Simplicity

When I look at the crypto space so far all I see is trading.  Cryptokitties had virtual art, but virtual art isn’t for everyone yet.  Right now, it’s just flipping different tokens back and forth.  My friend William Mougayar had a nice post on what constitutes a token. William takes the regulators to task.  I don’t disagree with him, but from the regulator’s point of view in many cases, tokens are “fixing” a problem that they don’t perceive as a problem.

I think one of the most important things I have learned about the SEC came from my friend Pat Daugherty who worked a long time for the SEC and now helps clients navigate the SEC.  It’s not about anything except protecting the most inept and vulnerable retail customer.  The SEC takes its watchdog hat very seriously.

On the flip side when I hear a lot of pitches on tokens I hear a lot of steps.  This has to be turned into this which will be custodied here which will settle here and clear here.  Bob Geras was one of the first VCs in Chicago back in the day.  We were having lunch once and looking at a deal.  Bob said, “There are too many moving parts to this.  It will fail.”   He was right.

Right now in crypto, I see a lot of stuff with too many moving parts.  Forget the SEC.  A lot of these things are not seamless.  Plus, many entrepreneurs have taken on industries where there are entrenched economic incentives to fight change.  There still is a lot of risk in the sector.  To better understand how normal people look at risk, or if you want to understand how to start to quantify risk, read the book An Economist Walks Into a Brothel.

Given what we know about corporations being risk-averse, what do you think they will do when an entrepreneur pitches them an idea about tokenizing their business?   They won’t see the potential, only hurdles and worries about ticked off customers.

When you first logged into Facebook, did it require a lot of explanation on how to use it?  Twitter?  Netscape?  Cryptokitties has a seven-step tutorial to teach you how to play. To me it’s neat.  What about the general public?

I don’t mean to throw cold water on the crypto sector.  I think there is gigantic potential.  However, I do think the sector needs to design for the uninformed and uninitiated.  You need to be able to login and just have it work.