ICOs Against the World Economy Bubble?

Miko Matsumura, the founder of Evercoin cryptocurrency exchange, was one of the pioneers of the first wave of internet boom as a Chief Evangelist for the Java Language and Platform. He has been active in the Silicon Valley for over 25 years and has raised $50 mln in capital for open source startups. As a board member of the Liberation Institute, which is known for providing scale and donation based clinical mental health counseling and services to underserved populations, he also has his philanthropic side.

Miko has been active in his support for the crypto community and acts as an advisor to several initial coin offerings (ICOs) including the ICO of NAGA, which ends on Dec. 15, 2017.

We asked Miko some questions about the current state of the crypto economy and other related issues:

Cointelegraph: Do you think the crypto-economy is in a bubble?

Miko Matsumura: I believe the entire world economy is a much bigger bubble. But to be more concise, I think there are some things that make cryptocurrency a much more fragile bubble. So the variable that matters most is not bubble or no bubble, as all economic activity can be viewed as a bubble. The variable that matters the most is fragility, and fragility is always relative to specific threat scenarios involving a collapse.

CT: Could you explain a bit more about this fragility?

MM: One source of fragility is the inability to exchange cryptocurrencies for many useful things. In particular in economics there is something called a Keynesian accelerator, which is related to the healthy circulation of money in an economy. To put it simply, if a customer buys a loaf of bread from a baker, the baker can turn around and use that same money to fix his shoes, and the shoemaker, in turn, can then buy flowers from the flower seller. This is because money is widely accepted. One of the signs of fragility of cryptocurrencies is that they are almost entirely used to buy other cryptocurrencies, with a few notable exceptions such as virtual non-fungible trading cats and of course the ubiquitous Bitcoin debit card which can be used to pay for most things.

CT: How can cryptocurrencies surmount this challenge?

MM: I am advising a company that is working on a crypto point-of-sale device that should enable people to buy everyday items in retail stores for cryptocurrencies. But until we see a strong and useful interconnect between the crypto economy and the "real" economy, we will not experience economic stability for cryptocurrencies. One very significant form of exchangeability is the ability to pay taxes with cryptocurrency, which is only available in very few places. Another variable that could cause the bubble to "pop" could be a regulatory backlash by governments. This could be due to too many scams or significant harm coming to retail investors.

CT: What do you think about Blockchain tech and developments like ICOs?

MM: In certain African countries, Zimbabwe for example, the local currency has failed the people. One guy I met at a Bitcoin conference was handing out 50 tln dollar Zimbabwe bills. There are currencies (like Dala) that have the potential to reach many millions of underbanked Africans, and so I am thrilled by the potential of decentralization to lower the cost structure of delivering utility services to a much wider collection of people.

CT: What do you think about ICOs?

MM: ICO is a mixed bag. The flood of capital has led to some pretty incompetent people taking money, which of course will lead to a bad reputation for cryptocurrencies. Lots of energy and time is being wasted. However, it's important to see all of these factors in balance. If you look at a half trillion dollar crypto "ball," if you assume that five bln has gone into ICO (the true amount is hard to measure because of the run up in the prices of cryptocurrencies) it's actually only about one percent of the total value of all cryptos.

CT: What makes ICOs investment worthy?

MM: I can share with you some ideas about what makes for a credible ICO in my opinion.

First and foremost I care a lot about the people. One big factor is chemistry and enthusiasm because I am a value-adding early stage investor, I preserve my enthusiasm and look for teams that spark something in me. Secondly I think there has to be a connection between what I call "heaven and earth," or the broad platform play (take over the world) and the narrow "solving a problem" play (just get some customers to pay you). It helps a lot if there are Metcalfe’s Law network effects like a social graph and data effects on top of the network effect you get from your token. Finally, I need some real confidence that the team can do the job. One of my favorite things is a team that has already shipped an application that already has paying customers. This takes most of the risk out of it. If a team is unable to deliver software, then there's no way they can produce any economic value.

CT: What factor helped you decide that you would become an advisor to NAGA?

MM: I agreed to advise the NAGA group because they already shipped SwipeStox which has a social network effect and already trades real-world stocks. Connecting that with the broader vision for a unified trading platform for public stocks, cryptocurrencies and virtual assets combines practical and measurable execution with an "eat the world" vision. Also I liked Yasin Qureshi, executive director of NAGA.

CT: What do you think about Bitcoin Wall Street FOMO? Do you think Silicon Valley has similar fears?

MM: I think Fear Of Missing Out (FOMO) is dangerous because it's emotion driven. I think there is a strong Metcalfe's law quality to the growth of Bitcoin and other cryptocurrencies, but I think the process of investment should be free of emotional attachments. I know this contradicts my earlier statement about being enthusiastic about founders, but I think investing in a startup is different from investing in a multi-hundred billion dollar coin.

Silicon Valley seems to be slowly pushing into Bitcoin and crypto. There's a culture here around disruption, so there's a comfort level with innovation and creative destruction.

CT: Do you think you are an ideological believer in cryptocurrencies?

MM: I am certainly passionate about the potential for cryptocurrency and I believe we are still in the early stages of a transformation of the world economy that will lead to the largest wealth transfer in human history, certainly in our lifetimes.I certainly follow an ideology when it comes to cryptocurrency, but I am not a crypto-anarchist, crypto libertarian or crypto utopianist. I believe in what I call ‘Open Source Money’ which is about a competition between a bunch of currencies about who can be the most performant, the most inclusive, the most secure, the most trustworthy, the least fee-laden, the most exchangeable, the most widely accepted currency. So you could call me an Open Source Money Maximalist.