In the Wall Street Journal, Andy Kessler interviews Mark Cuban, owner of the Dallas Mavericks, a “shark” from the reality TV show Shark Tank, and a self-made tech billionaire. Kessler, whose work I have been reading for years, takes Cuban through an examination of cryptocurrencies and blockchain, and of where the value lies. Kessler writes:
“Weather insurance (Arbol is a great example). With a smart contract I’m soon going to be able to have the Mavs buy weather insurance where using a smart contract I pick the temperature and precipitation thresholds and the smart contract checks the National Weather Service for my ZIP Code or another chosen data source and on that day or period if the threshold is met, I get Ethereum deposited into my account automatically.
“No different than the internet of the 1995 where people weren’t quite sure but eventually they saw the network effect and value. Smart contracts are going to eat a lot of the software-as-a-service world.”
I kept pushing: “I’ve seen complaints about the costs of transactions. Even with Ethereum. Isn’t it still too high, for textbooks certainly, but even for other higher valued items?” Mr. Cuban answered, “It is too expensive. But that’s specific to original Ethereum. There are changes coming with Ethereum 2.0 and immediate options with Layer 2 enhancements from a bunch of companies.”
I noted that Coinbase, now a public company, “is very profitable because their fees are so high but it’s speculators who pay. Won’t lower fees drive usage long term?” “Coinbase is the Netscape of now,” answered Mr. Cuban. “There will be cheaper options.”
I just had to ask. “Does it matter if Ethereum is $3,900 or $39,000 or $390 for that matter for the future you lay out to unfold? There seems a disconnect between how crypto is used for smart contracts and its value.” Mr. Cuban quickly responded, “Doesn’t matter at all.” And that is the bull case for blockchain. Crypto prices? Not so much.
Action Line: The value in cryptocurrencies is blockchain and the smart contracts it enables, from art, to mortgages, to the food supply chain and more. If you don’t already, it’s worth your time to understand why.
