The Trillion Dollar Start-up
Most weeks both of us, the Founders of Dunaton, try and budget aside time together for a personal dinner at a well-established, family-run restaurant in the heart of Knightsbridge. That way, no matter the hustle-and-bustle of the week’s business, for two or three hours, we get to discuss the business in all its aspects and check up on how each other is faring. We also get to discuss the corporate politics that are the subterfuge of every office in the City of London, as well as the bigger picture, as well as a varied range of other off-topic subjects, personal and professional, that have been on our minds recently.
One night, after the cursory run-through of whose-up-to-what and where-are-we-headed-now, the conversation turned to the more abstract discussion of truth and reality. Both of us, being bright, experimental innovators, spent the best part of our 20s in the same reality, which is to say, anywhere but in the office. As we discussed the ideas of truth, we agreed that everyone has their own truth that is somehow separate from the truth that is self-evident in the world around us. For a few, that truth is so far removed as to make such people delusional; for a large majority, that truth veers widely off in certain parts of our conduct — usually in our personal lives — and toes the line where the threat of significant punishment is the potential consequence of veering off too far. In both instances, people tend to believe the things that they say irrespective of whether the reality presents affirmation of the fact that things are so or not.
For a very few, reality stays sharply in focus all the time, even as the personal truth that things can look so very different remains equally clearly in the foreground. To harness this duality of truths takes some life experience, and not usually the type one is likely to find on the desktop computer, either. The issue with the virtual world today as we experience it is that it confirms almost any belief that we have in mere seconds: tap into Google now whether terrorists or the American government destroyed the Twin Towers on September 11, 2001, and you can find sufficient evidence to support whatever may be your personal truth in this regard. Such is the culprit of the information age: composed as it is of the core tenant of truth, information, the irony is that we end up with an even more blurry picture today of what is actually going on in most parts of the world than we did than in the days when we were confined to a letter a month and a Polaroid if we were lucky.
To cross over into the arc of game-changing innovation, we agreed, what it takes is not one particular version of events, but a clear picture of where you are now and an equally clear one of where you are going. The two diverge so much as to seem very often impossible to pin together in any sort of realistic life-like composition. And so, no one ever really tries to do such things; at least not nearly as much as they do to convince themselves that what is not so simply must be the case or else. Great innovators, however, live for these sorts of disparities and they feel the rush of excitement in every hardship that they counter on the way to forging the new reality of the future onto the tired old picture of the past. This rush is probably very much like the sort of adrenaline rush an extreme sports player gets before tackling a particularly deadly cliff-edge. While one is aware of the inherent risks of imminent death as one tackles the crumbling edge of the land’s surface hundreds of feet above the next landing spot, that’s all secondary in a way. The arc of potential achievement seems so overwhelmingly important at the time that not to take to the challenge up with both feet in first, heart and soul and whatever else all in with everything else is simply unthinkable.
Because of the extremity of such experiences, the great ideas that end up being the game-changers of industry, policy and society are nearly always born under such conditions. Metacurrencies and three-dimensional payments was no different. Faced with different but equally taxing personal financial and legal crises, the combined headwinds of an intense amount of hate we got almost daily at one point from lawyers, your regular bums on the internet and a whole lot of ordinary, nice chaps among those of the middle-class financial professions, not to mention not having to show for ourselves any real solution as to how we were going to restore approximately $60 million in value that had been long ago destroyed and left for dead, nothing could have seemed more foolhardy in retrospect than trying to tackle the abandoned Monkey Capital Initial Coin Offering (ICO) when we did. The chances by the end of 2017 that a successful emergence out of the storm would be the result of months of work without pay, without joy and without the company of pretty much anyone else except one another (at least to start with) seemed, in retrospect, extraordinarily slim even by your average entrepreneurial risk measurement.
That we came out the other side with the holy grail — the first ever form of legal non-securitised value innovation in a decentralised context — is testament to the importance of living in a world of two equally dichotomous truths. Simply, it is the contrast of one against the other wherein resides the energy that is stored up and ready to explode with the great innovations in the history of time thus far.
A common question which arises with cryptocurrencies is the question of whether they have any real value. This question is very often asked among digital asset entrepreneurs with the expectation that you will politely try to bullshit some sort of comforting possible utility value in a future where nothing at all is physical, not even your own self (thing in Blockchain really are not far off that point, unfortunately). The short answer however is “no”; cryptocurrencies are merely payment utilities and as such should reflect extremely short-term, transactional, value-neutral costs over time as a result. That is, if it were not for their supply quotas. The longer answer here, and the significantly more accurate one is, therefore: cryptocurrencies do not yet contain intrinsic value.
By jumping the gun, many investment experts have misunderstood the potential for more technologically-advanced extrapolations of the utility and value equations inherent in any economic scenario that exists among digital assets. Take a recent statement regarding cryptocurrencies that Warren Buffet made:
“There’s two kinds of items that people buy,” he told a US news agency in one of the Sage’s bi-annual all-American interview spotlights that have become a more mainstay feature of his in the last half decade or so., “[In both instances, people think investing is what is being done: however] one really is investing and the other isn’t. If you buy something like a farm, an apartment house, or an interest in a business, you can do that on a private basis. And it’s a perfectly satisfactory investment. You look at the investment itself to deliver the return to you. Now, if you buy something like bitcoin or some cryptocurrency, you don’t really have anything that has produced anything. You’re just hoping the next guy pays more.”
Warren Buffet’s claim that cryptocurrencies make lousy investments since there is no economic production that underlies the gains in the asset prices is completely rational. It is impossible to disagree with, in fact, unless you believe that more than 100% economic efficiency is achievable. If so, you also believe that Ponzi schemes are a good way to make a dime.
What he is saying is that without genuine production of something other than the unit of purchase for the sake of its purchase alone, then the only efficient form of value production is contained to the supply of assets being purchased by a large share of people. This results in those investors targeting over 100% economic efficiency in production since there must be more gains than can be shared among all participants at every single stage in the equation. You never have what you seem to have in value, basically.
However, what if the product that is produced is not anything tangible or useable like a car or a house. What if instead the product itself is deliberately engineered to produce a financial gain by bypassing the process of economic production? This would be cheaper, quicker and easier to make money with, and yet, because the underlying financial product was economic gain in and of itself, there would be no question about whether a purchaser of such an asset was investing or not.
This is what Metacurrencies are: 3-dimensional currencies that both allow the purchaser the ease of investing into them as standard digital units of payment (cryptocurrencies) at the same time as being intrinsically-valuable assets in and of themselves via referencing or being engineered to harness imminent and substantial value both from inside and outside the participant investors’ digital and physical real-life networks.
This brings us to another question we get asked a lot. That is, if Metacurrencies are not a technologically-improved version of cryptocurrencies, then what are they? The short answer is: digital assets that are a whole world more valuable than a standard crypto. A Meta is not to be confused however, with anything other than a cryptocurrency with value.
But as per Mr. Buffett’s comments on targeting impossible levels of economic pricing efficiency, the addition of this value is huge!
The reason we were opposed to securitisation of decentralised assets from the very start was simple: securitisation runs against the whole ethos of decentralisation, which is rooted in management-controlled value parameters. The decentralisation of returns has led to some almost unbelievable wealth-creating effects. To list the top 3 assets: Bitcoin began trading at a price of 10 cents in 2010 and is now around $9,000, representing a return of 9,000,000%; Ethereum was first offered at 14 cents in 2014 and can now be readily purchased or sold 430,000% higher at around $600 each; Ripple began trading at half a basis point (0.005 cents) in 2013 and currently sells for 90 cents per XRP, representing a 17,900% gain with around 15% of that having materialized in the past 12 months alone.
When compared alongside securitised returns, there is almost no argument in favour of adopting the latter as a comparable investment return asset class, let alone including securities in the same domain of value as decentralised ones. If securities are included among Blockchain assets, you can expect to see similar returns to those that are presently traded elsewhere on securities exchanges. During 2017, the top 3 performing stock exchanges comprised Argentina’s Merval Index, up 77%, The Nigeria All-Share Index, which was 42% higher and Turkey’s Borsa Istanbul, with 42% improvement over the previous year. Even if we average these three top-performing indexes and multiply the cumulative returns over the same time period as for our digital asset comparison pairs (which is optimistic at best) there is nowhere near the same sort of return profile among securities assets as there is for decentralised ones.
We are dumbfounded when we hear that teams are lining up to offer dividend-enhanced securities on the Blockchain, and that customers actually want such products. The only affect that putting securities on the Blockchain will have is to lower the average return by a massive factor, so that digital payment utility value as a market becomes virtually unrecognizable and fails to do what it does so well today, which is make investors incredibly high returns without the requirement for a large upfront capital investment.
At the same time, there is a distinct consciousness over the lack of intrinsic values that are represented among digital assets. The concern over the lack of real, tangible value is both understandable and wise. If the only area an asset is able to derive its source of value from is in its core utility, then ultimately it becomes nothing other than a commodity that exists with zero dimensions of additional currency value other than its own specific function(s). For now, the gamble is that digital markets will grow exponentially year-on-year, and thus the current premiums on digital assets will be justified by the future demand for the utility of such assets, but this is a gamble that, very much like a ponzi scheme, targets over 100% efficiency. In other words, betting on digital payments as a source of continually-increasing value by themselves is 100% sure to result in a catastrophic loss one day.
With both these arguments in mind, what appealed to us was the idea that we could somehow take the best from the exponentially-growing digital payments market and the best from the world of products which have tangible values, and formulate a new sort of asset class that would somehow work exactly like a payment tool and thereby remain non-securitised and unhindered by the continual interference of senior management teams and Board directors, while benefitting somehow from the soundness of underlying value that was sourced outside of the world of digital payments upon which these hybrid assets would draw their own values rooted in tangible values.
Brazen as we were, we seriously miscalculated the amount of work involved in achieving such an aim, let alone establishing a decentralised pool of such assets which digital payment asset holders could access on a whim.
The ICO of MNY was subsequently cancelled to a degree of angry by overall supportive investors. In order to buy time to find the potential solution while still keeping the market we had prematurely fostered active, we offered for sale a variety of digital assets for sale which we advertised with the proposed benefit of such assets becoming ultimately convertible into a brand-new COE/MNY token combination. Needless to say, we ended up trying the already shattered patience of the last of our remaining supporters beyond an acceptable threshold. It was not the finest moment in management history.
Meanwhile, however, as we wound down the previous market we had clung onto over a period of 6 months, we sought to find the answer to the problem we had set out so brazenly self-assured would take us just a few weeks to discover: how is it possible to represent real, tangible, growth and income-supported value on the Blockchain without tripping up over securities regulators?
To date, no one has managed to solve that particular puzzle; instead, eager to enhance their payment utility tokens with real value, many ICOs offer all sorts of dividend-equivalent features within their digital asset promotions, most of which are quite illegal to offer in the places they are advertised and sold.
We emphasize here that we had no aversion to dealing with securities regulators other than that they were not responsible — and are still not responsible — for overseeing the sorts of assets we were seeking to create and invest in.
The sorts of assets we had in mind still had the return profiles of Bitcoin, Ethereum and Ripple; they just happened to share the value foundations of Apple, Microsoft and Berkshire Hathaway as well. The plan of allowing investors to cumulatively participate in a passively-administered decentralised (digital asset entry-based) fund was looking a lot harder than we at first imagined.
For a short while our dreams of creating a decentralised hedge fund looked like wishful thinking and worst of all, wasted time and money. However, as we began working with some financial advisors on various side projects in London, we began to formulate a way in which such assets could be constructed.
As we proceeded with this new line of enquiry, we realised in so doing that we would need to build a marketplace for these new hybrid payment utility-income value derivative assets in order to maximize their potential.
We realised that what we had to do was build a marketplace for our decentralised fund to invest into — after all, without a market, how does the fund make money?
We called our new value-loaded digital assets Metacurrencies, or three-dimensional currencies, due to their dual status at both digital payment utilities and digital assets that held a form of referenced income value. We wrote a paper. No one bothered reading it except the lawyer, who read it cover to cover. That was usually a bad sign.
Amazingly however, none of the lawyers complained. We knew this was as good a starting point as we were likely to encounter any time soon. We also knew we by now understood the process inside-out to a somewhat unhealthy degree.
“Basically, what we are doing is building the closest thing to a security without it being a security,” explained one of our legal advisors to a fellow lawyer in one conference we sat in. “What is it then?” asked the fellow lawyer in response. “That’s a very good question. It’s a cryptocurrency with actual value,” replied our legal eagle. We were finally getting somewhere.
Metacurrencies are first and foremost three-dimensional currencies. They are expressly not securities. They are never securities. Securities are investment products which are 2D currencies. Metacurrencies reference 2D values but never actually conform to the characteristic currency value dimensional stereotypes those sorts of financial instruments necessarily occupy. Thus, the first part of our exploration begins with an introduction to what digital assets are in the currency equation, what they mean and where Metacurrencies fall among those categories.
To get started, it may be easier to visualize currency dimensions from the point of view with a company that counts among its prize assets a winning brand good brand. With that brand comes two dimensions of additional currency value. In the first dimension is the company’s promotional power. This promotional power enables the company to get delayed payment schedules, discounts on orders and increased bang-for-its-buck-spent on every advertising product promotion. In other words, having a neat band makes costs lower and it makes cashflow stronger. That’s the first dimension of currency value, right there — payment benefits.
In the second dimension of currency value, a brand boosts the overall intrinsic value of the company by adding substantial amounts of goodwill to the company’s balance sheet. In addition, all the ancillary benefits of having a big brand that produce the cost savings etc. result in a much more streamlined income and once again, that boosts the intrinsic value of the company. Now, in the third currency value dimension, a brand is able to produce an actual unit of payment that in and of itself serves as a form of simultaneous product promotion and product sale. In other words, while the brand is able to maintain and even enhance the goodwill on its balance sheet (the 2D currency value) it is also able to use a digital asset that cost it nothing to manufacture to pay for its promotional campaigns, maybe pay its staff and a whole lot of other costs, who furthermore, are all engaged in generating sales of the digital asset in the process.
How is it able to do this? Simply, by applying its own currency to its pre-built network of supply chains so that they are all installed on its giant branded value network, the currency has instant utility. For example, Coca Cola has vending machines, restaurants, cafes supermarkets and bars all across the world who could accept the Coca Cola digital unit of payment, thus installing immediate widespread utility on the Coca-Cola coin. At the same time, the Cola-Cola coin is connected to underlying real world value, since it obtains real products (i.e. coke bottles) at a substantial discount to cash (this discount can be subsidized by the reduction in cost elsewhere paying employees with the zero-cost of manufactured digital asset).
The combined nature of the Coca Cola coin bearing real intrinsic value (the value of the digital vs. cash asset discount on retail Coke bottles) and the actual utility of payment serves to create an effect where promotional cost is eradicated while balance sheet and income statement values soar.
This process — by which financing of cost processes to the extent whereby a negative cost (or a profitable payment) is the outcome is the subject of the second part of our White Paper series: Metafinance.
The final part of of the series of White Papers we wrote addresses the decentralised organisation — be it a hedge fund, conglomerate, local business, or whatever. The background to how we fell into this may be briefly helpful in this respect. Monkey Capital was launched as a decentralised hedge fund in July 2017.
Thus began our tour of the all the ways in which one could use digital assets to construct digital organisations. Our idea of the trillion dollar start-up only came to us much later on, when we realised how by playing all these various conventional financial values off each other in very unconventional ways, you could amass a type of growth previously imagined to be all but impossible; one in which even a company such as Uber, relative to the financing cost of generating such growth, would pale by comparison.
Because of their dualistic utility/value flexibilities, Metacurrencies are a major step in value innovation of digital assets. They provide the purchaser with the assurance of real base value that can be obtained with the unregulated non-securitised asset of hyper-inflated value that they are hoping to extract unusually high returns from.
Metacurrencies are, in a sense, the best of cryptocurrencies with the best of securities values referenced inside their exchangeable values.
Ultimately, what resulted from our efforts was one of the innovations we are most proud to say we ultimately succeeded in bringing to market. Despite the odds, the birth of non-securitised asset structuring on a digital distributed and the concurrent establishment of unregulated, non-securitised asset management functions via the same category of decentralised asset class concurrently took place in the start of the second quarter of 2018.
To summarise the context of the narrative that flows through the three White Papers we prepared as the foundation of the theory behind this undertaking, the thing that almost took us to the end of all our combined cryptocurrency ambitions what was in the end was the boat that got us to the other side of a much bigger, more dynamic world. That is to say, the world not only of digital cash but a whole impossibly uncountable number of potential value payment technologies, all sitting on a giant marketplace, trading values of extraordinary difference in terms of basic calculation but all ultimately tradeable and comparable with one another side-by-side merely by the reference to value in digital form that they maintain.
But that is so often how it always is. There must always in innovation be a sense of double-vision: the vision of how things are now, and how they can be after battling the odds with a cheery spirit.
In the end, we may have been a little late to get to our own party, culminating the delivery of our ICO almost a year after announcing it. Then again, as so often when it comes to working in the fields no one knows exist yet, we cannot help but notice either that we are still the first ones in the world to have arrived. That won’t last for long now.
There will be plenty an entrepreneur, for sure, who will soon try his luck once we have prevailed. And that’s the power of the Blockchain. You can start-up with minus something and end up a trillion dollars plus in the green. It’s what we set out to prove months ago and what we are now well on the way to proving right. Call that a decentralised hedge fund, a decentralised conglomerate or any number of other things, and it’s still essentially the same thing: it’s a trillion-dollar start-up.
That’s what proponents of the power of Blockchain technology mean when they say that it’s going to revolutionise the future. It’s something most people can’t even imagine it until it becomes an unalienable truth.