YouSaid · the spoken record

Chris Burniske

lines on the record: 57
first: 2017-11-07
most recent: 2017-11-07
sittings or episodes: 1
sources: podcast

Every line below is reproduced as it was said and linked to the record it came from. Nothing here is summarised or generated. Directory · Search · Corrections

“30% CAGR for 10 years is a significant return. But we don't have a formal basis for that. And then related to all of this is really the psychology of how these assets are going to play with the masses as they gain broader adoption. But someone is going to win a Nobel Prize on this stuff. We saw Black Schoals. It may not be me. There may be multiple Nobel Prizes that get won. I just want some crypto people to win Nobo prizes 10, 20 years up.”
2017-11-07 · Invest Like the Best · Chris Burniske - How to Value a Cryptoasset - [Invest Like the Best, EP.62] · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, you know, we've talked about them a lot and it's formalizing our understanding of velocity, formalizing our understanding of discount rate. Discount rate with inequities is the weighted average cost of capital. And we have formulas for doing that. For me right now with crypto assets, I'm basically saying this is three to five times riskier than what I would use for risky equity, but I don't have a mathematical basis for that. As an investor, I can say, well, this is how much I expect to get compensated.”
2017-11-07 · Invest Like the Best · Chris Burniske - How to Value a Cryptoasset - [Invest Like the Best, EP.62] · IDENTIFIED FROM THE TRANSCRIPT · source
“Basis, and right now it's serving as a disaster hedge against global macroeconomic dislocations, but in the future, I won't use Filecoin, but let's say Gollum for GPU flops in rendering and machine learning algos, if that's being used on a massive basis and very stably sort of growing in its use, maybe that becomes a reserve commodity in a sense. Maybe we have these new massive protocols that, yes, have this utility but have become stable and massive enough to the point where they're becoming a reserve asset of sorts.”
2017-11-07 · Invest Like the Best · Chris Burniske - How to Value a Cryptoasset - [Invest Like the Best, EP.62] · IDENTIFIED FROM THE TRANSCRIPT · source
“So there are all kinds of scenarios, right, in ways in which we can see velocity progressing. If velocity is infinity, then m equals pq divided by infinity implies your monetary base needs to be zero. And that's just a theoretical example. I would say, you know, this is where building in mechanisms to the actual consensus process that require people to bond, not only for this value component, but also reputationally. Like if you're going to participate, you should bond and there are protections against civil attacks where I can replicate my identity and actually become a threat to the network. It becomes much harder to do that if I have to stake $300,000 each time I want to replicate a node on the network. So, you know, we are seeing people build that bonding in. I do expect this asset class to be a new store of value on a global”
2017-11-07 · Invest Like the Best · Chris Burniske - How to Value a Cryptoasset - [Invest Like the Best, EP.62] · IDENTIFIED FROM THE TRANSCRIPT · source
“It just means I actually need fewer units or fewer smaller fraction of Ether to use the network. And so therefore the expense stays stable. And that's why I'm not overly concerned. I know there are some massive crashes coming. But so long as we're not deluding ourselves about the actual utility of these networks and these assets and what we're building, which I don't believe we are by any means, long run will be just fine.”
2017-11-07 · Invest Like the Best · Chris Burniske - How to Value a Cryptoasset - [Invest Like the Best, EP.62] · IDENTIFIED FROM THE TRANSCRIPT · source
“Scenario is if we go back to what I was talking about, the percentage in the float. If more of your store of value holders capitulate, I'm out, you know, and I'm not going back in. And there's no hands that come back, then you will actually have more tokens in the float, an increasing number of tokens in the float. And so that actually will drop the price of the token more, but it will ultimately find this equilibrium price, you know, where you've got the really strong hands holding, the people who have bonded, and this economy is still ticking along, still using this asset, because the economy is not dependent so much on the price of the asset. If you think of something like Ether and people are working on this, but Ether is working to dissociate the price per ether from the actual cost to use the network. And it needs to do that because just because the price of ether is going up doesn't mean the network should get more expensive to use.”
2017-11-07 · Invest Like the Best · Chris Burniske - How to Value a Cryptoasset - [Invest Like the Best, EP.62] · IDENTIFIED FROM THE TRANSCRIPT · source
“So I think of it exactly as you said initially, the former example, where basically the market price of these assets is a certain component of current utility value, and then the excess above that is the discounted expected utility value based on discounting a future utility value back to the present. And so that current utility value is the price floor. I can imagine scenarios where it trades beneath that just as stocks can trade below book. It's hard for me to see that persisting for long if the network is truly providing value to the world. And we have this very clear understanding of the supply side and, you know, demand is there or growing. Now, the way in which these assets could start to fall more and more in value in this sort of doomsday.”
2017-11-07 · Invest Like the Best · Chris Burniske - How to Value a Cryptoasset - [Invest Like the Best, EP.62] · IDENTIFIED FROM THE TRANSCRIPT · source
“They, the developers, some of the miners, and that community, and you basically, I don't know, hold them hostage until everyone shuts down the network. Or I don't want to get morbid here. But there is sort of that side. And so this is where Belagi wrote a great post on sort of the different forms of centralization and decentralization and how to look at those to better understand and investigate the resilience of these networks.”
2017-11-07 · Invest Like the Best · Chris Burniske - How to Value a Cryptoasset - [Invest Like the Best, EP.62] · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, and killing all the fiat on ramps. That's something that we talk about a lot. Like China did. And sure, that could happen in one nation or another nation. Or maybe there's a conglomerate of nations. But what we've been finding is that it's a bit this game of whack-a-mole, regulatory arbitrage, one nation whacks crypto, and the nation next to it raised their hand. They're like, hey, you guys can come here. And so because these are super national protocols, getting supranational collaboration from nations on how to handle them, I mean, it would be pretty amazing. And even then, there would be, I mean, again, I'm going deep down a hypothetical scenario and I can play Devil's Advocate within myself, but that's another one. I think really the one that seems most plausible to me is that you end up kidnapping all the core people within the space.”
2017-11-07 · Invest Like the Best · Chris Burniske - How to Value a Cryptoasset - [Invest Like the Best, EP.62] · IDENTIFIED FROM THE TRANSCRIPT · source
“Quickly that changes the proof of work from Schaff two hundred fifty six to something else and basically obviates the existing ASIC base. So then all this work has basically gone into doing something that at that point is obsolete. So that's one avenue of attack I can go through a number of different avenues of attack. There's the regulatory attack or basically just”
2017-11-07 · Invest Like the Best · Chris Burniske - How to Value a Cryptoasset - [Invest Like the Best, EP.62] · IDENTIFIED FROM THE TRANSCRIPT · source
“That much money if I'm a nation state. So then it becomes okay, well, I could basically try and rebuild a whole network. And I have the funds to do it. But what becomes a limiting factor is actually that Bitcoin is secured by custom hardware, ASIC, and the production capacity of ASICs is not that great. So for you to actually try and rebuild the whole Bitcoin network would be a painfully laborious process. You would probably want to set up your own fabrication facility and just quietly be producing your own ASICs and then hope that over time no one is going to notice that you're amassing this massive amount of hash power. You just turn it all on immediately. There are lots of scenarios, ways this could play out, but at the end state, let's say someone is 51% attacking Bitcoin and they have the majority of the hash rate. At that point, the core developers can release a software update, which everyone's going to be incentivized to move on.”
2017-11-07 · Invest Like the Best · Chris Burniske - How to Value a Cryptoasset - [Invest Like the Best, EP.62] · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, so it's going to vary cryptoasset by cryptoasset, but just for ease of example, we can run with Bitcoin. So Bitcoin's capital base right now is supported by half a million to a billion dollars of machinery. And you can do that calculation by just looking at the hash rate of Bitcoin and dividing that hash rate by the average hash rate of your average machine. I think the latest ant miner is 14 terahash. And you get the number of machines that need to be connected to the network. It's somewhere between 2,000 to 400,000. And then the average price of these machines is $2,000. That's a lot of money, but it's not...”
2017-11-07 · Invest Like the Best · Chris Burniske - How to Value a Cryptoasset - [Invest Like the Best, EP.62] · IDENTIFIED FROM THE TRANSCRIPT · source
“But, you know, could very easily see it becoming a bit like a stamp of approval, just like VeraSign works on the web, this ICO or this token project runs their funds and administers things using Aragon. And then as we get farther out in the future, and this whole idea of decentralized autonomous organizations and codifying much of what we see in existing organizations and running it transparently on a blockchain, that's more the direction that Aragon is going in the future.”
2017-11-07 · Invest Like the Best · Chris Burniske - How to Value a Cryptoasset - [Invest Like the Best, EP.62] · IDENTIFIED FROM THE TRANSCRIPT · source
“Okay, so Aragon, I believe they did their crowd sale in May, they're a team that goes a long ways back actually in the crypto space. They worked on a company called Stampery, which was basically stamping material within Bitcoin's blockchain and using it as this monument of immutability. And what Aragon does, it's an ERC 20 token, so it runs on top of Ethereum, whereas Steemit's its own full stack. The best way to say it in a sentence is it's decentralized Delaware on a blockchain in terms of it provides a framework for organizations to manage, well, first to register, but then to manage their cap table to pay out employees if they need to, to be very transparent about where funds are being held, how funds are being used. So a number of components, and this is constantly expanding as it's under development.”
2017-11-07 · Invest Like the Best · Chris Burniske - How to Value a Cryptoasset - [Invest Like the Best, EP.62] · IDENTIFIED FROM THE TRANSCRIPT · source
“So you as a reader, as a consumer, don't have to pay anything. But the way that Steam, at least in the last time that I went through it, the way that Steam allows you as a publisher to get content on there, you actually have to pay for the bandwidth. And you're more paying with it by the fact that you have Steam. The amount of basically material that you can put through the Steam network is proportional to the amount of Steam tokens that you have.”
2017-11-07 · Invest Like the Best · Chris Burniske - How to Value a Cryptoasset - [Invest Like the Best, EP.62] · IDENTIFIED FROM THE TRANSCRIPT · source
“So there are a few sides to this marketplace, but one of the most common ones is basically you can exert more influence on the network the more steam that you have. So let's say in the future you're an advertiser and you want to exert a lot of influence on the network, you can actually do that based on the amount of steam you have and push content higher to the top. So you're actually paying to get some content to the top and that gives you leverage within this system. But it's very explicit leverage. It's not sort of in the shadows. It's very clear what's going on, which allows people to trust the content more.”
2017-11-07 · Invest Like the Best · Chris Burniske - How to Value a Cryptoasset - [Invest Like the Best, EP.62] · IDENTIFIED FROM THE TRANSCRIPT · source
“Filecoin. I can go with an underdog that doesn't get enough love, and that would be Steam, actually. So Steam was launched, I believe it was 2016, although it feels much longer ago. And Steam, you can think of as the marriage of medium and Reddit, but incentivize with a token. And they came out, they had a hyperinflationary monetary policy. They fixed that. They've hard forked 19 times. They've changed lots of things. But similar to Bitcoin, say what you like about Steam, it's there, it works, people are using it, and it is proving out its resiliency. And what I like about Steam is roughly two-thirds of the block reward goes to authors of content, roughly one sixth goes to curator, so people that are actually up voting, downvoting, and helping surface the best content. And then a remainder goes to witnesses and people that stake and get interest. And so there's a really...”
2017-11-07 · Invest Like the Best · Chris Burniske - How to Value a Cryptoasset - [Invest Like the Best, EP.62] · IDENTIFIED FROM THE TRANSCRIPT · source
“In the way in which it grows and unfolds, then a verticalized infrastructure like AWS or Visa or whatever it may be. So sensitive resistance, resiliency just generally as a technology system, there's also a case to be made in some cases for a performance edge. So you take something like Filecoin. They actually think that they can provision files more quickly than AWS because there can emerge these local biases. If I am storing my files in New York, then the farmers, the people storing files around me are likely to be able to provision that file to me much more quickly if they're in a nearby vicinity. And that allows massive scaling, but with local biases in a way that centralized operators cannot.”
2017-11-07 · Invest Like the Best · Chris Burniske - How to Value a Cryptoasset - [Invest Like the Best, EP.62] · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, I would say it always comes down to is the service that it's providing in some way better being decentralized and centralized? Because, for example, we take cloud storage, I don't think that all files will ultimately be stored in a decentralized network. I think that some files are better suited to being stored in a decentralized network and some files are better being stored in a centralized network. So what is the competitive advantage? And so this is where we get into some of the things we talked about before, right, in terms of being uncensorable, but also uptime. If you look at Bitcoin's network from an uptime perspective, Bitcoin, for all its flaws and as much as people complain, it doesn't go down. You know, it's supported by tens of thousands of machines all around the world independently running this code, independently verifying and settling transactions. That is much more robust, much more anti-fragile”
2017-11-07 · Invest Like the Best · Chris Burniske - How to Value a Cryptoasset - [Invest Like the Best, EP.62] · IDENTIFIED FROM THE TRANSCRIPT · source
“Provided the inflation rate of the crypto asset, all these things come together so that sometimes you have really weird looking current utility value charts. And so that's why I go through this exercise.”
2017-11-07 · Invest Like the Best · Chris Burniske - How to Value a Cryptoasset - [Invest Like the Best, EP.62] · IDENTIFIED FROM THE TRANSCRIPT · source
“These kinds of things. If these teams don't have a fair approach to governance, then they can actually be forked and you can actually see a lot of value start to accrue to a competing protocol simply because they are better governing the members of their community. So that's a really key, if not the most key component of long term is this a team that I can put my dollars behind. And that's very similar with a venture capital approach of, okay, bet on the team. And then the third one that I spend a lot of time looking into is the crypto economics. Is the projected graph for this token based on all the assumptions I have, one that goes up into the right, or is it one that stalls out and actually goes down into the right? And that starts to become a balance of the adoption curve, so the growth of the unit economics, mashing up against the cost decline curve of the service.”
2017-11-07 · Invest Like the Best · Chris Burniske - How to Value a Cryptoasset - [Invest Like the Best, EP.62] · IDENTIFIED FROM THE TRANSCRIPT · source
“So there's, I mean, definitely a starting point is always technology. What are the tech chops of the developers behind this protocol? And are they trying to make a breakthrough in distributed systems that people have been trying to do for the last 20 years? Or is there a much more achievable roadmap? And how qualified are they to do so? Interestingly, technology is kind of table stakes because these are open source systems and I can download all the source code and spin up my own network and basically I've recreated everything at no cost which then takes us into the next investigation which is one of governance. All of this conversation and activity we've seen around forks really comes down to governance and if you are not properly governing your community which takes into account things like what is the asset distribution what is the participation process in software updates who is getting the majority of the new assets that are being issued all the”
2017-11-07 · Invest Like the Best · Chris Burniske - How to Value a Cryptoasset - [Invest Like the Best, EP.62] · IDENTIFIED FROM THE TRANSCRIPT · source
“So there's a gentleman named Nick Carter who's making a name for himself on Twitter right now, and he actually did a master's thesis under the sponsorship of ARC when I was here with the University of Edinburgh quantifying different forms of governance and looking at different ratios, for example, within equities, there's the Tobin ratio, I think it is. Yeah, Tobin's Q. And looking at are there analogies from that into the crypto space? And I don't think anyone has really formalized that. Nick took the best stab at it thus far, and I think he'll continue a lot of that work. But right now, it's still a very qualitative measure.”
2017-11-07 · Invest Like the Best · Chris Burniske - How to Value a Cryptoasset - [Invest Like the Best, EP.62] · IDENTIFIED FROM THE TRANSCRIPT · source
“1.05 to calibrate for that. Really, we should probably multiply by something like 1.2 or 1.3 to take into account some of the other platforms. And I'm sure all these numbers have changed. Changed a lot.”
2017-11-07 · Invest Like the Best · Chris Burniske - How to Value a Cryptoasset - [Invest Like the Best, EP.62] · IDENTIFIED FROM THE TRANSCRIPT · source
“from there, Jak's account to their bitstamp account, then in order to move that Bitcoin from one address to another, the exchanges actually have to, or one exchange has to send another exchange the necessary amount of Bitcoin. The third thing that'll go on is within some merchant service platforms. So for example, if I'm a Coinbase customer and I send Bitcoin to Coinbase merchant, that also doesn't have to hit Bitcoin's blockchain. It can stay within Coinbase. So when I did a bunch of work with Coinbase in late 2015 and into 2016, we basically did something where we knew from some of Coinbase's numbers and this publicly in the paper, we just said, okay, Coinbase is within its platform, at least at that time, transaction volumes were about 5% of what we were seeing on chain. So we just multiplied on-chain transaction volumes by one.”
2017-11-07 · Invest Like the Best · Chris Burniske - How to Value a Cryptoasset - [Invest Like the Best, EP.62] · IDENTIFIED FROM THE TRANSCRIPT · source
“There's a big difference between transaction volumes and trading volumes. And so transaction volumes are, as you are alluding to, on chain volumes which are basically moving amounts of Bitcoin using Bitcoin's blockchain directly, getting cleared and settled within the chain. Now, what a lot of people think of as Bitcoin volumes are actually trading volumes. And that is within the isolated liquidity pools that we call exchanges, so GDACs, bit stamp, and these guys. And that's just matching a bid and an ask within an exchange's order books. And a lot of that volume never even hits the chain. It's within that isolated liquidity pool where it would hit the chain is if at a certain point an exchange has had enough Bitcoin go off its exchange that it needs to net out the books or people just individual users are sending”
2017-11-07 · Invest Like the Best · Chris Burniske - How to Value a Cryptoasset - [Invest Like the Best, EP.62] · IDENTIFIED FROM THE TRANSCRIPT · source
“Really, from a means of exchange use case for goods and services and economy, more to support FX volumes. And so this is just a ratio that we have pulled together and we're tracking for Bitcoin. I would love to see someone do it again for the top 100 crypto assets. I've been working with a couple of professors to pull together the data set necessary to do this. It's a heavy lift because you actually need to sync a node to all the networks and pull blockchain level data and parse it. But again, inevitably something that will happen. It's just we have to find the right people with the right appetite and resources in order to do it.”
2017-11-07 · Invest Like the Best · Chris Burniske - How to Value a Cryptoasset - [Invest Like the Best, EP.62] · IDENTIFIED FROM THE TRANSCRIPT · source
“Exactly happens in times when the market really heats up and speculation goes through the roof. There are a few interesting things that happen. There's certainly a period after the bubble bursts where this ratio goes really high because the price of the asset is still relatively inflated, but everyone has gotten scared and they're not really moving their assets, so your denominator gets small even though the numerator is still rather quite big. It appears that right before the pop, the bad pop, not the good pop, right before things collapse, this ratio can soften a bit and the best way to explain that is actually some of Bitcoin's transaction volume can be shuttling Bitcoin between exchanges for arbitrage plays. And so as things are really heating up in a speculative fashion, you actually have more people shuttling their Bitcoin between exchanges, which increases the transaction volume, but not”
2017-11-07 · Invest Like the Best · Chris Burniske - How to Value a Cryptoasset - [Invest Like the Best, EP.62] · IDENTIFIED FROM THE TRANSCRIPT · source
“So full credit goes to Willy Woo, who I always give credit to for this because he is the first person who tweeted out the idea because everything in crypto happens on Twitter, right? But it's this idea, what's called an NVT ratio, so network value to transaction volume ratio. And what that ratio is, is you take any given day's network value, which is synonymous with market cap, but I use network value because these aren't companies, these are networks. So you take any given day's network value and you divide it by that day's transaction volume. And so if you take something like Bitcoin, right now network value roughly at $90 billion daily transaction volume at 1 billion, 90 divided by 1 yields a ratio of 90. Historically with Bitcoin, we've seen that it likes to base at around 50 and then everyone's still trying to work out”
2017-11-07 · Invest Like the Best · Chris Burniske - How to Value a Cryptoasset - [Invest Like the Best, EP.62] · IDENTIFIED FROM THE TRANSCRIPT · source
“In 10 years. So I'm actually always boiling these things down to the physical reality of how many machines have to be connected to the network or how many users. And is it 100 trillion or is it one million? Because, you know, there's a big difference there. That said, I fully expect this to happen, this idea of a lot more sell-side research, a lot more buy side analysts covering these assets, something I've been heartened to see is since I open source the general framework, I've started to see other teams, the actual cryptoasset teams, use the framework, create their own inputs, and include it as part of their SAFT or sale documents to explicitly show people what their assumptions are and why they are pricing this asset. And so my goal is, you know, as a community, we can find some way to create, you know, say, for the top 100 crypto assets, these models that rise to the top based on what people feel are the most reasonable assumptions.”
2017-11-07 · Invest Like the Best · Chris Burniske - How to Value a Cryptoasset - [Invest Like the Best, EP.62] · IDENTIFIED FROM THE TRANSCRIPT · source
“So right now a lot of these assets the majority are composed of more expectation than current utility value. And you can think of it as very similar to when a newly issued stock hits the market and trades at a pricey PE or a pricey price to sales or, I mean, and look at Amazon, it continues to trade, I think, above two hundred times earnings. And this is what makes a market as people disagreeing about these different ratios and how something should be priced based on future expectations. To your question about the standard deviation or how are all these things shaping up, I haven't gone through and valued every single asset. It's actually not what I have to do as a venture capitalist. I just have to make sure that the assets that I am choosing to invest in have some reasonable basis of what I have to believe for this to turn out to be a good investment.”
2017-11-07 · Invest Like the Best · Chris Burniske - How to Value a Cryptoasset - [Invest Like the Best, EP.62] · IDENTIFIED FROM THE TRANSCRIPT · source
“That can be self policed, I guess. And you look at, for example, the Bitcoin community, super focused on censorship resistance, but within themselves constantly policing each other all the time, people getting kicked out of the community, all kinds of political strife, really. And so my feeling with these systems is that if they're not serving for the good of humanity, then the masses will kind of come down on the protocol. And maybe it should be wiped out. It all depends on what that protocol is doing.”
2017-11-07 · Invest Like the Best · Chris Burniske - How to Value a Cryptoasset - [Invest Like the Best, EP.62] · IDENTIFIED FROM THE TRANSCRIPT · source
“Censorship resistance. Well, on one hand, censorship resistance could lead to total chaos. That's sort of where you were going with that example. On the other hand, you have more the libertarian side of things where we will self-organize, we will self-actuate and self-police ourselves. I think the reality actually falls in between. You know, a lot of these protocols, the vast majority of these protocols are being built by really well intentioned, brilliant people that are working to decentralize the world's data wealth and power. And there are social protocols baked into the software that dictate the way in which people interface within it. And so myself maybe being an optimist, my hope and also as an investor in the space, things I look for would be things that work towards enabling a censorship resistance.”
2017-11-07 · Invest Like the Best · Chris Burniske - How to Value a Cryptoasset - [Invest Like the Best, EP.62] · IDENTIFIED FROM THE TRANSCRIPT · source
“Sure, so augur's a prediction market. And basically what a prediction market allows you to do is to put up something that you would like to bet on. And someone else can take the other side of that. Now, Augur and another similar crypto token Gnosis are setting this up so that it's an unstoppable form of this market. It's censorship resistant. So you can end up wagering on anything, which certainly that can become very dark very quickly. But there are other more interesting things that we can wager on that, again, could drive efficiencies. I think that in the case of auger and gnosis, this is something where because it is so consumer facing, it needs to be very easy to use. And so with a lot of these crypto tokens, you're going to, I think, see them crossing a consumer adoption chasm before they get real utility value versus some of the cryptocurrency.”
2017-11-07 · Invest Like the Best · Chris Burniske - How to Value a Cryptoasset - [Invest Like the Best, EP.62] · IDENTIFIED FROM THE TRANSCRIPT · source
“It may be that is pulling from a lot of this underlying cryptocurrency and crypto commodity infrastructure, much of which still needs to be built to provision this finished good or service.”
2017-11-07 · Invest Like the Best · Chris Burniske - How to Value a Cryptoasset - [Invest Like the Best, EP.62] · IDENTIFIED FROM THE TRANSCRIPT · source
“Within the vertically integrated structures of the tech incumbents that we use today, but there is a price for that. And so what we see happening with cryptocommodities, Ethereum being the most well-known one, which provides access to this decentralized world computer, is this massive proliferation of the disaggregation of our tech stacks and actually creating markets to price these cryptocommodities on a 24-7 global basis, which could drive a lot of efficiencies. And then the third vertical, the crypto tokens, running with this analogy of, you know, in our physical world, we have physical currencies and physical commodities that come together and form an economy which produces finished goods and services, which the end user interfaces with. Crypto tokens are the end user facing products. They are the things like Steam or Auger or Swarm City or whatever.”
2017-11-07 · Invest Like the Best · Chris Burniske - How to Value a Cryptoasset - [Invest Like the Best, EP.62] · IDENTIFIED FROM THE TRANSCRIPT · source
“Pricing actually of the good what is like I struggle and other people struggle with this idea of well there's not really explicit pricing of what it costs to send a remittance and that's why you may have noticed when we're talking about the remittance example I actually just kind of lump things into PQ but so that's cryptocurrencies. What is actually easier to grok for most people I've been finding are the crypto commodities and so when I say crypto commodity that is basically referring to this idea that in our physical world we have physical commodities so oil, wheat, natural gas, so on and so forth and they power our physical world but we increasingly live in a digital world and so this idea that we have digital commodities compute power, storage, bandwidth, transcoding re-encryption all these different things there's actually a price for that it's it's hidden”
2017-11-07 · Invest Like the Best · Chris Burniske - How to Value a Cryptoasset - [Invest Like the Best, EP.62] · IDENTIFIED FROM THE TRANSCRIPT · source
“That's a really good question. And we specifically called the book cryptoassets and not cryptocurrencies for a reason. So, you know, right now the taxonomy that we're running with, which I have no doubt will change given how early we are in this industry, the taxonomy is that crypto assets are composed of three verticals. So there's cryptocurrencies, cryptocommodities, and crypto tokens. And the cryptocurrencies are what people most commonly associate or confuse with the term cryptoassets. And those are Bitcoin, Monero, Zcash, Dash, Litecoin, Ripple, and the definition of occurrency is that it serves as a universal means of exchange store of value and unit of account. And so these cryptocurrencies, you know, that is their use case. And that actually starts to get a bit more abstract within the MV equals PQ calculation because of the”
2017-11-07 · Invest Like the Best · Chris Burniske - How to Value a Cryptoasset - [Invest Like the Best, EP.62] · IDENTIFIED FROM THE TRANSCRIPT · source
“Would need to be even higher if more assets are being held just as a store of value. So if we were to take it to 80% or being held as a store of value, then 20% times mystery velocity needs to equal six. And so this is where we start to see the means of exchange velocities of these assets could be much higher than the aggregate velocity.”
2017-11-07 · Invest Like the Best · Chris Burniske - How to Value a Cryptoasset - [Invest Like the Best, EP.62] · IDENTIFIED FROM THE TRANSCRIPT · source
“Around $90 billion in network value, but you end up taking a weighted average for the whole year. And so let's say that weighted average actually turns out to be $60 billion because Bitcoin's inflected towards the late part of 2017. So that $360 billion in GDP divided by a monetary base of $60 billion yields an aggregate velocity of Bitcoin of 6. Now that aggregate velocity is composed of smaller instances in which Bitcoin is used. So for example, going back to this idea 60% of Bitcoin is held just as a store of value, that has a velocity of zero. So 60% times zero plus 40% times some mystery velocity needs to equal six. And so doing the math, it ends up being that means of exchange velocity would need to be 15. And that means of exchange velocity”
2017-11-07 · Invest Like the Best · Chris Burniske - How to Value a Cryptoasset - [Invest Like the Best, EP.62] · IDENTIFIED FROM THE TRANSCRIPT · source
“So I don't have the graph in front of me of velocity. I typically use the Saint Louis Fed, but I know right before the eight oh nine crisis we were around ten. And then we massively increased the size of the monetary base while the economy stayed roughly flat, and so velocity has been cut in half. And so I think right now velocity is for the US dollar is around five. Now, when we look at Bitcoin historically, that aggregate velocity has been in this five to six range. And so, for example, to do that math, right now Bitcoin is flirting with roughly a billion dollars a day in transactional volume. So that's not, that doesn't take into account exchange traded volume. That's just on-chain transaction volume within Bitcoin's economy. So a billion dollars daily, if Bitcoin were to do that every day for a year, that's 360 billion roughly, in that year. And then you know Bitcoin right now.”
2017-11-07 · Invest Like the Best · Chris Burniske - How to Value a Cryptoasset - [Invest Like the Best, EP.62] · IDENTIFIED FROM THE TRANSCRIPT · source
“Value carrying utility as you were with a velocity of 5, and that's where we start to go down this rabbit hole of, well, how high could the velocity of these assets go?”
2017-11-07 · Invest Like the Best · Chris Burniske - How to Value a Cryptoasset - [Invest Like the Best, EP.62] · IDENTIFIED FROM THE TRANSCRIPT · source
“Perfect. So current remittances market, just to make the math easy, roughly five hundred billion dollars. It's a bit north of that, but roughly $500 billion if we make an assumption using this adoption curve in a future state, Bitcoin is going to be facilitating 10% of that market. That means Bitcoin will be facilitating $50 billion of transactional volume in order to facilitate the remittances market. So that's the GDP in that case of Bitcoin for that one service it's providing. I then, so the monetary base necessary equals PQ divided by V. If I have an assumption about velocity of say five, that $50 billion economy divided by a velocity of five means Bitcoin needs to store $10 billion in order to allow that now if it has a velocity of $10 for that use case, it only needs to store $5 billion because basically you're getting twice as much”
2017-11-07 · Invest Like the Best · Chris Burniske - How to Value a Cryptoasset - [Invest Like the Best, EP.62] · IDENTIFIED FROM THE TRANSCRIPT · source
“A very high one, 30, 40, 50 percent to get, okay, this is a rational market price in 2017 based on the future utility value in 2025. That rational market price in 2017 hopefully has a certain percentage that is current utility value, right, based on this whole calculation we've gone through. And then the premium above that you could call it speculative value, but I can make the same argument for how stocks are priced and we don't call those speculative values. It's really just the expected utility value over current utility value.”
2017-11-07 · Invest Like the Best · Chris Burniske - How to Value a Cryptoasset - [Invest Like the Best, EP.62] · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, it was $20 billion in the monetary base that needs to be stored, I would divide that $20 billion by the 20 million tokens that are in the float to get the current utility value of one of those tokens in that given year. Now, I have to do that with the way I've set it up into the future. And so then I can look at the current utility value of a token in 2025, and I can discount that back to the present at whatever discount rate I want to use.”
2017-11-07 · Invest Like the Best · Chris Burniske - How to Value a Cryptoasset - [Invest Like the Best, EP.62] · IDENTIFIED FROM THE TRANSCRIPT · source
“60%, so 60 million in this hypothetical scenario is pulled out of the float. And then let's say 20% is bonded to be part of this consensus process. That means only 20 million tokens are in the float. And all assets are priced at the margin and priced based on future utility. And so when this calculation of the current utility value of an asset really sets aside what is just held with a velocity of zero and says that is not continually being priced. That is basically just being held. What is being priced at the intersection of supply and demand at the bid in the ask is if you have a certain number of assets in the float that can incentivize or lubricate this economy within the mv equals PQ calculation, only those assets should be taken into consideration. So if I have from the prior example, let's say twenty billion”
2017-11-07 · Invest Like the Best · Chris Burniske - How to Value a Cryptoasset - [Invest Like the Best, EP.62] · IDENTIFIED FROM THE TRANSCRIPT · source
“Sure. So, for example, let's say 100 million tokens have been issued in total, but sixty percent of those are being held as a store value which we believe given some of the analysis I did with Coinbase is roughly accurate. It could be higher.”
2017-11-07 · Invest Like the Best · Chris Burniske - How to Value a Cryptoasset - [Invest Like the Best, EP.62] · IDENTIFIED FROM THE TRANSCRIPT · source
“So, to reiterate what I said at the end, from a broad perspective with proof of work, the assumption there is everyone is a bad actor, and so I am going to force them to continually expend energy to participate in the consensus process. And the reason people think of it as inefficient is as the price of Bitcoin rises, there is actually a greater and greater incentive to participate in the proof of work process or to be one of those machines. And because of that, more and more and more people are becoming part of that proof of work process, which makes it more and more competitive, which means more and more electricity is being burned. And so actually the”
2017-11-07 · Invest Like the Best · Chris Burniske - How to Value a Cryptoasset - [Invest Like the Best, EP.62] · IDENTIFIED FROM THE TRANSCRIPT · source
“Up a certain amount of asset so that if they behave poorly you slash that deposit and hence you have an incentive to not be a bad actor as opposed to Bitcoin which is kind of saying we assume you're bad actors all the time and we're going to continually punish you by making you exert work.”
2017-11-07 · Invest Like the Best · Chris Burniske - How to Value a Cryptoasset - [Invest Like the Best, EP.62] · IDENTIFIED FROM THE TRANSCRIPT · source
“So bonding is going to have different manifestations depending on the network. But if you take something like proof of stake, which Ethereum may move from proof of work to proof of stake in Q1 of 2018, proof of stake requires you as a participant within the consensus process of Ethereum to bond a certain number. And I think the last I heard it was going to be a thousand Ether, which is a significant amount of money at today's prices, $300,000. And to bond that to be part of the consensus process. And then you are actually the assets that you have bonded proportional to the assets that the entire group of people participating in the consensus process, that dictates how frequently you basically are able to participate in the consensus process and earn a reward, similar to how mining works. And so it's basically the idea with bonding is you get people to lock”
2017-11-07 · Invest Like the Best · Chris Burniske - How to Value a Cryptoasset - [Invest Like the Best, EP.62] · IDENTIFIED FROM THE TRANSCRIPT · source