Ark analysts Yassine and Frank on Bankless
Yassin
Engineering + finance
Crypto in 2017, joined Ark
Frank
GPU mining in 2017
Previously data + cloud engineer
Ark typical week —
Monday – portfolio review
Middle of week – research, long-form writing
Friday – brainstorm with advisors and team
Every financial asset will eventually become a crypto asset
Generational shift from internet > crypto
Balaji – Blockchains:scarcity what internet:information
Easiest explanation of crypto is a distinct asset class, requires separate framework from trad assets
Continuation of “software eats the world”
Every bank needs a fintech strategy now, and soon every bank will need a crypto strategy
Spectrum of centralized vs decentralized trust
“There are no solutions, only tradeoffs”
Money requires most decentralized trust
Defi / web3 requires a bit less
Status quo / web2 is very centralized trust
Different revolutions evolving in parallel – Ark believes money revolution is most profound (Bitcoin)
Bitcoin is prime candidate to compete as global base money – the more boring and predictable, the better
Eth, Solana, Terra – tradeoff decentralization for higher throughput and lower cost
What does perfect balance look like?
Eth 2.0 vision – PoS, sharding, rollups – the upgrades enable it to compete with the alt L1s (unlike bitcoin where conservatism is a core value)
alt L1s sacrifice the decentralization for greater throughput and speed – makes them more similar to status quo (web2, centralized)
Bitcoin could be $1M+ by 2030
$28T market cap = 3x gold market cap
Becomes global store of value
Ark first gained BTC exposure in 2015 through GBTC
Bitcoin’s use cases are additive and zero-sum given 21M fixed supply
Supply shock given that majority are long-term holders
Bitcoin is Veblen good – demand increases as price increases
How it gets there:
1. Digital gold (replacing gold)
2. Corporate treasury (eg, Microstrategy, Tesla, Square)
3. Global HNW investment (seizure resistant)
4. Nation-state treasuries (eg, El Salvador)
Defi / web3
Crypto native protocols are generating much higher revenues per employee than trad finance
Power of open source, software eating finance
Uniswap = 20 people, $40M revenues per person
Chris Dixon: Uniswap may be the most valuable codebase per line
ETH market cap could > $20T in next 10 years
All ETH transactions = chain revenue
More and more tradfi revenue moving on-chain, plus new sources of on-chain revenue
ETH = Hybrid of global dev platform + value to token of being native currency to that ecosystem
$20T market cap = $180K ETH price
Financial revolution (ethereum) is more competitive than money revolution (bitcoin) – riskier / more uncertain
If ETH wins both financial and money revolutions (beats bitcoin and competing L1s), then ~$50T market cap
NFTs
From static collectibles to dynamic digital assets
NFTs are digital property rights = own our data for first time
Right now web2 (eg, FB) owns data
Incentivizes more spending on digital content
Gaming opportunity – Fortnite makes $5B in revenue for purely status based digital goods
Good example – in Indonesia, $SLP (from Axie) is being accepted for local taxi rides
Growth of metaverse – eventually online monetization and spending will surpass offline
In 5-10 years
Frank: proof points that crypto is becoming mainstream, being adopted, diversifying, no longer speculative like 2017
Crypto becoming popular for (some) politicians to support, and increasing regulation as positive for ecosystem
Yassin: unbelievable to be witnessing in real time, who knows what next 4 years will bring