This is a segment of the BlockWorks Daily Newsletter.
“Business counterfeiting is speculation. Business men always give value in exchange for income and therefore perform useful functions.”
– Andrew Carnegie
When asked about the competitive threat posed by the newly formed federal steel, Andrew Carnegie smirked that his true specialization was not iron but “manufacturing stock certificates.”
That negative comment was a symbol of the boom in industrial “trust” stocks of the 1890s, most of which thought it had nothing to do with business and speculation.
There were exceptions – the great monopoly trust formed in things like oil, sugar, tobacco, etc., naturally, turned out to be a good investment.
However, things like ropes, wallpapers, and ffin had formed trust that was not essentially a stock promotion scheme.
The collapse of the National Corde Company in 1893 – The “Rope Trust” caused widespread financial panic that overthrew many similar trusts in the business of “manufacturing stock certificates.”
The result may be a cautionary substance from Crypto, an industry still best known for its token manufacturing (not a value).
Most of these tokens do nothing. And most often represent different ways to trade useless tokens.
The crypto market remains so highly self-referential, but we have always hoped this would change over time. We will build a new financial system and bring assets and investors.
If so, they feel they should arrive anytime now – the technology is now sufficient, the block space is cheap and plenty enough, and the SEC is in remission.
There are signs of hope that it may be happening.
For example, there is a prominent boomlet of real-world assets that drive Onchain. This is largely thanks to the success of BlackRock’s tokenized money market fund Buidl (a product that is in many ways really outperforms the outward chain equivalent).
Stablecoin assets can also be expensive and can be launched. This morning’s MasterCard announcement may ultimately bring Crypto to the non-cryptic public by promoting payments through Stablecoins.
From the current $240 billion level, a recent report from Citi predicts that managed Stablecoin assets will skyrocket to up to $3.5 trillion by 2030.
(Note: I did math, but 2030 We’ve been away for 4 and a half years. Shocking, I know, but it’s true. )
If there’s something like a $3.5 trillion tokenized dollar on-chain, then investable assets will follow.
For example, I recently purchased two Pokemon cards and an on-chain bottle of whiskey.
It’s so easy, I’m thinking of both these investable assets – either such delivery or storage fees is a game changer.
Investing in cards and bottles is more fun than making 4% with Buidl or losing 100% with Memecoin.
Hopefully, there will be more options available for crypto investors to choose from any time soon.
Kyle Samani even believes there will be all Options: “Virtually all assets trade in essentially globally permitted systems like Solana,” he predicted in a recent report on the future of Crypto Capital Markets.
If so, that includes, of course, stocks and bonds.
It’s still difficult to imagine what these might look like beyond the current blockchain and defi token offerings. This is almost entirely self-referentially used in crypto trading.
But now the block space is very cheap and abundant, people are trying new things.
For example, Time.Fun is an experiment that symbolizes people’s time. Zora is an experiment that uses “Content Coins” to surface and prioritize information. Trump, a “celebrity coin,” is an experiment to turn emoliment into tokens. The Story Protocol is an experiment with programmable tokenized IP. The Believe App is an experiment that turns X’s posts into Memecoins (or “Idea Coins”) and offers to funding business ideas that they roughly represent.
Like most experiments, these probably fail.
But if Crypto Capital Markets keeps throwing spaghetti on the wall like this, then some new and interesting things should eventually stick.
Importantly, they may not all be cryptographic.
Wall Street is increasingly experimenting with recent experiments. TomaszTunguz points out that since 2018, only two companies with less than $100 million have been using IPOs in the US.
two!
The failure to offer new investors to invest in is at least partly because the IPO process has become so expensive. Tunguz estimates it will cost as much as $26 million to list it on a US stock exchange.
It is a very expensive way to raise capital.
In contrast, raising capital with Crypto is almost infinitely cheap.
In some cases, literally: tokens issued by Zora are “just for fun.” In other words, Zora raised share capital without selling its shares. This is a strange trick that can only be done with cryptography.
That hasn’t done much so far for crypto investors. For most investors in most crypto tokens, the returns were pretty bad.
Of course, many people are crypto-rich, but not about creating or investing in something useful.
Instead, it is primarily from token manufacturing.
Andrew Carnegie isn’t impressed. He believed that businesses should succeed by “giving value in return for revenue,” and not only provide new things to speculate, but also succeed.
However, he may sympathize with the crypto market, as the stock market was not that serious at the time either.
American steel was a type of financial engineering product that Carnegie departed.
