All Podcasts Between2Chains B2C0034: Starbucks and Miami are launching tokens (w/ Jeff Dorman)

Episode Summary

Nov 15 2021 . 39 MIN

B2C0034: Starbucks and Miami are launching tokens (w/ Jeff Dorman)

In this week’s episode of Between 2 Chains Jeff Dorman joins our host Peter Hans, talking about Tokenization of Starbucks and Miami. Going through tokenizing reward programs, shell companies, ENS and lot more.

Show Notes


In this week’s episode of Between 2 Chains Jeff Dorman joins our host Peter Hans, talking about Tokenization of Starbucks and Miami. Going through tokenizing reward programs, shell companies, ENS and lot more.

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You can reach Peter Hans on twitter @peterdhans82


  1. Peter Kicks off the conversation with a very exciting news about tokenizing reward programs by example of Starbucks.
  2. Jeff joins by saying about how introducing liquidity doesn't send us necessarily away, it just gives you more a financial flexibility with regard to what we're already doing.
  3. Jeff elaborates about the shell companies like BAKKT.
  4. Jeff explains how Tokanized Reward Points can be distinct from blockchain in some situations.
  5. Peter talks about how Starbucks is an obvious example of a real world application of blockchain.
  6. Peter and Jeff shifts the gears towards Miami coins.
  7. Jeff explains about how well Investment bankers structure ideas, and they structure ways to kill capital formation.
  8. Jeff sets the analogy between Amazon Prime membership and Miami Coins.
  9. Jeff talks about starting Bitcoin as currency and further development till seemingly endless possibilities of what a blockchain based token can be.
  10. Peter and Jeff sums up the show by taking us through ENS stuffs, ENS protocols and dot eath.


NOTE: Following transcript is generated using AI. Minor errors might be present.



Welcome to the real vision Podcast Network. Before we get going, we want to remind you that Jeff Dorman is the co founder and chief investment officer of ARCA funds. And Peter Hans is ARCA funds managing director. The commentary and opinions expressed in this podcast are solely those of the podcast participants and do not necessarily reflect the opinions of our funds or its affiliates and are subject to change for any reason without notice. Any discussion of investments or investment strategies within this podcast are for informational purposes only, and not to be construed as a recommendation to buy or sell any particular investment security, digital asset or strategy. Investing in digital assets involves a high degree of risk and volatility including the risk of the total loss of principal and now enjoy the show with your host Peter Hans.



Jeff, how are you? Welcome to Between 2 Chains first time on the show, right?



Yeah, never been here before for a longtime listener, first time caller. Thanks for having me.



My pleasure. In a world of firsts. There is some very exciting news that, again, makes us look clairvoyant. The one of the examples that, you know, we've always given, you know, investors are those learning more about the space in terms of various applications for a token, and whether you want to call it the cap structure of a company, or what have you is, you know, basically like tokenizing rewards programs, we've airline miles, but like one of the great examples is Starbucks, right? Like they've kind of already have a token, it's just not tokenized. It's not on a blockchain. And sure enough, you know, what had what is what is Kevin Johnson, CEO of Starbucks, also a hell of a point guard for the Phoenix Suns back in the early 90s. What is he What is he announced that through blockchain or other innovative technologies, I don't know what that means. We are exploring how to tokenize our rewards program. Really interesting stuff. What do you think? What's your take away?



Yeah, I mean, first, I think of all the corners that we've been on, since getting into digital assets, you know, four plus years ago, I think this is the this is the one that I've stood on the most and have been loudest about was was my view that and obviously, your view and others are ARCA that every single company in the world is going to have a token on their capital structure at some point, and it will live you know, in between debt and equity, you will not replace debt and equity, but it will be a tokenized loyalty rewards program that has some form of financial upside as well. In fact, I was actually looking through the archives, I was trying to find it on the archive blog. I knew I'd written about this once and actually wrote about it before we even started archive. That's a long ago, I wrote this was early 2018. But I talked about how, with using Starbucks, specifically as an example how I've been a shareholder of Starbucks for almost 20 years, and I don't drink coffee, I get absolutely no benefit whatsoever from Starbucks. The only time I ever go into a Starbucks is if I need to borrow their Wi Fi or use their bathroom. As a result, Starbucks gets absolutely nothing from me, they get no financial rewards from me. We're basically just, you know, passing ships in the night or mercenaries. Whereas there's all these people out there who are loyal coffee drinkers and love Starbucks and are getting no financial reward whatsoever from what Starbucks is accomplishing. So it to me it was inevitable that the companies are going to start to do this. And there's no better company to do it than Starbucks, right? It's much easier to introduce a new token or a new quasi, you know, hybrid equity slash loyalty rewards program to an existing user base than it is to bootstrap a new user base from scratch. So I think, you know, I don't know how many customers Starbucks has, but But you know, obviously, it's one of the largest customer bases in the world. It makes all the sense in the world. I think it's a homerun for customers. It's a homerun for Starbucks, and I looking forward to seeing exactly what they do with this.



Yeah, I mean, you know, a lot of the rewards portion of the of the of the, of the program obviously doesn't really change or it can change but it doesn't have to but what makes this so advantageous for the customer base is now it's, it's transferable. You know, it becomes in essence, a, you know, I hate to use the word currency, but it becomes an essence of native currency. I mean, this the Starbucks stars, or an E is a native currency, right? I can pay for coffee with Starbucks Rewards points. But now tokenized right. The interesting thing that Starbucks can do is if I, you know, right now and I go in and I pay with stars, they're just like, Alright, great, you know, like Like, you're not giving us money for coffee, it's a rewards program fine. But if you tokenize, the rewards program, what Starbucks can actually do is sell those tokens in the open market, right? They do have some sort of they will have some sort of economic value, there will be some sort of exchange rate, they can sell them for USDC or for ether, right. So I would take something that was just like, you know, non transferable had no intrinsic value to something that will now have more over intrinsic value.



Yeah, absolutely. And, you know, to the point that I think we probably made before on the show here is is, it also means that you're not locked into something which you could be viewed as a negative for the for the company, meaning, you know, maybe you start as a Starbucks customer, and you love Starbucks, and you build up all these tokens, and then you realize, you don't really love Starbucks, and you decide to go to Pete's coffee instead, so you sell your Starbucks tokens and buy Pete's coffee tokens instead. So on the one hand, that might be a negative for the company. On the other hand, you might find someone like myself, who hasn't been a coffee drinker, but because I owned a lot of these tokens, and I see the financial value, and I'm getting all these rewards utility, maybe it turns me into a customer. So it can go both ways, I think, I think it will turn customers into stickier customers. But this idea of introducing liquidity, it doesn't send you necessarily away, it just gives you more a financial flexibility with regard to what you're already doing. Anyway. So I think, you know, there's a lot of different ways that Starbucks can do this. I'm not 100% sure that they probably even thought it all through yet. You know, unfortunately, there's no real good investment bankers yet in this face. But you know, from a token design standpoint, there's a lot of really cool things they can do with this, you know, you can you can you can mix, a lot of things already exist. So for example, I'm an American Express card holder, right? Every year, I get early discounts on going to the USO, right, Starbucks is a sponsor of, you know, hundreds of different events and organizations out in the world. I mean, you know, maybe being a Starbucks token holder. Now, he's going to be, let's say, for example, 10% of all revenue that Starbucks earns will be dividend and back to token holders. And if you own Starbucks, you also get the same kind of loyalty, membership, reward cards that you already get with your Starbucks points. But also, you're now getting access to concerts and sporting events that Starbucks is sponsoring, there's all kinds of different things you can do. And really, what the blockchain just becomes Is that is that holder of record, right, that record of ownership, that is very easily proven that you own it, but also very easily transferable when you no longer want. So I think if you increase the utility and the financial rewards at the same time, and you also give the ability to, you know, move in and out of these companies, as you see fit, it ultimately is better for everybody. So again, I'm really excited. I hope he follows through with it. I don't know exactly what the plans are. But it'll be really interesting to see how this develops. And I'm glad it was Starbucks over some other companies being the pioneers.



Yeah, absolutely. And the other the other thing it does, which, you know, we've talked about in the past, not necessarily on this show, but, you know, theoretically, it should make someone more brand agnostic, you know, at least independent of the quality of the product, right? Because, you know, airline miles is a great example, like, you know, I'm always gonna fly united, because there's the United hub in Houston, and I have miles on there, and I want to recruit my mouse doesn't do me any good to have 3000 miles on, you know, Delta. But if those airline miles are transferable and exchangeable. Now, I don't really care because I can exchange those Delta miles for United miles or Starbucks tokens or eath. Right. You know, same kind of thing. Same kind of thing here. So yeah, really, really exciting to say, and great news, well done kJ.



And I think the other part of this I think, is interesting too, is for those who are familiar with the company BAKKT. They went public earlier this year in a reverse merger or in a SPAC the valuation made absolutely no sense it was a $2 billion valuation, it has since traded up to $6.7 billion market cap, in large part because they have signed partnerships with companies like Starbucks, I don't remember all the other current partnerships that they have. But this is a company that basically has no users has no revenue. It's but the idea of bakkt is that eventually you're going to be able to trade all of your tokenized rewards, your airline miles, your Starbucks points, etc. So while you know, unfortunately, I don't have the ability to analyze a $6.7 billion, basically, shell company that doesn't exist yet. For any all intensive purposes, there is a world where you could see that that valuation could materialize in the sense that they seem to be the forerunner right now for being the trading venue for all of these different loyalty rewards. So again, a lot has to be a lot has to be done still to see what the structure of these tokens are, whether or not they're viewed as securities or not, or whether or not they're just like exactly the existing program that already exists and just a tokenized version of it. But you can see some of these pieces starting to come together, right some of these things that we've been talking about for years, and some of these companies that that, like I said, have largely just been shell companies with high valuations, the pieces are starting to kind of come together here. And you can start to see a world where we, whether it's bakkt or somebody else becomes a real, you know, eBay of reward programs, where there's just tons and tons of transactions going back and forth. You know, like your example, you move from Houston to Atlanta, and you need to get rid of your United miles to get delta miles. And, you know, you go to back to new exchanges. So, you know, not trying to endorse bacteria like that. But I think this is where it gets really interesting is that I'm not I'm not personally great at investing in stories that don't have a lot of substance. So I would never look at something like backed and say, That's a good investment. But, you know, again, this is, this is starting to be proof in the pudding. And it'll be interesting to see what what a company like backed might look like in you know, 12 or 36 months?



Yeah, that is interesting. Yeah, I mean, in terms of deeming them securities, who the hell knows? Right, what the SEC is going to try and argue, but I don't see how these would be deemed securities. I mean, there's no, you know, I can't imagine there's anticipation of, you know, future value associated with like a Starbucks star, right. You know, you wouldn't, you wouldn't own those in anticipation of making a lot of money on them. Right. You know, they're like, they're in essence stable coins, backed by backed by coffee, or goods at Starbucks, I guess. Yeah, maybe that's a stretch. But the other thing I also would point to is, you know, in the earlier episodes, when I did have, you know, former members of the SEC enforcement on here, and describe kind of loyalty points and rewards tokens, you know, I got that exact response that, you know, those sound like loyalty points or rewards tokens, which would not be deemed a security, but again, old regime, new regime, who knows what one might argue, but, uh, but you know, Starbucks, I can't imagine would not do their homework. So whatever they're going to, they're going to issue is going to be done aboveboard?



Oh, for sure. I would never suggest that they wouldn't. I think the issue is a token that is just a tokenized version of their loyalty program is not that interesting. Like he said, like, this already exists, right? So the the, to me, the advantage of blockchain has always been the transferability. But also the flexibility with what with what you can do with regard to the code and the smart contracts that you're writing. So if it really is just to tokenize loyalty program, it's fine, you know, it's good. But if they can do some other perks, like we talked about, whether it's perks about, you know, getting the benefits of some Starbucks sponsorships, or getting some form of financial reward, then you do start to get in that dangerous category, a territory of whether or not you are a security, I think, from a consumer standpoint, that's what you want to see, that's the best product. From a regulation standpoint, it's harder to pull off. And I think that's largely why you haven't seen a lot of companies issue this yet. I mean, you know, there's so many companies out there, whether they're publicly traded companies or private companies that wouldn't benefit right now from having a digital asset, just because we've seen the success of, you know, in the digital asset market of all these companies and products that are doing it. But they're either being advised poorly or not at all, or they just haven't figured out the regulatory framework yet. But for me, I'd rather see a really well designed token that does all of the things we just talked about, that engages their customers that turns their customers into quasi owners, that helps grow the brand and the user base of the company. But to do that, you know, there's still some hurdles to do it right. So my guess is the first version of this Starbucks tokenized loyalty program will maybe not be the most exciting thing in the world. But again, that's the flexibility of blockchain, they can change this token over time, we've seen many tokens that start is one thing and morph into something else, because, you know, they change the benefits that come with it. So regardless of what happens here, it'll be a nice starting point. But I think it'll probably be a little underwhelming with regard to the overall utility and financial economic gain of it.



Yeah, that's, that's probably accurate, but I mean, it most certainly. licensee, certainly, it has the potential to bring a lot more people into the ecosystem, which I think is very powerful.



For sure. Yeah. I think I think when we when we look at just the adoption of digital assets in general, right, everybody needs that starting point. Everyone needs that, that that onramp. And we go back to three years ago, a lot of people really were interested in blockchain, but just didn't really believe in Bitcoin, and didn't want to take the price volatility while they were trying to learn something. And then later ethereum came along. And you know, people want to do experiment with that. But same problem with the price volatility. I think now we're at the point where anybody who wants to get into digital assets can easily find an on ramp that has nothing to do with price volatility or set another way. People are running out of excuses to not be experimenting with digital assets. Because whether it's DeFi or NFT in gaming or stable coins, or you know, eventually things like this Starbucks loyalty, reward cards, you're going to you're pretty soon are going to have to interact with a digital wallet, right? You're gonna have to get comfortable with, you know, a wallet provider, you're gonna have to get comfortable with some version of sending and receiving assets, some form of things. exchange. So you know that that's what's exciting to me is is how we see multiple people coming into this space. You know, maybe it's because of what Facebook is doing with their conversion to Meta, maybe it's the, you know, Chinese yuan, or CBDC's. At this point, it doesn't really matter. Anything, you know, Miami coin, for example, Miami is airdropping Bitcoin right now to some of the holders of the Miami coin. We've seen the same thing in El Salvador. So more more more probably important than anything is what you just said is that it is going to be incredibly difficult to live in this world without having a wallet of some sort. And understanding how to interact on blockchain. And the number of people who are going to get that exposure is going to start growing very quickly, because of all these new additions to the market.



Well, that's a good, maybe a good segue there. Because, you know, we're talking about what's going on with Starbucks. And that's a really interesting new use case. And I think a question that often comes up is, you know, or maybe even a criticism of the industry is that, you know, well, everything is just feeds on itself within this own ecosystem, like, you know, there's like a house of cards potential, what you can say about any industry, but it's growing, but you know, Starbucks would obviously be an example of like, a real world application of blockchain that has nothing to do with, you know, anything else. I could live on a lot. It's out some but talk about, you mentioned Miami coin, and, um, you know, loosely aware of it, right, I'm assuming, like, the audience is somewhat aware of it as well. But like, what, what's the deal with that? What is that supposed to do? And I know New York has one now to or is coming out with one like, what are these? These aren't like, muties? What are they supposed to do?



I'm not I'm not an expert on Miami coin, and I haven't had a chance to really dig into all of it. Again. My initial take, when I looked at it was it was a little underwhelming, it almost looked like they threw this idea out there and didn't really know if it was gonna stick or not, but they certainly didn't spend weeks or months really thinking about it. My understanding is, there's no utility right now to the Miami coin. Basically, the mayor of Miami has been very proactive, has been influenced a lot by the Bitcoin community more so than the overall digital asset community, and basically created a coin where you can mine four stacks, stacks being a smart contract platform built on the Bitcoin Blockchain. And then ultimately, if you mind for these rewards, you can become a Miami coin holder. So it is generated money for the city of Miami, I believe it was like $20 million that has been generated. But now they're with these minor rewards, they're looking to give back to the token holders by issuing a dividend. But it seems a little circular right now, in the sense that there is no real, there's no reason for it, right? It wasn't like they went out there and raised money via Miami coin to do an infrastructure project or to you know, fix roads or to build a new park, it was just sort of something that was created and existed as a proof of concept, but doesn't have a whole lot of utility for the Miami token holders as well as Miami residents, where I think this could be done better in the future would be you effectively get rid of revenue bonds or general obligation bonds, right. So most municipalities fund themselves by issuing a bond, it could be a general obligation bond, where you use it for anything you want, it could be a revenue bond, where you are tying it to a specific project, like, you know, fixing a road or fixing a park. And you know, that money is, you know, that money is given to the city and in exchange for the bond and the bond has some sort of a fixed coupon. And usually tax benefits of you, if you live in that state or in that city, what you could do to get rid of that is do a token, where let's say you have, you know, a big public park that you're going to build, you issue a token specifically tied to that park, that raises the money for the city to fix the park or build the park, you as a token holder, then get rights to that park, maybe that's early access to concerts that are you know, done in the park or maybe that's you know, a special corner of the park where you can host birthday parties or events right that there has to be some utility assigned to this to make it worthwhile for the people who are funding it you know, if you were doing more of a general obligation token rather than a revenue token, you would do something like you know, you get discount fares on buses or discount fares when you ride taxis or you know, a easier access through the airport or something like that right there there needs to be some form of connecting the municipality token to the people who are funding it and then what happens is you can if you do this right, and you start to build surpluses at the at the city level, then maybe one day there is actual dividends kicked back to you for supporting the city right and then you and then if that happens, then it becomes again this hybrid of utility as well as a financial instrument and you can see a world where if you live in New York, but you think Miami is gonna be the hottest city in the world but you don't feel like moving to Miami or you don't feel like buying real estate miami, you can just speculate on the Miami token because you know that that's going to basically grow in value as the city of Miami grows because the utility of getting these discs counts will become more value valuable as the city grows, or the financial benefits of a company of a city running a surplus will become more valuable in the form of tax reward. So, you know, again, I'm doing this a little bit off the cuff here just based on conversations I've had with others and thoughts we've done. But there's a lot more that you can have done with a municipality coin than then what the city of Miami has done to date. But you know, we'll see it. These are first iteration projects. So you know, hopefully the newer ones in the future will be better and more well thought out.



So real quick, one point of clarification here. And it's been a while since I've traded munis, but my understanding is, the difference between a revenue bond and a general energy or a general obligation bond is is is the risk you're taking as the creditor it's the investor in the bond, a general obligation bond, if you do a general obligation bond of the city of Cleveland, right? The the credit risk you're taking is with the city of Cleveland, if you are doing a revenue bond, tied to like the, like Houston has Houston hotel occupancy tax revenue bonds, where the payment of that coupon is done solely based on the revenue collected from taxes of associated with hotel occupancy. So it's not that the revenue generated from the bond goes to something, it's that the revenue to pay, the coupon comes from something the municipality can do whatever they want with the money. General Obligation just means that it's the obligation of the city or the municipality to pay the interest on that bond and you're taking that credit risk,



Correct, Yeah, yes. Sorry. If that was not the way I stated, yes, you're absolutely right.



Cool. What would a municipality in essence, like, what could they use a Miami coin for? I mean, I guess the only thing else they could issue it, they could sell it raise money like a bond, and then instead of pay an interest on it, or they could, you know, you could stake it, and they could pay interest in yield for Miami coin, they could pay interest in more Miami coin. But ultimately, I guess there has to be some sort of utility associated with that Miami coin or New York City coin. Right, you know, to, you know, maybe if you have a New York City coin, again, you know, your donation cover to the city museums, you know, the recommended donations covered or something like that, or you get, you know, 50% off raise pizza, and only pepperoni and cheese.



Yeah, and I think that's, I think you hit on the point here, which is part of part of what investment bankers do really well is they structure ideas, and they structure ways to kill capital formation, right? This is basically what you're doing here, you're talking about a capital formation tool. And there just aren't a lot of investment bankers who are doing this yet, or advisors, you know, those who are in the know whether it's someone like an ARCA or our friends at Delphi, digital, or others who, you know, do a lot of help with companies and projects on structuring and restructuring their tokens. You know, at the end of the day, we're asset managers, and we're working on our own portfolio, we don't necessarily have advisory businesses yet. But eventually, this is a business that's going to happen, there's going to be advisors who are working with these companies in these cities and these universities to help them structure a token that makes the most sense for them. Now, the beauty of it is unlike a, you know, debt or equity instrument, where you have the perspective, and the perspective is pretty locked in. And once you issue it, that is what it is. And there's no real way to tweak it from there, other than redeeming it and issuing something new with these municipality tokens from New York and from Miami, you know, they do have the ability to tweak these over time. So to your point on New York, you know, hopefully, it's a better iteration than what Miami did. And then the next one, you know, the Los Angeles token, the Chicago token, the Houston token will be better iterations of that. But you're absolutely right. Like you have to, you have to do two things when you issue when you design a token, right, you have to have some form of financial incentive to own this, and you have to have some sort of benefit or utility for owning it. So things like discounts on the subway or discounts at museums or, you know, he's a direct access to, you know, parts of the airport, something like that, like there has to be some sort of beneficial ownership, because what you're trying to do ultimately, is you're trying to do the same thing that digital assets have solved for everywhere else, which is you're trying to create a coordination and incentive mechanism. So if you are a resident of New York, and you want you have to be incentivized, in some way, shape, or form to own this token, and ultimately, that is going to create the value that makes this trade and makes others want to own. So there's a lot of different ways you can do it. And I applaud all the cities that are thinking it through. And I think, you know, it'd be a fascinating area of the market to watch this develop because as we've seen with everything in digital assets is there's a copycat effect with one company or project does it everyone does it. So I think, you know, we're just scratching the surface as to what some of these Muni coins will look like.



Yeah, I just I guess right now without without any utility. I don't get it. All it seems like people are doing is maybe mined for stacks, which then becomes the Treasury for the municipality, and they're paid rewards for doing that, but it's all in stacks? Which I don't know any value, are you doing it? It just seems like you're just using a bunch of energy to to get nothing?



Well, the idea of this and really a lot of things is there's almost a fake it till you make it mentality and digital asset.






Like which is, if they can, you know, going back to Miami coin, for example, right? If you were basically saying, Hey, we're just going to introduce a coin, and anybody can mine it. Right. Okay, that's great. We mined it. And the city of Miami gets a little bit of money as this is being mined, I think I think the way it was written was, the city gets, you know, 30 to 100% of the stacks, tokens that are that end up in the wallet, and the users get the rest you right, there's no benefit or utility to it. But eventually, if every Miami citizen has a wallet, and everybody's participating, you can add that functionality over time, right? I think I've used this analogy in the past. But Amazon Prime is a great example. When you first bought your Amazon Prime membership, you were getting free shipping, that's all you were getting. And everybody was like, Okay, there's some price that I'm willing to pay to get free shipping, because that's how much I'm spending in shipping anyway, when I use Amazon. But they added all these other benefits later, right? They added the free shipping, outside added free Whole Foods discounts, and the free movies and the free music and all the other things that have now come with an Amazon Prime membership, that wasn't part of it when they first put it out there. And I think the same is true of Miami coin in New York when everything else right with the first iteration of it may not be what ultimately looks like. But if you can get adoption, for whatever reason, then you can start adding these other benefits. And if these benefits are strong enough, then it will lead to more people wanting to own it. Right. So in the same way that you can track Amazon Prime membership, you had an early group of users who had a singular benefit for why they did it. Over time that benefit increase because Amazon you know, Amazon became a better company, the your Amazon Prime membership, and your free shipping became more valuable. As they added on these other benefits like movies and music and Whole Foods discounts. It brought in new customers who valued those things more than they valued free shipping. And you know, the flywheel continues, and you just continue to grow and iterate. And I think you get the same thing we'll see here. So even, you know, I haven't spent a lot of time on these Muni coins in terms of exactly why you don't I don't live in Miami. I don't live in New York anymore. But my guess is you'll see a lot of people who do, they'll experiment. So they go, I'll put a little money into this. I'll support my city. Oh, it's kind of worthless right now. And then three months later, oh, look what they did. You know, because I own my Miami coin. Look what I got access to. And then they tell someone else about like, Hey, that's pretty cool. I want to buy this. And then eventually this becomes a real thriving ecosystem.



Yeah, no, there's there's a lot of truth to that phenomenon. That is that is that is definitely accurate. Yeah, I mean, we'll guess we'll see what happens. I think Austin is looking at something too. Which doesn't surprise me. But I guess I guess we'll see. I guess we'll see what happens.



Yeah, for those who don't for those who are interested in learning more about that there's a site called And that explains how Miami coin works. And ultimately, they're gonna be the ones who are issuing the New York coin. So for those who do want to go in depth more with the city coins, is a good site. Good reference.



Yeah, there's, I mean, there's no shortage of utility potential. And, you know, I would think if they're investing this much in it, there, there has to be some thought in terms of what can be done. And, you know, it's a good it's a good opportunity for, you know, knowledge share and, you know, these mayors to work together, and there are a lot of problems that, you know, can certainly be solved not by, you know, the magic of blockchain per se, but just by, you know, different ways of putting utility into different people's pockets, wallets, you know, and generating revenue from that it's, it's compelling. It's very compelling.



Yeah, absolutely. So I think from from an investing standpoint, what's what's probably the most fascinating thing here is just how far we've come from the first iteration to blockchain right? We started with Bitcoin we start with currency, then we started with the we had a ethereum, some smart contract platforms and some forks of Bitcoin, etc. But now we're talking about seemingly endless possibilities of what a blockchain based token can be. And, you know, we we have historically referred to this as an asset class, it's becoming increasingly clear that this is not an asset class at all, that this is a technology that's going to underpin all asset classes. And as a result, you know, even a firm like ARCA, you know, we have 30 to 40 employees and everybody's dedicated 24/7 to digital assets. A year ago, we could keep up with absolutely everything that was in this market. We knew every token, we knew the use cases, we knew the properties, we knew the valuation techniques. Now, I mean, we can't keep up with with, you know, half of what's going on right now. And I think others in the space are finding that to be true. And that makes more sense of the technology than it does have an asset class, right. If you are a, you know, corporate bond investor, you should know most of the corporate bonds, but there's, there's no way that you're going to know every equity and every piece of real estate and every commodity. That's basically where we're at right now. Right? Just because you're in digital assets doesn't mean you're going to understand every single municipal coin and every single university going around Single social token and every, you know, DeFi application and every NFT. It's just impossible, which is awesome for the state of the industry, right? It means that we are expanding incredibly fast with regard to all the different ways that this technology is impacting the world. But it also means that as investors or users, you know, you do have to recognize that there's no way to keep track of everything anymore. And, you know, there's only certain topics that you know better than others. It also means that if you do have a real passion for something, you can be one of the foremost experts on that specific topic, because there's not that many people who will be. So, you know, he creates a lot of unbelievable investment opportunities, because there just isn't that much competition. It creates a lot of really cool usage opportunities, because you get to be the pioneer and try things that others have never maybe never seen before. You know, there's also been a lot of financial windfalls as a result, not just a price appreciation, but there's been airdrops of companies and projects, where if you're an early user, you get AirDrop tokens, and you basically get a free financial windfall, right, we saw that with uniswap, the early users of uniswap, were just issued a token. There's rumors right now that Metamask, you know, the noncustodial, wallet from ethereum, that they're going to be air dropping a token to their customers. There was one just yesterday a project called ENS, which is a basically a decentralized identity, using the dot eth, in your user profile, you know, not a tremendous amount of use cases yet for that. But in the future, that might be your digital profile, your daddy's profile becomes linked to everything you do. And there was an airdrop yesterday, ENS tokens. And you know, that's already a billion dollar market cap of the token. And nobody bought it that was just given to the people who were early users of that protocol. So what this, what we're seeing here is, it's expanding faster than you can keep up. But if you want to dedicate your life to it, or if you want to start experimenting with projects, you are being rewarded for doing so. And that's pretty empowering. When you think about how you know, any regular person from, you know, children, to retirees, to people working in various industries, you have a chance to play around with something and be an early adopter and be financially rewarded for doing so.



Yeah, some of the ENS stuff and I wasn't wasn't familiar with it. So when you do see those profiles on Twitter, you know, so and so dot eth, that's not just them, put it in there, because they like eath, that's them using this ENS protocol.



Yeah, means they basically registered a domain name for themselves, it's effectively the GoDaddy of web 3.0.



Very interesting.



so if you created a domain for yourself with a dot eth domain, you can build on that however you want, you might be able to you like that, you might link that to other things in the future that prove that that is that you own that, you know, that register. And now there's a token supporting that protocol and those who have a dot eth, profile, were rewarded with those tokens. So again, you know, going back to fake it till you make it, it I don't want to speak too much on the ens. I don't know that much about it. But it was, you know, long before it had any functionality. People were experimenting feel like, oh, cool, I want to go register that domain. Why wouldn't you, and instead of it being a land grab, like we saw in the .com era where every single word, somebody would go out there and buy a domain name, just to look to sell it to someone later. This was, you know, real people in the Ethereum community who said, this is going to have value in the future. I don't exactly know what it is, but I'm willing to try it. And you know, a couple years later, they get a token. So now what it's going to do is it's going to create even more loyalty, it's going to create even more usage, more people are going to start figuring out what to do here. But more importantly, I think what I saw yesterday, there's a spreadsheet going around right now of all the different projects that are related to digital assets, that potentially might AirDrop a token one day now it's completely speculative. There's no information on whether or not they will or not, but now what that what to think about what that does for young people in this industry, they're going to go out there and test and experiment with every single project, they can, just in case one day, they get AirDrop tokens for doing so. And that's pretty cool, right? I mean, how do you how do you bootstrap the growth of a company or project faster than that, right? You you hint at potentially air dropping a token one day, and all of a sudden you have, you know, 1000s, if not hundreds of 1000s or millions of potential customers coming in and trying it and giving it a shot. And obviously, that alone is not enough, the project or the company or the product has to be good enough that it's sticky, and people will use it. But it's a good way to get people in the door. Right? It's a good incentive for a rep. So you know, whether we're talking about, you know, city coins, or ens, or anything else we've discussed, it all comes back to this coordination. And this instead of if you can coordinate and incentivize people to use it, you have a much faster trajectory of growth and a much higher probability of success. And that's what we're seeing.



Very interesting. Yeah, the airdrop phenomenon is, is really interesting, because I mean, not only, you know, do you get rewarded for being an early customer, which isn't again, a new concept, right? There's rewards there's loyalty points. There's all sorts of things, but it's almost like the, the surprise or the mystery of it, you know, and and the potential for because again, these assets are transferable like the appreciation potential, you know, like you could actually be, you know, very lucrative Lee rewarded for being a customer something. Yeah. And I saw that spreadsheet as well. And I was trying to figure out what the hell any of it it was to play around with it,



you give your kids some some bitcoins and stable coins on ethereum and you give them that spreadsheet and say, here you go, knock yourself out, go play with everything and come back and tell me what you what you like and what you don't like. So I think there will be a lot more that I mean, you know, we would the nice thing about blockchain is you can measure the usage, you can measure the activity, like you're going to see in the next six to 12 months, just an explosion of usage and explosion of wallet, downloads and explosion of transactions and explosion of application users. And it's largely going to be driven at first by this speculative fervor of Will I get an airdrop, but eventually you're going to get a handful of real companies and projects that probably wouldn't have otherwise succeeded if it wasn't for this. And that's pretty cool to see.



It is, it is very interesting. ENS something, you're looking at is it a token?



I mean, it's a day old, and you know, haven't had enough time to look into what the token the token is designed, and whether or not a billion dollar market cap makes sense. But yeah, I mean, it's definitely on our radar as a as an investment manager, that's our job is our job is to look at, you know, try to get ahead of themes, and and sectors that we think are going to be interesting and try to find those companies and projects. And sometimes it works the other way, sometimes the company project just comes out of nowhere. And, you know, it's our job to look at it after the fact and try to figure out there's real value there. So we'll have an opinion on ENS at some point. I think, to date, we haven't. But again, this is what we are learning as investment managers in this space is that, whereas a year ago, we knew everything before it happened. Now, there's a lot of things that we don't know. And we have to learn as fast as everyone else's. So you know, if you're a hungry, personal investor in this space, and just want to learn, you know, you have the same time and resources and everything else that Arca does to learn about it. And it's a it's growing faster than we ever expected, across this, this entire industry. So we're not gonna know everything, nobody's gonna know everything, which is maybe discomforting relative to what we saw 18 months to two years ago. But it is, you know, what is necessary as this industry continues to grow is that you're gonna have different pockets and different people who know more than others in different areas. And yeah, it's if you're new to this space, you have a chance to be an expert before anyone else's, which you can't really say about a lot of other industries and a lot of other asset classes.



Yeah, I mean, it really is crazy. The speed at which with this is growing. I mean, I don't know what we all expected, but, but it's incredible. So, Jeff, you know, as always, good conversation. Thanks for joining. And look forward to next time.



Great. Thanks for having me.



 Make some money. Take care man.



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