low and sell high.
That strategy works as long as
The bull market continues and asset prices continue rising, and
You accept that there is a high risk associated with those high rewards
But what’s the risk though?
Like any market, the risk is that the bull market ends and turns into a bear market.
At that point, the market turns against you and the asset values start going in reverse (removing value from your portfolio).
This is true whether you account for your returns in a fiat currency like US dollars or in a crypto asset like Bitcoin.
Many crypto investors operate on a Bitcoin standard where they measure their returns and their net worth in BTC.
Since the supply of BTC is fixed, if your portfolio holds 1% of the Bitcoin supply, it will always hold 1% of the Bitcoin supply.
How you denominate your returns is an individual choice and not really the topic of today’s episode.
I will say one more thing there before moving on though.
If you denominated your portfolio in BTC, the % of your portfolio that is held in Bitcoin would be considered your cash position, since that is your default asset.
OK, back to the point then.
I think right now most investors are going to continue to denominate their portfolios in dollars so I’ll continue to speak in those terms.
So there is this phrase I use quite often which is “Never eat your seed crop” which means you have to leave some of your harvest left over in order to plant for the next season.
If you eat all your crops you will have no yield the following year and you will starve.
I personally thought about this most recently when I wanted to buy a car.
My first thought was to realise some capital gains, pay the tax on the profits and use the remainder to buy the car.
The trouble is that a car is typically a depreciating asset unless it’s a classic, and I wasn’t looking to buy a classic.
So I would have exchanged an asset that was gaining me capital to an asset that would lose me capital.
That’s the difference between an appreciating asset and a depreciating asset.
Let’s say I was holding a position in Ethereum right now that was worth $50,000, and I bought it for $10,000.
I could sell it,
take out the $50,000
Pay the tax on the gain (which in the UK would be about $8,000)
And then be left with $42,000 in cash to buy the car.
That car might then depreciate at say 10% per year, losing me $4,200 per year in capital value.
Not only that, there is an opportunity cost to factor in.
Not only am I losing $4,200 in depreciation, I’m also missing out on any income or capital gains I would enjoy by continuing to hold my Ethereum.
You might say well Chris, you’re making it sound like a no brainer but you’re forgetting what you said earlier that cryptos can experience bear markets as well.
Ethereum isn’t always an appreciating asset.
Between January 2018 and December 2018, Ethereum depreciated by 94%.
You heard that right, it went from $1,400 to $80.
Now the 10% depreciation on the car doesn’t sound so bad does it?
So what to do?
To my mind this all goes back to what I see as the most fundamental question of investing, the balance between how much money you want to make vs how much risk you are willing to take.
There typically comes a point where you’ve accumulated enough capital through investment gains that it makes sense to shift gears, reduce risk and switch to an income strategy.
With crypto specifically, if you had managed to accumulate say $1m worth of crypto and want to de-risk by switching to an income strategy then one approach would be to split it 50/50.
That would mean converting $500,000 of your capital into dollar stablecoins and then leave the other $500,000 in crypto assets.
Then you could place those $500,000 in stablecoins into a lending scheme and earn anywhere from 10-20% annual yield.
At 10% that would produce a monthly income of $4,166 before tax
And at 20% that would produce a monthly income of $8,333, which is $100,000 a year. And you’d still have your $500,000 of capital.
Meanwhile, if the other half of your crypto portfolio were all in Ethereum, while the dollar denominated value will fluctuate, you could also place your Ethereum on deposit with a lending service and earn an interest rate on that too.
This is a 50/50 illustration because that is the perfect hedge straight down the middle, but the splits are obviously totally flexible.
I just like 50/50 because it allows you to straddle both the fiat and the crypto financial systems equally.
It also allows you to do a re-balancing every so often.
https://3speak.tv/watch?v=marketingmonk/lrbvnfpx
Start your formal crypto education for free at https://cryptoversity.com/
Talking points:
I’ll define all the various terms as we go but...
This discussion is going to explore the paradox between:
The fact that Web3 development needs funding (we can't expect it all to be done by volunteers)
Large VC funds create a point of centralization
How can we still make money as individual investors?
You know how we do this by now, to make sure your understanding is thorough we start general and then go specific.
So let’s lay down the basics. When we say Web3 what do we mean?
Web1 was the static web, which would be more akin to a broadcast media where major media companies simply used the web as another way to distribute their content.
Web2 is what we are on now, the interactive web which consists of a co-creative process between vendor and user.
We used to formally refer to this as ‘user generated content’.
Facebook contains mostly user generated content but you can also post links to professional generated content from an external blog or media company.
The comments section at the end of most news articles would be considered user generated content because those people are effectively adding additional content to the same page the article appears on.
Then users can also create their own content as a simple Facebook post or more formally as a blog.
Web3 is all of that but decentralized. It’s often referred to as the decentralized web.
This is yet another step away from Web1 where the web was just a broadcast media used by large corporations with a traditional ownership structure.
Web2 is largely still powered by large corporations but 2 elements of control started to slip away from them.
One was the monopoly on the content (since users could add to and even challenge what was said by posting their own comments)...
And the other was that the web provided a billion dollar infrastructure for new companies to start up and compete with the large corporations.
The flaw in that model is that many of the big tech companies who run the web today became that way by buying up the successful startups and centralising power in one place.
Investors made money off of this by privately funding these tech startups or by investing in the IPOs of Google and so on.
So that’s a quick bit of back story.
What’s starting to rumble now though is a conversation about who is going to own web3?
How can you have a decentralized system if you have a bunch of early investors controlling a load of shares and making the decisions?
It’s the old adage that “whomever pays the piper calls the tune”, meaning any given organisation is accountable to whomever pays them.
For Facebook that would be their shareholders and their advertisers, not their users.
And I’m not just picking on Facebook it’s the same for other big tech companies as well.
And I’m not saying there is any evil intent going on, it’s simply a function of the system they exist within and the incentive structure that existed at the time.
The joker in the pack here seems to be Jack Dorsey, the CEO of Twitter, because he keeps talking about funding things like a decentralized open source social network, building innovations on top of Bitcoin and so on.
And that’s leading people to question how a silicon valley CEO can funnel research and development money into a new infrastructure that makes people like him and his investors less powerful?
VC funds have always been a big deal when it comes to tech startups, everyone knows that.
It’s traditionally been considered a high risk, high reward play, because hell, you might end up with a share in the next Google, and all you have to do is put your money in a VC fund and then let the experts find the next unicorn.
With Web3 though the VC fund is being re-imagined using crypto and blockchain technology.
Depending on how long you’ve been in crypto, you may or may not have heard of “The DAO” which was the first major attempt to create a decentralized VC fund.
The short version of the story is that $150m was invested using the Ethereum network, a hacker exploited a flaw in the code and started draining it of all it’s money.
That ultimately led to Ethereum splitting into two networks, Ethereum and Ethereum Classic.
Ethereum Classic is the original version of Ethereum with the flaw and the so called ‘theft’ left in tact, with the belief system that code is law, and the Ethereum network we have today is the version of Ethereum that was rolled back to before The DAO was drained in order to recover everyone's money.
So that one didnt even get off the ground.
The idea though was to pool everyones money into this decentralized VC fund instead, make investments and share the profits, rather than all the individual investors doing their own thing.
The concept isn’t new, there are investment clubs all over the world, but the innovation was doing it all with smart contracts.
https://3speak.tv/watch?v=marketingmonk/jyixeapt
For 7 Best DeFi Strategies To Make You Money click https://www.cryptoasset.school/7-defi-strategies
Talking points:
So I want to open this up with a quote from Jim Rohn.
I remember him saying on one of his audio programs that the ants think about winter all summer, and they think about summer all winter.
He says you can observe this in their behaviour. They never get faked out by what is happening. When it’s sunny you can see the ants desperately collecting food and storing it, because they know winter is coming even though the sun is shining bright and they could just be sunbathing.
Conversely, in the winter, they don’t despair, because they know summer is coming back soon.
With that in mind then, let’s think like an ant. Even when crypto prices are booming and the sun is shining, what can we be doing to protect our assets for if and when a crypto winter befalls us.
I started thinking about this more when I came across this new project called Bumper, which is a smart contract based insurance product that works like an option. You take out insurance and start paying a premium, and then if the market crashes, you exercise the option and the insurance pool pays out the amount of USDC that you took out insurance for.
I do not currently know of anything else that does this but maybe you guys do?
https://antimatter.finance/ “Create and trade tokenized perpetual options in a permissionless environment across major blockchains.”
But this is done without price oracles. It’s all arbitrage driven.
These work like the Binance leverage tokens BTCUP and BTCDOWN etc.
A broader question might be, what other defi or smart contract apps are out there now that can do a similar job of hedging our crypto portfolios against price volatility?
This led me to https://coinmarketcap.com/view/options/ which lists 10 different Options tokens. So that's a whole other can of worms I’d need to explore.
How do traditional options markets stay solvent? In an event of systemic collapse, there wouldn’t be enough capital in the insurance pool to cover the entire system. So what’s the deal there?
Does it just rely on (and assume) that there won’t be a systematic level event?
Is it seen as simply “we’ll cross that bridge when we come to it”?
What about using centralised derivatives like on BitMex?
What is the benefit of creating DeFi options and futures?
They say there is nothing new under the sun, and that seems to be true with crypto.
As innovative as blockchain technology is, all we have been doing for the last decade is building better versions of financial products that already exist.
Options and insurance is an age-old finance product, but now it’s just been re-imagined for a blockchain and crypto asset world.
Back to Bumper, while they may not be doing anything new conceptually, what they are doing is making a complex financial derivative like options, accessible to the average investor (which is exactly what crypto and defi is good at).
That’s really the overall opportunity of crypto, to re-invest every aspect of the traditional financial system using this new technology infrastructure, and that's why one opportunity after another keeps coming along.