[Editor’s Note: For the sake of transparency, before you read or re-read this post – you should know that on November 19, 2022, I sold all cryptocurrencies in my portfolio, and am no longer confident they are viable in the long-term. Would prefer to announce this with my reasoning behind the decision, but since I expect to be resoundingly criticized, trolled, and ridiculed, I’d rather take my time explaining the logic and that could be a week or two until it’s ready. There is much pumping and dumping going on in the space and that’s not my agenda. So I’m putting this disclaimer out on November 22nd, and will insert a link when I have finished authored the essay listing the rationale.]
Why the next generation on the Internet could be the greatest wealth-creating opportunity of your lifetime…
To reach the higher levels of success in business and life, you need the ability to peer around the corner and see what’s coming next. That’s not nearly as hard as it sounds. Any good futurist will tell you that the future is already here, it’s just not evenly distributed yet. Therein lies your greatest opportunity.
Contrary to popular belief, there is no mysterious process or closely guarded secret for wealth building. It’s actually quite simple. True and lasting wealth is created by the people who can look around that corner and envision possibilities. Usually, possibilities that can solve problems and add value, thinking one step ahead, zigging when everyone else is zagging. (Or zagging when everyone else is zigging.)
Frequently, this involves determining what is coming next (based on the already available clues) then speculating what growing pains, challenges, and problems will be created. Once you have an idea of at least some of these growing pains, challenges, and problems – you can get to work on:
To that end, in recent posts I’ve been sharing some of the advice I’m providing to my Breakthrough U Coaching Program clients on grave challenges the world is facing – and the corresponding opportunities they provide. Post one was on Pandemic Winners & Losers and number two was The Development of the Matrix. Now let me share what I believe is the paramount challenge/opportunity the world will face in the next 20 years….
Web 3.0, the next generation of the Internet
There aren’t many institutions you can name that affect the world right now more than the Internet. It has a massive impact on every area of our lives, and that impact is growing stronger. And it’s about to get bloody. Real bloody.
What we think of as Web 1.0 was the development of the worldwide web from roughly ‘97 through 2004 when the Internet was basically people surfing around looking at content on unrelated webpages. In Web 2.0, software applications were built on the web not the desktop, things became more interconnected and hyperlinked. Web 2.0 was the beginning of social networking and social media with the advent of platforms like blogs, wikis, YouTube, Flickr, and Myspace. This was user generated content in social communities, and I would argue this was the big breakthrough that allowed e-commerce to develop. People went from fear of entering a credit card online to a point they had no compunction about having their most private information stored on at least a dozen different websites. Web 2.0 was juiced along by the explosion of smartphones and mobile apps, which amplified and accelerated all the disruptions the Internet was creating.
I would argue that Web 2.0 was arguably one of the ten most impactful developments in human history. (Ranking up there with the Agricultural Revolution, Renaissance, invention of the wheel, alphabet, and printing press, discovery of fire, space travel, and of course, the cheesy gordita crunch.) The Internet connected you to everyone in your life who mattered and introduced you to new vistas you hadn’t even imagined. It forever changed the face of marketing, education, entertainment, commerce, communication, relationships, government, and a hundred other important elements of daily life.
Words like disruption and innovation have become such cliches that they don’t carry enough juice to describe the level of cataclysmic commotion that is about to happen as Web 3.0 blows up, tears down, and reconstructs some of the most important aspects of our daily lives.
I posit that the development of Web 3.0 will impact humanity greater than any previous event in human history.
You might believe this is a pretty breathtaking hot take. (And it is.) But before you dismiss it as hype or delusion, let me challenge you to do the following: Read or re-read the Risky Is the New Safe book that I wrote in 2012 and Mad Genius from 2016. Analyze how many things I predicted, including the streaming entertainment wars, Brexit, gene editing, rideshare services, and cryptocurrencies that have come to fruition. (Those positions may seem weary now, but at the time I was doing the book tours, many media interviewers speculated whether I had escaped from a psychiatric ward or beamed in from an alternate universe.) Then evaluate what I’m suggesting with the appropriate level of consideration.
Then also take into consideration, I am not a tech expert and if we’re being totally honest here, am still struggling to become fluent in emoji. (And nothing you read here should be construed as investment advice.) At this point, I understand these concepts better than 97.4289 percent of the population – which means I am still extremely ignorant and know just enough to be dangerous. As I did in the two books mentioned, let’s explore this technology from the aspect of how it will impact the layperson and how it follows (or doesn’t follow) the laws of prosperity.
Human nature seems to have a default setting when it comes to new, innovative developments. Anything in existence when you were born (no matter how stunning of a quantum advancement it was) just seems ordinary and natural to you. Anything new developed when you’re in your teens and twenties (and smarter than everyone else in the world) is breathtaking and revolutionary, and you usually become an evangelical proponent of it. And anything developed after you’re 40 is just fucking irritating and evil, because it means you have to change a belief or behavior you already possess. I’ll do my dead level best not to fall prey to this way of thinking. I’m not the cranky old guy who dismisses cryptocurrencies as vaporware superstition, nor am I a member of the Bitcoin cult who gets orgasmic every time a football player puts laser eyes on his Twitter pic. Everything I share next is presented in the following context:
So, what’s all the Web 3.0 fuss about?
Some of the most pressing challenges humanity will ever face – and likewise, some of the most lucrative opportunities humanity will ever face – will come about as Web 3.0 unfolds over the next two decades. Web 3.0 will have a cataclysmic impact on everything. The way we build, market, sell, communicate, educate, date, learn, wage war, and forge the peace. I cannot emphasize enough how transformational Web 3.0 will be upon the world: Colossal fortunes will be made, and lives will be enriched in extraordinary ways. I predict that in the distant future, the development of Web 3.0 will be considered as integral to the evolution of humanity as the Agricultural and Industrial Revolutions. And…
Before we reach the promised land, there is going to be a bloodbath that will make the dotcom meltdown look like a friendly game of checkers. (We’ll come back to that in a bit.)
For now, let’s set the stage by taking measure of where we are at in the developmental process. I hear lots of analogies like we’re in the first quarter of the football game, or the 3rd inning of a baseball game. If you want to use a sports analogy, where we are now is a group of owners and players are first mulling around the possibility of even starting a league. No actual games have even been played yet. Right now, the stage of Web 3.0 technology development is the evolutionary equivalent of biology’s primordial soup. But that doesn’t mean you can check out now and tune in two years from now to catch the action. The land grabs and market share are getting divvied up now and a great deal more will get locked up over the next five years.
The catalyst for Web 3.0 is blockchain technology. More specifically, what the tech allows to come into existence. Blockchain will impact virtually every area of human life. This technology can host cryptocurrencies, improve election security, provide digital IDs, facilitate better healthcare, enable the Internet of Things, protect royalties for creators, provide verifiable smart contracts, and literally millions of other uses we haven’t thought of yet.
If you’re new to all this and not sure what a blockchain is, it is a specific type of database. Unlike most databases, a blockchain stores data in blocks and they’re connection along a chain. (In this case, a chain of computers.) In essence a server spanning the world is created by linking hundreds or thousands of computers. This combined computational power and storage capacity allows millions of users to access the database simultaneously. As new data comes in it is entered in a new block. Once that block is full, it is chained to the previous block in chronological order. Many kinds of data can be stored on a blockchain, but in most of the cases we’re looking at, the chain is a public ledger (viewable and verifiable) of transactions. (Most people in the space also posit that it is immutable, but I’m not willing to go that far.)
Think of a blockchain like a pearl necklace. Each pearl is connected on a chain, and you would know right away if one or two of the pearls were missing or damaged. Each individual pearl is valuable, but the necklace holding all the pearls is more valuable and now has a utility. (In this case, to impress people at galas.)
Eventually the whole world may run on the blockchain. Arguably it could be the most important invention in half a century. Some of the most tantalizing uses at the moment, and the ones I believe will most impact your prosperity, include:
None of these four uses are fads. I believe all are here to stay, and will have bright, bold, and brilliant futures. But these developments are not going to be a steady, measured progression where everyone gets rich and lives happily ever after. The process is going to be a wild, sketchy, molar-jarring, motion-sickness-inducing, rollercoaster ride from the heights of the atmosphere to the depths of hell. Some will make fortunes; others will be wiped out.
Which takes us back to the bloodbath I promised you earlier…
While these developments should shake out to be highly beneficial for society, there will be a great deal of collateral damage along the way. I’m not too concerned with the expansion of De-Fi and DAOs. Both are macro movements that won’t offer much risk to the average person and are likely to improve their lives in ways both subtle and significant.
In my view, the more the financial system gets decentralized, the better it is for consumers, and the sooner, the better. Take a look at what I wrote about banks in Mad Genius:
“The banking industry is easy to pick on because large institutions like Wells Fargo and Citi operate in an alternate universe (called ‘the past’) where they think they’re so big and indispensable they can dictate terms and make their customers jump through hoops to meet their ever-growing need for bureaucracy. But those days (and those types of organizations) won’t last. We have to question if there really is any purpose for banks in the new economy.”
The reason rideshare platforms overcame all of the systemic, overwhelming forces conspiring to shut them down is at the end of the day, they’re a better idea than taxis. By the same token, decentralizing finance is better than the corrupt, incumbent system of banking, finance, and government manipulation, so it will ultimately prevail.
As for DAOs, they will definitely empower some communities and great things can happen through them. But if you’ve ever tried to get something brilliant done through a committee, you can imagine the challenges that will be created for an organization with no boss, a very fluid structure, and thousands of people trying to influence the decisions. If you’ve ever served on a condo board, you’re probably already experiencing PTSD just reading the last sentence.
Some people in the space are predicting DAOs will replace corporations and others suggest they will take the place of governments, but I don’t see either happening. Still the concept itself is brilliant and there certainly are lots of possible iterations that can happen. DAOs around specific blockchains, cryptocurrencies, or NFT communities make total sense. And like a lot of Web 3.0, there will be many other beneficial aspects and uses we haven’t even thought of yet.
Where I see the imminent bloodbath coming is in the cryptocurrency and NFT categories...
As is frequently the case, to really grasp the complexity of this issue, we must resort to simplicity. To that end, let’s circle back to the three ways prosperity is manifested that I mentioned earlier and apply them to this space right now. Blockchain tech, cryptocurrencies, and even NFTs are certainly cases of envisioning possibilities. But for those possibilities to reach the next step – manifesting prosperity – they have to solve problems and add value.
At this stage of the game, there isn’t enough solving real problems or adding actual value. There is a HUGE amount of potential here, but at the moment, much more ambitious talk and goals versus actual implementation. (And alarming levels of hype, mindless FOMO mentality, mining the miners, and downright fraud.)
The long-term wealth created in the Web 3.0 space won’t be the profits created when coin, token, or NFT prices fluctuate, but the value created when the tech is used to solve real problems in the real world.
We were told that cryptocurrencies were developed to be used as (checks notes) currency. But at this stage of the game, virtually no one is using cryptocurrencies as currencies, no matter what the hype tells you otherwise. (And if you are using them as currencies, that's very foolish and shortsighted right now.) If you buy Bitcoin for $20k and sell it two weeks later for $40k, you’ve manifested $20k worth of cash for yourself (provided you convert it into fiat currency or other tangible value) – but you’ve solved no problems or created any value for the universe. Likewise, if you snatched up a CryptoPunks EFT and watched it accelerate in value. You may have solved your problem of not being rich enough and added value (allegedly) to your net worth, but once again, you haven’t solved any problem or created any value for the world at large. In prosperity terms, you’ve created no more value than if you won an equal amount of money at a slot machine. It was entertaining and you can use the cash, but you haven’t dented the universe in any way. In the future, NFTs will offer a profound menu board of benefits. But at least 98 percent of the projects being promoted on your Facebook and Twitter feeds right now, are the prosperity equivalent of empty calories.
We can argue that Bitcoin can be used as a store of value. But only if we’re honest enough to admit it hasn’t happened yet and might not settle into that role for a few years or even a decade or two. (And tougher to do since the price dropped more than 30 percent in the short time I spent writing this.)
Right now, buying Bitcoin is like playing poker. If you understand the game and are fairly cognizant of math, you have a great chance to see your investment go up. But at some point, all the bitcoins will be mined, and it will settle into use as a currency. When that happens, it’s simply another medium for exchange, serving the same function as the dollar, euro, or yen. (Update 7/09/21: If you think I'm crazy to suggest that once BTC is a currency it holds no inherent value, I'm no longer alone. Check out the video that Nassim Taleb put out on July 2nd. He's making the argument that the inherent value of BTC is zero, for a different but similar reason.) You can argue that it is a better store of value than fiat currencies (and I’d agree with you), because it can’t be devalued as easily as the printing press currency.
Ultimately each potential cryptocurrency will have to navigate this process. One of three paths will be taken:
If option three occurs and people begin using it as a currency, it will become commodity like, because it will just be used for payments. The value can’t go up forever. Too many people in the crypto cults can’t seem to grasp this reality.
That doesn’t mean you can’t buy a crypto low and sell it high. Of course you can. Just as you might have bought Apple or Amazon at $50 a share. But don’t lose sight of the principles of prosperity. Look for investments where the platform is solving real problems and adding real value, and don’t conflate them with simple gambling gains that can occur.
The ETH token really isn’t trying to be a currency. The developers in the Ethereum blockchain community are moving rapidly to solve real problems and add real value. Personally, I think the future here is even brighter than Bitcoin. But after these two, we fall off the cliff very quickly…
It just seems like other cryptos wanting to be currencies don’t really understand what Bitcoin is meant to be: safe money. They look at things people use it for (getting money out of Venezuela, helping unbanked people in El Salvador make transactions, etc.), then they create coins to do those functions but they don’t do the actual work to make safe money as the Bitcoin community is doing. There won’t be one in a hundred thousand of these meme coins that actually create and hold value.
Another reality of life is that governments use money and the banking system to control their citizens. They won’t give up this control without a bloody fight. Strong decentralized developer communities like Bitcoin and ETH have a fighting shot to exit from the carnage intact and even stronger. (And DAOs will likely be helpful here.) Most of the meme coins being flogged in your social media feed right now will be vaporized.
Every idiot who invested $50 in Dogecoin before the spike now believes they are the next crypto savant billionaire. Day traders have mortgaged their homes, depleted their kid’s college fund, and maxed out their credit cards to buy scores of cryptocurrencies and NFTs that will quickly (or already have) become worthless. Do not do this. And if you already did, take corrective action now.
At this point the majority of entities in the crypto/NFT space are simply shitcoins, memes, and Monopoly money. Most of the “blockchains” being promoted today aren’t even developed or they’re complete frauds propped up by a Whitepaper bought on Fivver for $50. Dogecoin is a fucking (and literal) joke, and everyone promoting doge knows it, but is waiting to see how much they can cash out before they bail. Right now, 99.99999999999 percent of the NFTs available are shit. In fact, they’re worth less than shit, because shit is useful for fertilizer. The Bitcoin cult believes the currency is immune to reality and will always end each fluctuation at a higher floor. That will be true until it isn’t.
There is simply too much worthless shit being hyped as collectables and fine art in the NFT space. At some point, the NFT market is going to crash big time. There will be margin calls, millions wiped out, and scads of negative publicity, which will induce investor panic. When that happens, don’t expect people to make distinctions between all the shit flooding the zone and legitimate players like Bitcoin and ETH. You could see the equivalent of a bank run in the digital space. If so, it wouldn’t surprise me to see Bitcoin settle below $5K for a while. I’m not saying this will happen, but I am saying it’s not crazy to prepare as if it might. I do think ultimately Bitcoin rebounds and goes much higher, so it’s a solid long-term hold.
In 2018 I predicted that when things ultimately shake out, there will be two major cryptocurrencies in use on earth. (One “white sheep” accepted as legal tender with many governments and finance entities subject to higher regulation, and another “black sheep” less regulated one, servicing the most fervent libertarians and privacy seekers.) Nothing that has happened thus far has changed my opinion on this. But all investments are like alligators. If you don’t have enough money to feed them, they eventually eat you. The people who are buying big now on margins and other credit will likely get slaughtered during the shake out.
The other relevant dangers to be aware of in the crypto/NFT space right now are:
Now here’s the thing about these dangers. They are the same fucking dangers that virtually every new innovation faces. You could have said the same warnings for the stock market, bond markets, fiat currencies, the traditional banking system, fine art, and collectibles. I only bring them up here because in this new developing crypto world, as in most disruptions, the technology develops a lot faster than its ability to be analyzed, regulated, or protected against. The vast amount of poser blockchains, worthless meme coins, and dead-on-arrival NFTs is staggering and millions of people will be victimized.
Having said all that, please don’t take any of this to mean that I am against De-Fi, blockchains, cryptocurrencies, or NFTs. I’m a proponent (and closet raving fan) of all of them. They will ultimately prevail. But what you should be cognizant of is that they all will look exponentially different than they do now, and there will be some massive mountains, valleys, and even some blackholes along the journey. The vast majority of cryptocurrencies that launch will fail and a vast majority of NFTs will return to the nothingness they were born from. The real problem-solving benefits of NFTs (tracking ownership, verifiable smart contracts, and possible royalties, etc.) are just beginning to be explored.
You should never judge a new development by how janky, inconvenient, or bulky it is now. Remember that lovely Motorola DynaTac 8000X mobile phone that Gordon Gekko carried around in Wall Street? Compare that brick (which cost $3,995) to the elegant supercomputer you’re probably reading this post on right now. Compare that authentic “calling from inside a garbage can” sound of the first Skype calls to the brilliantly functional Zoom calls you can do today.
When you’re looking at potential disruption at the scale we’re about to experience with Web 3.0, there are three good questions to ask:
We can argue that the most pressing problems facing the world right now are centered around money and the financial system: poverty, access to capital, income inequality, and inflation. And the one constant in all of these areas is government. More specifically the corrupt, incompetent, and unfair ways they use their financial powers to control and hold back citizens.
The most lethal part of their behavior is printing worthless money. Just here in the U.S., the government has created more than $5 trillion from thin air in the last year. Toss in the trillions more created by other governments in Europe, Asia, LatAm, etc. and the number are simply too astounding to be comprehended by you, me, or anyone on earth.
The only free cheese is in the mousetrap.
If you ask me whether Dogecoin or the recent $5 trillion stimulus program is a bigger scam, I’d have to rate it a tie. Elon Musk suggested that for Doge to be viable, it needs to speed up block time 10X, increases block size 10X and reduce fees 100X. I’d have to say there is a better chance of the Dogecoin developer community making those reforms than there is a chance the U.S. government stops printing worthless money. I believe within 10 years the dollar will be replaced by a cryptocurrency as the global reserve and NFTs will revolutionize content creation, royalties, and contracts. My intrigue with NFTs comes not so much from the art world, but how they will impact financial and legal agreements. In this realm, the things that aren't either currencies or equities probably will be NFTs. I believe there's a good chance all financial assets will get tokenized eventually and things like your term life insurance, car title, and home deed will be NFTs. Just as millennials’ generational investment strategy moved from offline to online, the following generations will migrate from centralized finance to decentralized finance.
So, big picture, for those of you keeping score at home…
Get in on all these things, not as a day trader, but for the long haul. Step back from the laser eyes crackpipe and evaluate things from the prosperity perspective: adding value, solving problems, envisioning possibilities. And know that these all are integral pieces of a much bigger and more important movement, the world’s migration to Web 3.0.
Schedule some time, shut off all your devices and do some critical thinking about how Web 3.0 will impact your job or business, and the industry or profession you’re in. How will it change the way you raise and educate your children? What will it mean for your relationships, where you choose to live, and how you communicate with those you love? How will it impact the ways you buy and sell? How would you use the tools that Web 3.0 provides to disrupt your own business? How will De-Fi, DAOs, cryptocurrencies, NFTs, and other blockchain-based technologies impact your day-to-day life just five years from now? Give this all some serious thought, because all this is…is the seminal moment in human history thus far.
HT: I would be remiss if I didn’t thank Art Jonak for his generosity in allowing me to bounce ideas and sections of this thesis off him, and then giving his advice.
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