May

28

 I have a friend, fairly young (today is his 20th birthday) guy in London. He has no university degree, and has spent not very much time there. Working as a project manager at some IT company, he was earning about what my daughter will be at Morningstar (where she will start in about two weeks—let's hear it for the econ major, better yet, let's hear it for mom and dad who warned about the perils of an English or history major—and can point to the lack of jobs those folks have now that they've graduated) at a ridiculous salary (not that she's complaining).

He just snagged a job at one of the major consulting companies building a blockchain group as the program manager at about 4.5 times (no, not a typo) what he was earning before (with barely 4 mos experience). At first I didn't believe him, but I heard overnight from another friend that an announcement had circulated among a few folks at the consulting firm confirming that this fellow was starting on Monday as program lead.

Absurd? Perhaps—but that's what the market rate is. For those of us who lived through the dot-com bust, it suggests just how out of kilt the area seems to to be—not merely the valuations of the currencies but the perceived opportunities by corporations. At the height of the dot-com bubble, some kid with minimal work experience and a high school diploma could create an idea (like Hotmail) and implement it with 2 days of programing (like Hotmail) and then sell it for a cool $100 million (like Hotmail). Or be hired as a COO for a start-up at a $200 million valuation at a ridiculous salary—and no product (though they had a photo of a whiteboard sketching out a potential produce with a price point no one knew had any basis in reality. Or…you get the message. But if companies are willing to invest in the area to the degree that it seems to be with him, I have to wonder if we're looking at the side of the picture, not its center.

Blockchains are in that situation, as the money flows into them. Or are they? Real products doing real work with real pricing (for the systems supporting the blockchains). So while we can argue about ethers vs bitcoins and whether they are too high or too low, the basis for those currencies to exist is undergoing explosive growth. And that's really the story here. You might get burned on the specific currencies, but investing in blockchains is a low risk-high reward proposition right now. And the question du jour is how to invest in blockchains, not the currencies.

Levi Strauss made as much as many of the 49er miners, and he kept doing so long after they had passed from the scene. Selling the pickaxes may not create as much wealth as using them, but it's a lot safer and will yield a lot of profit.

Sentiments about cryptocurrencies may be hard to assess. Sentiments about blockchains is another matter altogether. That's not only real but with significant money behind it. While I am happy for my friend, I think he would acknowledge that he's not sure how to explain the orders of magnitude change in salary except as suggesting a lot of confidence in this area as one of the building blocks of the future (or present, I suppose).

This thread may be about the blockchain du jour, cryptocurrencies.

Perhaps it should be about blockchains, the emerging technology of informational interchange.

Henrik Andersson writes:

I believe this sentiment described by David to be deeply flawed. The current bubble is in blockchain, the technology. Typically you hear these type of arguments from non technical, consultant type of people. The reason for using a blockchain in the first place is its trust less nature, it needs to be public, open and will be open source - thus this is not where the economic value lies. The banks and the consultants preying on their fear of being disrupted are using blockchain as a buzzword but without a token, it becomes nothing more than an inefficient database. R3 is maybe the best example - they recently realized tis and have abandoned the blockchain technology altogether! There is nothing revolutionary in a private blockchain, it is a shared database, not an immutable ledger. The economic value will lie in the tokens of these blockchains - they become the fat protocols that now can be monetized directly for the first time. The value lies not in the many times free software underlying these tokens. This is a good think piece: "Thoughts on Tokens".


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  1. James Nesfield on June 6, 2017 8:02 am

    The event aspect of blockchain when configured to a charts of accounts can compress the time lag in reporting thereby rendering a real time accounting system that can roll into the value of the asset. So no more quarterly reporting or snap shots, window dressing and what not the lag is the time it takes the network to process the transaction and render it to the actual daily earnings.

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