Bitcoin has achieved what PayPal couldn’t says David Sacks, a former COO of PayPal who invested in many web 2.0 companies, including Facebook, Uber, SpaceX and others.
Making him an influential investor in Silicon Valley, alongside Peter Thiel, who now serves in the Trump administration, and Reid Hoffman of Linkedin. Giving them the nickname of PayPal mafia due to striking rich early on with PayPal, then investing in many companies that became very successful.
“Bitcoin is fulfilling PayPal’s original vision to create “the new world currency.” We actually had T-shirts printed in 1999 with that mission statement,” Sacks says before explaining they tried to create a database of money at PayPal, but failed. However, bitcoin and other digital currencies like ethereum have succeeded in doing so through a decentralized blockchain based network.
“The underlying enabling technology, the blockchain, has been turned into a developer platform,” Sacks says in a recent interview before adding:
“You can also feel that something revolutionary is happening. Money is being made programmable. That’s a fundamental change with implications we can still barely see.”
Through smart contracts, ethereum in particular allows the creation of dapps that operate globally on the public blockchain where you can set rules through code on how eth tokens should move or behave. That has wide implications, Sacks says:
“Ultimately this is a technology for maximizing the efficiency of every asset, means of ownership, fluidity of markets, and mechanism of payments. The goal is the optimization and maximization of the world economy. That may make it the biggest revolution of all.”
That may apply to VCs – like himself – too, who he suggests are being disrupted due to a new method of raising funds through Initial Coin Offerings (ICOs) that have already funded many start-ups.
“The most promising use cases to date are: store of value, payments, crowdfunding, file storage, identity management and authentication, prediction markets, escrow, title chains, notary chains, provenance, and supply chains,” Sacks says before adding:
“There are 1,500 ICOs already launched or announced, plus many other blockchain companies, so there’s a lot more to come. This is an extremely exciting and fast-moving space.”
That number appears to be very high, which may suggest he is labeling public blockchain currencies as ICOs. A suggestion further streangthened by him wondering whether USA’s Securities and Exchanges Commission (SEC):
“Distinguishes between “protocol coins” (which have an actual use in a software ecosystem and should not be viewed as securities) and “asset coins” (which are securities).”
The SEC has puzzlingly suggested something like Decentralized Autonomous Organizations (DAO), controlled by all token holders, is an issuing of securities.
Sacks expresses concerns regarding regulators, and SEC in particular, wondering what approach they will take towards this space:
“If [SEC] rulings support innovation, that will lead to a more competitive world for VCs, whose world is already quite competitive. But that world will also be more frictionless and efficient,” he says.
Interestingly, he doesn’t speculate much about jurisdictional competition nor calls on SEC to act in a certain way. But ICOs are already starting to ostensibly exclude US citizens from taking part.
Moreover, US’s jump on the gun for a second time – learning nothing from the BitLicense debacle in 2014 – might once more give other jurisdictions room to maneuver and attract talent now that America has laid down its cards.
With London’s FCA telling trustnodes: “we don’t regulate digital currencies and the [Distributed Ledger Technology] infrastructure beneath them.”
But, SEC is going through some personnel changes, so a u-turn might be in the hat. However, that may depend on whether rich VCs like Sacks flex their muscle to keep competition out or whether they champion innovation and pressure regulators to come up with new rules for a very new age in a world that may be blockenized, as Sacks himself says:
“Almost any illiquid asset today lends itself well to moving onto the blockchain and becoming tokenized. It will create a deeper market with improved price discovery and should increase the value of those assets.
In the long run, even liquid assets like stocks could move onto a blockchain because of the benefits of this platform.”