391: Hedera/HBAR: My Asymmetric Dream

Last week I did a back-to-school episode for you on asymmetric risk. I told you that my primary asymmetric risk related investments are in cryptocurrency. As a reminder, asymmetric risk investing means you throw in some money that, if you lose it, isn't going to kill you. But on the other hand, if things go well, could make you rich. Cryptocurrency has done both for a lot of people. In fact, in many cases it has done both to the same people at different times (yours truly included). Let's take a step back and review this whole crypto thing a little bit for those who haven't been involved in the rollercoaster ride for the past decade and a half. It all started back in 2009 with a white paper circulating amongst computer scientists authored by someone calling themself Satoshi Nakamoto. The idea was a digital currency with no central authority like the US government or some big company. This currency would be tracked not by one ledger but thousands. In keeping a "distributed ledger", there would be no need central authority. This currency would also be immutable and something that no one could simply confiscate like a bank putting a lien on your cash. This is a massive oversimplification of bitcoin and purists are sure to correct me, but that was the essence of the original bitcoin thesis. It was simply a way to exchange value without a middleman. Bitcoin has interesting parallels to gold. It requires "mining" to make it. Mining in this case requires computational power to solve math problems. Back in 2009 nerdy computer types were mining thousands of bitcoins on their desktop computers. Now it takes serious expensive hardware and warehouses to mine bitcoin. Very few people thought it would be worth anything anyway. In fact, the first commercial bitcoin transaction was made on May 22nd, 2010—almost as a joke. 10,000 bitcoin were accepted as payment for two supreme pizzas from Papa John's. Last year, the cost of a single bitcoin had exceeded $70K. So, I hope that was a good pizza. Anyway, over the next few years, bitcoin saw its ups and downs but the regression line was clearly positive and extremely steep. Within the last 5 years or so, there have been bitcoin futures and publicly traded financial products as well. It has clearly been adopted by the mainstream. And, in my humble opinion, the chances of it going to zero are about…zero. Now despite its volatility, bitcoin has been recognized largely as a storage of value. This is another parallel with gold. And also like gold, it's a little bit difficult to use in everyday transactions. You see, the bitcoin network is extremely secure but very slow (in part because it is extremely secure). It would make your morning stop at Starbuck's unbearable. Other technologies like the lightening network have offered potential solutions to the speed issue, but for now, bitcoin really is a gold-like commodity. In the meantime, tech entrepreneurs have recognized that distributed ledger technology could be used for more than just money. Distributed ledgers are now being used to create a different kind of internet—the so called Web 3.0. Web 3.0 is owned by the user. So think about internet businesses like google and Facebook now. You use them but they are being monetized by a single company that you don't own. Web 3.0, in theory, creates online businesses with similar functionality but now, instead of there being a separate owner, the platform is owned by anyone who owns a token to that business. So…no more big brother like Facebook or Twitter telling you what you can or cannot post. And you aren't making money for corporate America by using these platforms. Anyway, so all these "crypto" projects outside of bitcoin really aren't about exchanging value. They aren't really meant to be money. Instead, the tokens in these alt coins (anything but bitcoin) are more like owning stock in software companies. Some software companies like Ethereum build infrastructure. Others are more specific and build functional businesses or games using the infrastructure software. Anyway, hopefully you get the idea. Web 3.0 is coming for sure. It's just a matter of time where it just infiltrates everything you do on the internet. You may not even know you are using software built on one of these tech platforms. It will just be one more thing that makes our lives easier that we take for granted. Anyway, a lot of these new programs and services require infrastructure that is not only on a distributed ledger and safe like bitcoin. But they also need to be fast. Hedera (aka Hedera Hashgraph) was a project that I learned about and invested in about 6 years ago in a presale. It is arguably the fastest and most secure distributed ledger network in the world. It also currently has the most transactions. In all transparency, I own a fair amount of its native token, HBAR. And, I have been praying for it to explode like many lesser cryptos have for the last 5-6 years. At one point it had gone up about 5X from where I bought it but I never sold. Its technology is so good that I thought it had a lot more upside. And I still do despite it being half the price I bought it for a few years back. Bottom line is that I have not lost faith. The project has met every goal on its timeline. It just hasn't seen the kind of price action that you might expect from what it has accomplished. To be clear, this podcast is not an endorsement to buy HBAR but it's an example of one of my asymmetric bets that I thought I would share with you. Cofounder Mance Harmon has been on the show before and was kind enough to join me again to tell you about the project and give us some insights into the crypto world today. So if you're curious what kinds of asymmetric bets I'm making, make sure to tune in! Buck P.S. If HBAR goes $30 I probably won't be doing this show anymore LOL!