The Incentive Revolution: Blockchain DAOs Change Everything About The Future Of Investing

I’ve spent the last few months helping to create SKTLs, a Space Cryptocurrency, whose purpose is to reward space enthusiasts for an expanding space economy and, even more importantly, to help fund the clean up of space debris. My work on this project has helped me understand that cryptocurrencies, block chain and smart contracts are creating an entire class of assets with new incentive structures that can be utilized through the Decentralized Autonomous Organizations (DAO) to create new incentives for our economy and society. But before I get there, but let’s talk about the current batch of cryptocurrencies and why you should avoid 95% of them.

Some of my friends who started getting into cryptocurrency in the last couple years believe that all the old rules of economics no longer apply. Even as I’ve been a vocal bitcoin believer and holder since 2013, I don’t quite agree with them. Here’s one rule that won’t change: It’s not enough to have demand for something; that thing must be scarce to have value. For example, air has infinite demand, but has little value because most people just get by breathing the air around them.

That’s partly why I continue to think that more than 95% of the current batch of the nearly 15,000 different cryptocurrencies that you can trade on nearly 500 different cryptocurrency exchanges are actually stupid, silly or just outright fraudulent. To be clear, 99.99% of the stupid or silly cryptocurrencies will head to zero and 100% of the fraudulent cryptocurrencies will head to zero. That leaves about 5% of the current batch of cryptos that will eventually still have value and will actually probably increase in value in coming years.

I’d also add that I fully expect that the SEC will eventually be sending cease and desist letters to the founders of thousands of cryptocurrencies at some point in the next few weeks or months. Any cryptocurrencies or token in which the creators received founder’s tokens or any other benefits are going to be classified as securities when the SEC looks at them. If they got economic and/or financial benefits but didn’t register with the SEC from the beginning, they’re probably in violations of code. I imagine that the SEC will give a grace period to most of them to get registered and that most of the good ones and many of the bad ones will end up being registered with the SEC. But there will be a lot of pain for even the best cryptos as this process plays out and I’m generally cautious on crypto for the near/mid-term because of this risk along with the fact that the crypto market feels quite crowded too.

As we worked to create a space-debris-cleaning cryptocurrency, we’ve made sure the new SKTLs cryptocurrency is not in any way, shape or form, a “security” as defined by the SEC. For example, there are none of those aforementioned “founder tokens” or any other financial benefit that the SKTLs creators get. Almost all of of the 15,000+ cryptocurrencies out there right now have large stakes of ownership held by each of their respective creators. On the other hand, all of the SKTL tokens are being either airdropped to the first 100,000 people with a US or Canada cell phone who register at the SKTLs Airdrop Registration page and an equal amount will be reserved to donate to cleaning up space debris and an equal amount will be reserved to be paid out as the space economy expands with new satellite and astronaut launches.

See, that’s where those new incentives and motives and organizational structures that the DAO enables start to come in. One of the reasons it’s so important to try to be empathetic as an analyst is because you have to understand incentives if you want to understand economics and financial markets. And by creating new incentives built upon the open blockchain network of smart contracts is where cryptos, or more specifically blockchain and the smart contracts that blockchain enables change everything.

Up until cryptos enabled a trustless distributed autonomous and anonymous transactions to exist, there were three major categories of finance: Ownership (equity), lending (bonds), and taxation. That is, if you had money at any other time in the history of humankind and you didn’t want to just put it under your mattress, you either bought something with it or you lent it to someone or you were forced to give it to the government. If you bought ownership into a business, you wanted it to grow its cash flow to create more money for you over time. If you lent money to a business you wanted it to generate at least enough cash flow to pay you back with interest over time. And if you sent it to the government, it meant that most of it would be wasted or used in corrupt ways and that hopefully a penny or two from each dollar would actually provide some protection or benefit for society.

But suddenly, as with our SKTLs Space Crypto, the incentives aren’t about cash flows or interest payments (taxes don’t go away though!). For the SKTLs crypto to create value, the space economy has to grow, space debris has to be cleaned up and people have to accept that a transparent and open cryptocurrency can use people’s profit motive to do a social good. I talked all about this in a recent radio interview that you can listen to here by the way.

Another example of how these new incentives are created by cryptocurrencies comes from the Helium tokens. The Helium token incentivizes people to help build a 5G network. This is done by connecting a Helium mining node referred to as a hotspot to your home or business wi-fi network. Once connected to your wi-fi network, you are rewarded when the network talks to your node or when someone uses the data from your node. This incentivization system means that Helium has created a wiki-fied 5G network where end users are putting the nodes in place to run the 5G network instead of the wireless companies having to do that themselves. Indeed, Dish Network has partnered with Helium to help Dish reach a critical mass of 5G nodes.

For the entire history of mankind, the economic incentives have slowly evolved from barbarism to nomadism to bartering to salt to gold to centrally-controlled currencies to cryptocurrencies. And that’s exciting in its own right — that we’re living through the latest fundamental economic revolution in currency. And it’s not just the currency revolution, it’s an Incentive Revolution and that’s where so much opportunity now lies. After our SKTLs Space Cryptocurrency launches, we’re planning to create a token that creates incentives for entities to clean plastic from the ocean. And we plan to create a token that creates incentives — that is, profit-motive incentives — to feed hungry people and shelter people who need somewhere to go. In twenty years, these new organizational structures and incentives that create wealth over time are going to make ownership of stocks and bonds less important. Blockchain-based DAOs will compete with the traditional corporate and not-for-profit organizational structures.

This is what I mean when I say that we shouldn’t underestimate the changes that cryptocurrencies, blockchain and smart contracts are creating for our society and economy — and our pocketbooks. The investment opportunities are here for us to make a lot of wealth in coming years and decades as we figure out ways to make the world a better place doing social good through profit-motive. But don’t forget that there will be a lot of pain and a lot of losses in a lot of cryptocurrencies along the way.

If you have a US or Canada phone that receives SMS messages and you’d like to receive 1000 SKTL tokens when the airdrop happens, simply be one of the first 100,000 people to sign up on the SKTLs Airdrop Registration page. The only thing you’re risking by getting the airdrop is your time, there’s literally no way to buy SKTLs yet. If your next cryptocurrency trade requires anything more than time, it’s probably too risky right now. So be careful out there!