 Live from Nassau in the Bahamas, it's theCUBE, covering Polygon 18, brought to you by Polymath. Okay, welcome back everyone. This exclusive live CUBE coverage here in the Bahamas for Polygon 18, it's a crypto event, it's talking economics, it's all the players in the space really discussing the future. I'm John Furrier with my co-host Dave Vellante, our next guest, Bill Tai, friend, Facebook friend, industry legend, venture capitalist, kite surfer, his Twitter handles, kite VC, follow him. He's also involved in bitfury and a lot of Bitcoin related activities. Been a mentor to others, great to have you, Bill. Thank you, John, really appreciate you having me on the show. You tweeted in 2010, this Bitcoin thing is interesting, check out this white paper. Okay. Yeah, that was... Just a little moment. You know, back then, I didn't know it would be maybe a seminal moment. I was just lonely. So in the backstory there, a very good friend of mine is Philip Rosdale. And he had approached me when he was starting a site called Second Life, where you basically created digital avatar, maybe of yourself, maybe not. And you have this kind of, you know, world where you have people in an unstructured environment. And in the very early days of Second Life, when people were kind of just milling about, I said to Philip, I said, hey Philip, you know, maybe we should create a currency. I said, you know, like if you think about it, think about what is Las Vegas? Las Vegas is this pile of sand, but there's this metropolis on it. How did that happen? I said, you know, if you took 10 people, sat them in a circle, and you put one poker chip in the system, and said pass it to the right, and everybody did that a million times a year, everybody would have a million dollars of income. And then you could take chunks off and build a casino and build a resort and you'd have Las Vegas. So I said, let's do that. And so the Linden dollar was born. And so soon there was this thriving economy in Second Life that just, it was quite amazing to see. And so when Bitcoin came out in 2009, as soon as I heard about it, I wanted to see what it was. So I went to the site and I read the paper and it just seemed really cool. And so I started to play with it a little bit and by 2010, I just thought it was really cool, but no one else had seen it. So I took the Twitter to say, anyone out there using this P2P digital currency, you know, and- It's funny, our first web, you know, I started SiliconANGLE in 2009, Dave and I partnered in 2010. Our first website that developed, we didn't want to pay Pali, we wanted Bitcoin. It's 22 cents, I think, at the time. And we used the site for about a half a year and then we changed it and back paid Fiat. But if you think about where this comes from, you brought up Second Life, okay, online virtual world, really ahead of its time, but really set the stage for what we're seeing now. Gaming people who know virtual currencies thrive in crypto. So I'd like to get your perspective. I know you've done a lot of investing in mobile and gaming and whatnot. Where does that cross over? Because there's been a lot of virtual currencies going on in games for a long, long time. How is that influencing and impacting this industry? Well, you know, it's, I guess, you have to ask, when you ask, you know, where does the real and where does the digital, like, do they cross and what are they? What is currency? Is the U.S. dollar real? Right next to you. Let me pause for a second to reach out on my phone because did you see a tweet today from Sheila Bear? I have to read this. Okay, so I just saw a tweet from ZeroHedge earlier today. Sheila Bear on Bitcoin. Quote, I don't think we should ban it. The green bills in your pocket don't have an intrinsic value either. Well, look, the government wants to get rid of paper money. The people want to get rid of paper money. But what is it really, right? I mean, so. Back by the U.S. military, maybe. I don't know, I mean. What is it? What is it, right? Right, so I don't really see a difference. You know, they're kind of the same thing. You know, it's just, it's something that people believe in as the embodiment of value exchange, whatever it is. So if it's a green piece of paper, if it's not, if it's a shell, if it's a pebble. I mean, there's a fascinating book that you can read called The Ascent of Money by Neil Ferguson. He's at Stanford now at the Hoover Institute, but he got widely known after the great financial crisis unfolded. He basically wrote a book called The Ascent of Money, which tracks the history of value exchange across civilized communities. For thousands of years, from pebbles, to shells, to feathers, to credit, to false swaps. And coined the term Chimerica, which is sort of the interdependence of the cash flow and what became apparent to me when I read that was that the world of ICOs is actually no different than anything we've experienced in civilized humanity. You know, if you think about even in the United States, in the 1800s, at one time, there were over 200 currencies circulating at the same time. If you think about the formation of the United States as colonies, a bunch of guys get off the boats, they draw lines around the forest, here's Connecticut, here's Vermont, here's New York, here's Virginia. Let's do an ICO. They all did an ICO. If you think about it, they created their own unit of currency per their community and geography. No different than what's happening today. When Lincoln was shot, there was a $5 Confederate bill in his wallet. I mean, the Confederates had their own money. Yeah, and I also, you brought a point up in the conference you were in in Dubai, which is I thought was really intriguing and provocative but also kind of real. The oil dollar association post World War II, you essentially was an ICO, you're securitizing oil. That was an ICO. It was the privatization of oil, right. Yeah, so you know that the modern currency system that we have today that is commonly known as the PetroDollar, so it's actually a relatively recent phenomenon. So if you think about, of course the quote US dollar was around a little bit longer than 1944, but it was really at Bretton Woods that the dollar had its sort of birth to become the world standard currency. And you know, this is maybe a little bit of an oversimplification, but think about the picture after World War II. So you basically have every major productive economy have war, destroy themselves. The US enters late, finishes it all off completely. And you basically have 100 million people milling about. A little bit like Second Life, right? So what do you do? Gotta make a productive, create a currency, set of currencies. So for every community of interest, like every token community of interest, you say, well, here's a lira, here's a frank, here's a pound, here's a mark. Let's take gold, reference the dollar to gold and reference every one of these currencies against the dollar. Gentlemen, start your engines. Right, so how is that different than an ICO? Okay, so that was fixed to gold for a long time until people started to game it. And when the French accumulated a lot of dollars and they realized, whoa, there's more dollars than there are gold, I'm just gonna go cash all this in. So they literally came over to take all the gold and then the president took it off the gold center. So it had to couple to something. So what is the utility token that that became? That became referenced to petroleum because the US had basically forced everybody in the Middle East to accept dollars as payment. And what that did was it created the dollar as a storage of energy. So you could basically take a token of oil and as a separate nation, you could store that through your trade if you had sort of a surplus and you provided yourself energy security. Well, most currencies, right? Historically, I've had a pretty short shelf life. Presumably the same will be true in the blockchain world. Don't know. The crypto world. If you look at the history of humans over six million years and it's arguable is it four or six or whatever it is, you're right, like they've always been multiple currencies all the time and very rarely have they ever become sort of like super dominating currencies. That is also a very recent phenomenon, I think driven by the Industrial Revolution and a combination of the petrodollar and scale economics in manufacturing. Well, and overwhelmingly here at this event, people feel like security tokens as an asset class are going to vastly overtake utility tokens. You know, actually, securities are a whole, I mean, regular security. That's an interesting subject altogether, right? Okay, so there was a time in my lifetime when I was a securities analyst at Alex Brown in the 80s. And in that period of time, everything traded at 10 times earnings, right? So you had a barometer for, a stock should be valued at this because it should have a PE of actual real earnings. Independent of its growth or anything else. Yeah, and if it grew, you had a peg ratio. So you'd have a little bit higher growth and so a little higher PE. But what's happened to securities over time of that ilk, okay, you had to get these companies profitable to get them public in that era. And then over time, the sort of like network effects have come in and communities of interest have formed around companies. So, and the structure of securities has moved from give me something with earnings, multiply it by a number to get the value to give me a share of something that has no voting rights and no earnings. Does that sound like a token? That's Snapchat, right? So you literally have, you know, Google, Facebook, all these companies now issue shares that don't have the characteristics of equity shares. They don't vote. What are they now, right? So tokenization is sort of a natural extension of that. Do you see that? They don't have dividends either, I mean. Do you see that as a fundamental shift in the value equation, the perceived value equation? Both, is it sustainable? I think it's basically, so, you know, I go back and forth on this because, you know, is it a trend line or is it a return in the past? Right, so what is a Confederate dollar that was in Abraham Lincoln's pocket? It's a belief, right? So what is a share of Snapchat? It's a belief. It doesn't have earnings. It doesn't give it a... And a token is a belief. Right. But the trend is securing something, right? So the trend we're seeing is obviously the ruling. First of all, the ruling in Switzerland was interesting. You now have a trading, so an asset, so security asset and then trading. So they kind of went a little bit deeper, which I think is helpful for the community. But what are they securing? So the trends we see as percentage of revenue, non-dilutive and equity, classic sense, so kind of a token. And then some sort of either buyback options. People are doing things like that. Are you seeing patterns like that? What are you seeing for security token to make sense? It's all credited, paperwork's known. Yeah, so, you know, it feels like, so some people refer to sort of Bitcoin as digital gold. You know, and in that sense, like gold is a commodity, but is the root of securities. You know, whether it's gold ETFs or something because you perceive a limited supply and you perceive a storage of value. So that is where I think Bitcoin sits. But then I think this whole other category of utility tokens that may be considered security tokens by definition of law, that resembles the petrodollar. And as we were talking about earlier, you know, gold used to represent or a dollar used to represent a share of gold, but it didn't anymore. So what was underpinning it? It was basically, in my opinion, the ability for that token to have utility as an instrument to purchase oil for your energy security. And so I think that's kind of where the utility tokens are today. You're a leader in the industry and you're well known. Communities need to thrive. And factions form, currencies form, and can be very productive. It also can be counterproductive. So what's the unwritten rules that you guys are putting forth? Are people meeting? Are you talking? You know, and sometimes as people make money, which a lot of people are making a lot of money right now, even for something for the first time, didn't have money, make money. You know, egos kind of come in. So all these are normal things. But again, this is a societal community dynamic, but super important. Institutional investors are coming in. Big money. This isn't Burning Man. This is, Burning Man's cool, but you can't model this industry after Burning Man. Maybe you could, I don't know. What's your take? Well, you know, it's, I think that the guiding principle really needs to be looking out for the greater good. Because I think that is the issue that everyone's trying to solve for. And it's not just endemic to Bitcoin and blockchain. It's a societal issue that's been with us since the creation of civilization. And I don't know how to solve for that, but I think you need people to stand up and just make sure that people are thinking about that all the time. You know, and I think over my career, I think I started as kind of like a geek hacker sitting in the back of the room working on little microchips and building stuff. And I still do that on weekends sometimes, but for whatever reason, I've been thrust into this role now where I do have a set of communities of interest that started actually around kiteboarding, but it became sort of a larger community around entrepreneurship. And we've actually, I have a 501C3 that supports ocean causes and entrepreneurial things. And it's called Acti Global. And we have a couple value statements. We actually, we're codifying it. So we actually have a little pin. You know, and the Acti stands for athletes, conservationists, technologists, artists, and innovators. And all of us collectively, we combine our energy to work on causes. Some of the things that we support around ocean conservation and the preservation of ecosystems, but we also work on a lot of other entrepreneurial efforts to help each other. But the thing that I've realized with our group is we've been very productive as a community. And you see a lot of companies that are born in our community, funded in our community, like, you know, whether it's Canva or Zoom or, you know, any number of projects that turn into community-based companies, because the group of people, they think and they stand for something greater than themselves. So that's kind of, you know, one principle. It's sort of like, you know, how do you place your values as something to support the greater community? And that's something that I think if everybody would just think about that a little bit and stand for something greater than themselves, the world would be a better place. And on that note, the second ethos that we operate to is that we strive to leave every person or place we touch better than before we touched it. So when you see us like kiting at a beach, you'll see us picking up garbage, too. You know, so we don't go someplace without trying to improve it a little bit. And I think we help each other on the companies, too. And then I think the last thing that people really should try to do, everybody in this world of technology has a little bit of a superpower, whatever that is. You know, they wouldn't be doing the things that they're doing if they weren't, like, totally insanely focused on a piece of technology. They know something that other people don't. And if everybody would just try a little bit to use the powers the universe has granted them to empower others, to unlock other people, the world would be a better place. So I think, you know, I think all these factions, if we could just get people to stand for something greater than themselves, work to make people and places better off than before they touched them, and empower other people, I think we'll have some great help. You know, empathy is a wonderful thing. And also, you mentioned know your neighbor. You know, that's a big thing. We're doing our part here on theCUBE, bringing our mission content. Bill, it'd be great to have you on and we'll get that clip out on the network about your mission. Great stuff. And great to see you. Awesome. You too. Your great leader, people look up to you and certainly we're glad to have you on theCUBE. Thanks for joining us. A more live coverage after this short break here, theCUBE in the Bahamas for Cryptocurrency, Token Economics, Polycon 18. We'll be right back with more after this short break.