Expert: Mark Carnegie – The Opportunity in Ethereum

HOSTS Alec Renehan & Bryce Leske|9 October, 2021

Meet your hosts

  • Alec Renehan

    Alec developed an interest in investing after realising he was spending all that he was earning. Investing became his form of 'forced saving'. While his first investment, Slater and Gordon (SGH), was a resounding failure, he learnt a lot from that experience. He hopes to share those lessons amongst others through the podcast and help people realise that if he can make money investing, anyone can.
  • Bryce Leske

    Bryce has had an interest in the stock market since his parents encouraged him to save 50c a fortnight from the age of 5. Once he had saved $500 he bought his first stock - BKI - a Listed Investment Company (LIC), and since then hasn't stopped. He hopes that Equity Mates can help make investing understandable and accessible. He loves the Essendon Football Club, and lives in Sydney.

Mark has more than 30 years of experience as an entrepreneur, investor and corporate adviser in New York, London and Sydney. He co-founded leading Australian boutique corporate advisory, venture capital and private equity firm Carnegie, Wylie & Co with John Wylie in 2000. In August 2007, Carnegie Wylie was acquired by leading Wall Street bank Lazard Inc. Mark then went on to found M.H. Carnegie & Co, managing more than $900 million on behalf of institutional, wholesale and high net worth clients. As a corporate adviser, Mark has advised Qantas and Coles Myer on general strategic matters, Westfield on its $22 billion merger and Qantas on its JetStarAsia start-up in Singapore. Mark holds a BA from Oxford University and a BSc (Hons) from Melbourne University. He is a former Treasurer of the Oxford Union.

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Bryce: [00:00:15] Welcome to another episode of Equity Mates, a podcast that follows our journey of investing, whether you're an absolute beginner or approaching Warren Buffett status. Our aim is to help break down your barriers from beginning to dividend. My name is Bryce, and as always, I'm joined by my equity buddy Ren. How's it going? 

Alec: [00:00:29] I'm very good. Bryce pumped for this episode, I should say excited. I always say it and I am excited because you know, there's one topic that seems to dominate financial markets at the moment, and that is crypto, bitcoin, Ethereum, NFTs. There's so much going on a mission and you're even doing virtual horse racing. It is the talk of the town. But in this episode, we're going to talk about perhaps the most exciting innovation or technology that's in this space that probably doesn't get the credence and attention that it deserves. It's not the currencies that sit on top, but it's actually the blockchain that sits underneath and some of the really exciting things that are coming out from this innovation. 

Bryce: [00:01:12] Absolutely. So we're going to unpack blockchain, fintech and I guess everything in between a bit about China as well. So to do so, we are joined by an expert and it is our pleasure to welcome Mark Carnegie. 

Mark Carnegie: [00:01:27] Well, thank you very much for having me, but please don't be out there marketing this as though I'm the expert on this. I'm one of these antiquated dinosaurs who is trying to understand might. Well, we're

Alec: [00:01:40] all trying to understand. So that's good. We can say you're more of an expert than us. Yes. 

Mark Carnegie: [00:01:48] Well, that really, really, that is an embarrassing statement. But young, bright kids. But you know, the fossil. 

Bryce: [00:02:00] So we're going to talk about a bit about the the blockchain and some of the business models that are coming out in the space around the around fintech, potentially a bit about the investing landscape, what's going on over in China and co.. So stick around for all of that. But for those of you who haven't come across Mark before, he has more than 30 years of experience as an entrepreneur, investor and corporate advisor in New York, London and Sydney. He co-founded leading Australian boutique corporate advisory, venture capital and private equity firm Carnegie Wiley and Co with John Wiley in 2000. In August 2007, Carnegie Wiley was acquired by leading Wall Street Bank Lazard Inc. Mark then went on to found MH Carnegie and Co. and now manages more than 900 million on behalf of institutional, wholesale and net worth. High net worth clients. So a lot of experience there, Mark, so let's get stuck in. 

Alec: [00:02:51] So Mark, we want to start this conversation with a comment you made recently in a presentation. You said that Bitcoin is a sideshow compared to some of the new disruptive blockchain business models that are out there now. Bryce, as a avid Bitcoin investor, was thrown by that. So let's start there. Why? Why is bitcoin a sideshow and what are some of these new business models that are perhaps more exciting? 

Mark Carnegie: [00:03:21] Well, so I'm a big believer in Ethereum, and I think that it can just carry far more functionality than bitcoin. We'll come back to bitcoin because there's a sort of existential question about which feeds into this whole question about where hard assets should be in your portfolio. So it's a bit of a tangle at the moment. If I can just say park bitcoin for a second, I'll make my case against Bryce in a second. Ethereum, right? Ethereum's seems to me to be an incredibly, incredibly disruptive functional innovation in the world at the moment. The idea that you can have trustless statements about how assets get moved around the world on the blockchain is a huge, huge deal to me. And everything that cascades out of Ethereum, be it Binance, a thousand other things, the whole growth of DeFi and then NFT and stuff like that. I bifurcate the world. Bitcoin is a sort of gold attacker, whereas Ethereum is an attack on 15 per cent of world GDP and 50 per cent of world market cap. And so Ethereum and everything else seems to me to be much more interesting intellectual exercise and potentially way more disruptive for the world than bitcoin. 

Bryce: [00:04:45] Wow. There's some big statements there. That's awesome. I'm not going to go head to head with that, that's for sure. So let's start with blockchain for those that may not be familiar with what it is. How would you explain it to the uninitiated? 

Mark Carnegie: [00:05:00] So Buffett and Munger have got this great, great theory about always invert and the most powerful one of their inversions, I always thought was, if you had the internet and you had internet news and somebody came up with the newspaper. Yeah. How much traction do you reckon newspapers and magazines would get in a world where you already had internet news? Not a lot. Exactly right. You just go. Why would I possibly want printing presses? Why would I possibly want a 24 hour or a three week delay or a 12 hour delay on the news coming from where it originated, where it got disseminated via all of these trucks and newsprint? It's just not. Yeah. And so the answer is that newspapers and magazines are absolutely still born in a world where the internet exists before they arise. They did scramble that you need to think through is the same for money. And this takes a lot more work. But in the end, at the moment, most of your money other than the 50 bucks you got in worldwide, is really just bits and bobs in a banking system. Yeah, it's just lines in an account, and it's supported by a government saying we'll step in if this stuff goes bad and ensure your deposits, which is really what happened in the GFC. Within living memory, the world's financial system blew up. It was insolvent across the board and people and governments realised, actually, we've got a huge problem here, and we're just going to have to guarantee everything in the financial system, no matter how rotten it is from within. Yeah, the answer is if you could find a way where you could actually point to the blockchain and say, that's my money, I get to keep it in all circumstances. You just wouldn't be paying the insurance. You wouldn't be paying the regulators. You wouldn't have this messed up system of Basel three with the way the world banking system works, which trust me, nobody understands. Yeah. Like I've talked to the people who write those rules. I talk to the people who interpret them. I talk to the people, they litigate them. Not a single person got a clue. What's going on? None. Yeah, it's just the greatest, greatest sort of. Let's all trust each other and pretend the emperor does have clothes when the emperor has no clothes whatsoever. Whereas on an Aether blockchain, the answer is you can point to it. It's everybody to great. It's on the blockchain. That's what I mean. So if you had the Aether blockchain fully distributed, you just wouldn't need the fiat currency system. You wouldn't need the regulations, you wouldn't need anything like that because it would all be there for everybody to agree. 

Alec: [00:08:12] It's it's a it's a fascinating topic, and it's one that I'm sure a lot of people are struggling to get their heads around. I mean, I'm struggling to get my head around it. So I think if we if we get a bit more practical to sort of ground it in, you know, the change that Aether especially has actually brought, I guess, or is bringing about. If we compare the world before blockchain to the world with blockchain or after blockchain, what are some of the biggest changes that we're saying or that we should expect to see in the future? And I guess in particular, what is it the blockchain is doing 10x or 100x better than the previous model? 

Mark Carnegie: [00:08:51] Well, if you layer up the accountants, the regulators, the lawyers, the bankers, every layer upon scam in the world's financial system? Yeah, there's a frictional cost of between 15 and 20 per cent of world GDP through just parasites checking each other's homework with no clue about what they're trying to do substantively. Yeah. And that numbers grow on over 30 years, from three per cent to 18 per cent or something, depending on the day. And as Paul Volcker wonderfully said, there hasn't actually been any practical, useful financial innovation since the ATM. Okay. So it's just been this absolute mould on the world economy, growing wildly for no good reason. And what this does is allow all of that to be replaced by a plain English, completely verifiable system. And I think a whole lot of people who want to clear the world of that and get back to actually making practical innovation in the world, a better place is saying we like living in a blockchain. World without any of that, rather than having to pay that. Don't think about a blockchain world is where we are at the moment, right where we are at the moment is the blockchain players are just taking to the field at the moment, right? They sort of running out through the ticker tape parade, but nobody's landed any sort of blow in in anger yet. Yeah. So I mean, I can give you individual examples of where blockchains actually been able to do useful stuff that traditional financial systems haven't been able to do. But we haven't really got going with blockchain at the moment. 

Bryce: [00:10:55] Yeah, we're actually talking about this this morning where we kind of sit on the adoption curve with crypto and and the blockchain and sort of comparing it to the adoption of the internet and how a lot of people in the early stages discounted the value of the internet. And you know, we then eventually got to the point where we are today, where there's some major players that survived the 2000 dot com bubble and equating it to what's going on now. Where do you feel we are on that sort of adoption curve when it comes to blockchain and bitcoin and crypto? 

Mark Carnegie: [00:11:27] I think you sort of 92 at, 96 in 1992 to 1996 in terms of where we are at the moment, OK? But but just remember, I mean, if you're willing to actually take the red pill for the crypto maximalist, yeah, which I just want to put out there, not because I'm a believer of it. But remember, these crypto guys are basically saying this is the Gutenberg press and Luther nailing the 99 theses to the Cathedral Wall. Like the guys who are serious about this say this is going to involve a complete remaking of the Treaty of Westphalia, so they're not talking about this is some sort of Beanie Babies bubble or anything like it was back in 92 and 96. They're talking about way back to the 30-Year War in Europe. 

Alec: [00:12:23] Yeah, mean it's it is pretty mind blowing, but I mean, that's why we're doing this episode because it's really exciting to think about and to think through what the possibilities are. So Mark, I think, you know, most people would be familiar with bitcoin if only for the, you know, the constant speculation about price that seems to dominate a lot of financial news whenever bitcoin is running. However, you see the, I guess, the more exciting opportunity in the space with what Vitalik Buterin is building with Ethereum. So I guess let's start with a bit of a basics 101 for people who may be familiar with Bitcoin, but not Ethereum. What's the difference between the Bitcoin blockchain and the Ethereum blockchain? 

Mark Carnegie: [00:13:05] We'll come to Ethereum in a second, and I don't think that actually the bitcoin versus ethereum analysis is actually the helpful one if you're an investor. I think the helpful one, if you're an investor, is bitcoin versus gold. So bitcoin is a plausible and I actually think internally coherent challenger to gold in that there's only so much gold. The price of mining gold is going up. The cut off grades for gold are going down. All of the analysis about gold having a value in 100 years time is to do with its inherent scarcity, and it's got a complex bundle of both jewellery uses and industrial uses as part of the world. Yeah. And then are you guys familiar with this phrase? Talebs God of Lindy? 

Alec: [00:14:00] I'm not. No. 

Mark Carnegie: [00:14:02] OK, so Taleb has this phrase the guy who wrote the black swan of somethings Lindy. And what he says is that distributions are not always traditionally normally distributed. And so he came up with this idea that the length of time that a West End play or at a New York play is likely to run is the same length of time that it's already run. So even if it's been going a year, it's likely to continue for a year. If it's been going two weeks, it's likely to go for another two weeks. And so the idea that something's just been around for a long time is an indication that it's likely to stay around for a long time. So what gold's got paid for bitcoin is it's Linda. It's been around for four or 5000 years as the mechanism of exchange. Now it's bounced around in all sorts of different ways. It's been made illegal to own it. It's survived just an enormous amount of stuff. Whereas Bitcoin, every year it lasts, it's getting a year more lindy. So. Early on, it had none of that impact, you couldn't claim it was Lindy at all, whereas every six months or 12 months, every time somebody like Jack and Miller goes and dies one per cent of it or something. It's getting more acceptance. So what I say is focus on gold versus bitcoin and focus on the fact that bitcoin's likelihood of continuing to work as a currency is growing up every six months that it does and stays as part of a medium exchange ecosystem like it is in crypto at the moment. It's likely to end up doing another six months as relevance, but it's still an eye blink compared to gold. And you guys fundamentally understand how bitcoin works. Yeah. 

Alec: [00:16:05] I mean, we think we like to think we do. But yeah, I mean, we we know, you know, there's a limited supply, how it's mined and the basics of the blockchain. 

Mark Carnegie: [00:16:19] Yeah, and they can't hack it. And so they've absolutely hit it with everything they possibly can. And except for some sort of Dunkirk attack in China or one of the mining pools finding some way to have a 51 per cent attack, all of which are sitting out there at the moment. The fundamental ability to hack the blockchain isn't going to happen. And so you've got two or three attacks that are still out there live to happen. But you feel like most of the western world bitcoin would go on one direction of a hard fork. And so the gold's going to stay gold. And if you look at gold, real gold, real gold by the time you've insured it stored at etc probably cost you 100 bucks a year to just maintain might be more than that. Yeah. So you pay one per cent a year to hold the gold, even in an ETF or a structure like that, whereas it provided you don't make a mess with your wallet, which you know, puts a whole lot of responsibility on you. You don't pay anything holding your bitcoin, and it costs you nothing to move it to Switzerland or wherever. So if you are a real proper tech prepa, there are a whole series of reasons why your bitcoins better functionally than you got. So gold's better because it's older and because everybody you can turn up at the border between Uganda and the Central African Republic and gold all clear in that market. In fact, us Dollars. Well, whereas the guy on that border, when you want to get across, he ain't going to take bitcoin. 

Alec: [00:18:06] So Mark, I think that's a really good distinction between bitcoin and gold. Yep. So then for people who are then wondering where Ethereum fits into it, you don't think the right distinction is between bitcoin and Ethereum? No. 

Mark Carnegie: [00:18:21] So I think the right challenge is the world financial system as it exists with the major players Stripe and Ethereum and PayPal. So what I do and I know this is not going to help is bitcoin versus gold. Where do you want a store of value? Make a decision between something that Lindi and something that works better in the new world? Choice number one Choice number two is the existing infrastructure of global and local payments is, you know, Visa, MasterCard, the Swift network, all the stuff that happens when you try and send your money to your mother in in the UK and it takes three or four days to arrive and it costs you 50 bucks to send $500 and you go how they let that happen when you line up your payment charges? Yeah, so you got. And what I think is clear is the old guys have just been with all the incumbency. Their ability to innovate and get out of their own way has proved to be very, very poor. So I believe that other people can't and might disagree with me, that the incumbent financial services businesses cannot innovate and get out of their way, even though they've got all the customers and all the reason in the world to innovate. So you can debate that, but in terms of assertion, that's my first assertion. And then the second assertion is that the PayPal guys who've gone on to other things get their intellectual successor, the Collison brothers at Stripe. And that is a real plausible, a Cirium killer. If you can move money all over the world on the stripe network for 100 basis points, the. A sense amongst the smartest people in the world, and they ran a phenomenal business, and with all the problems that Vatileaks got of getting the Etherium community to move correctly and the free rider problems when finance just sits on the top of them and stuff like that, I think there's a plausible case that this strike really makes it easier to move money around the world than Etherium does. But at least that's a fair fight between a centralised system at Stripe and a decentralised system in theory. Now, which of those two is going to work? I don't really know. I think those are the bets you've got to figure out in this world. 

Bryce: [00:21:00] Yeah. Well, we are certainly hanging out for the Stripe IPO at the moment, given the fantastic business it is. But I think this is a good segue way to actually start discussing what all this means for investors in the retail investing space, particularly looking at some of the public companies that are adopting this technology, as well as some of the new business models that are coming out of blockchain. But before we do, we'll just take a quick break to hear from our sponsors. So, Mark, as I said, let's have a chat about the investing landscape when it comes to fintech and blockchain. You've mentioned there PayPal and Stripe and where they're all kind of sitting, but are you seeing a number of potential business models emerge from the blockchain Ethereum? And what are some of the most exciting ones to you? And if you could think of any sort of publicly listed it as well, that'd be great. 

Mark Carnegie: [00:21:50] Yeah. So look, I haven't done the deep dive on Coinbase, but I suggest you guys get one of the analysts on it to talk about it because I've read enough to know that it's actually analysing all at the moment. And I know that the domestic Australian exchanges are just printing money at the moment. And it's been one of those things where, like when Facebook went public and just had that period of sort of trading down after the IPO because everybody said down and it's crap. The bull case is is able to get laid out for Coinbase at the moment, and you can figure it out. Yeah. So it could easily be that it's five to 10 from here in the same way as Google was when it went out and traded. Just get close to the IPO price for three to six months and then it's just been a rocket ship ever after and so too with Facebook. So that's the first thing, which is anybody who can actually do their own analysis or find somebody who understands the exchanges should be able to look at Coinbase and say, Is this worth doing or not? And they had blow-out earnings earlier in the week as well. So you've got some good information out there. I just haven't done the work on it myself because where I am in the crypto space is, I'm 100 per cent in on DeFi and paid to play gaming, which is a sort of venture capital opportunity. And from your guy's point of view, it's really it's the people in your audience who've got crypto accounts at the moment who could look at AIG and Axie Infinity and stuff like that and form their own view. Now, I think these guys are way, way ahead of themselves on value personally. But there's no doubt Pay-To-Play gaming is attacking 200 billion of revenues and nearly two trillion of embedded value, and it's it jumped the shark in June. So it's it isn't that long since it started. So there is a ton of running room in paid to play gaming at the moment. You can't buy them on exchanges because of all of the regulators and stuff like that, but you can buy them on crypto exchanges. 

Alec: [00:24:12] So Mark, you mentioned two new business models that are emerging the Decentralised Finance, or DeFi and paid to play gaming. We've heard a little bit about decentralised finance in some other episodes we've done, but I haven't come across the term paid to play gaming before. So maybe can you tell us a little bit about that business model and sort of how it compares to the 

Mark Carnegie: [00:24:34] are either of you gaming? No, no, no. Okay. So I understand I'm not a gamer either. And so I just you need to understand very quickly, find myself bogged with the facts. And so it's worth finding some way to pick up somebody who really understands this space. But I can sort of give you the broad economics. If you're sort of a rich entitled Westerner and you want to play Fortnite, a World of Warcraft or something like that, getting some of the base level pieces of equipment to be competitive takes you, let's say, a week anywhere between a day and a week. For a particular piece of the gear, you then take somebody who's in a market that's got 20 per cent male youth unemployment, and they love gaming, but they earn nothing. And so they're the opposite rich entitled they're poor and got all the time in the world at the moment. You can buy via a PayPal account particular pieces of World of Warcraft or Fortnite inherent gear. Follow me at the moment, you might need a sword. You might meet it this. You might need it. That right? It's going to take you 40 hours to get it. It's far easier to buy it from some guy in the former CIA or somewhere else. Yeah, until you send real hard cash. And what this does, what pay to play gaming does is to say just buy it with crypto inside the game. So it just increases the cycle time. And with these new games, unlike Fortnite or World of Warcraft that are sitting in some smug, centralised business, getting $100 billion a market cap or something like that is actually infinite. He came out of nowhere three or four months ago, and it doesn't take huge amounts of bandwidth or a really, really make computer to play it, so the guys in the emerging markets can play it just as well as in the developed world. So there's more money to play for because the guy in the middle who owns Fortnite or World of Warcraft doesn't exist. And then the second thing is in the same way as Fortnite just said, we're not going to pay Apple the 30 points by having Fortnite downloaded via the App Store. All of these crypto games and these paid to play games are all downloaded straight off the internet and via crypto. So if you assume these things have got 60 per cent gross margin and 30 points is going to Apple at the moment, half of the value of these games goes to Apple under the old world, whereas in the crypto world, that half goes to the network. So you've just got a ton more value to share amongst the guys who've written the original code and the MVP for the product and the early adopters who get the play, get the game to sort of critical mass of players. And our rough numbers are there's two trillion of centralised value that the pay to play gaming guys are coming after in the crypto world, and it's probably at five to 10 billion at the moment, the aggregate market value of the pay-to-play market cap. And we've got stuff going at the moment, and the speed with which you can add value players is absolutely breathtaking. And I'm not, you know, I'm not a sort of guy who gets stars in my eyes, but I'd never seen anything that can grow as fast as this. We're talking 10x awake. 

Bryce: [00:28:27] So decentralised finance is, you know, one of the most discussed blockchain based innovations. And you know, you've summed it up well when you said that it takes the speed of all financial transactions to instantaneous and the security to nearly perfect at zero marginal cost. Sounds pretty good. Yeah, to be honest. Now there are a lot of publicly listed companies around the world that are adopting this technology, and I think it'd be great if you could help us to understand this mechanism and and how the blockchain helps to achieve this. 

Mark Carnegie: [00:29:03] Sure. So the best story I've got isn't a publicly investable opportunity. It's just a story from my friend Ian Love, who runs one of these crypto funds and in fact, the first crypto fund established in Australia. He told a story. He's got a charity up in Burma, which looks after orphans. And, you know, there was a coup in Burma not that long ago. The whole of the traditional financial system broke down, just froze for a week. Now he's these people live day to day, week to week, so he needed to get money to them. And it just was. He's got these two separate things. He's got this charity in Burma and he's got a blockchain business. And so he was just desperately trying to get money to people to pay wages in a Burmese orphanage. And what he did was transfer bitcoin to somebody in a coffee shop in Rangoon, who then had other people come in with phones and swap the local currency. The actual physical notes for the bitcoin phone to phone in a war zone in a place where a coup was going on. And I've just never seen a better, more visual example of why bitcoin just kicks arse and DeFi kicks arse compared to the other system. I mean, I don't know how many times you've seen people. When the Swiss systems broke down, like I had a friend of mine stuck in Malaysia, an Icelandic friend of mine stuck in Malaysia when the Icelanders turned around and said set of forks to the UK government and they just froze Iceland for two weeks on the Swift network. This guy's a pilot. He's in Malaysia, he's got his wife and his son, and he got absolutely no access to cash. Well, that just wouldn't happen now. You'd have a crypto account and you'd be able to get the money to him, however. 

Alec: [00:31:10] Yeah, it's it's pretty. It's pretty amazing to think just how mobile money can become when it's when it's all digital and it doesn't rely on a central authority to, I guess, authenticate it or transfer it for you. Exactly. We are saying. We are saying. Early adopters, I guess, in the the public markets were seeing companies like Square Launch, a decentralised finance business, I guess Visa is looking into it. Apparently, PayPal is eyeing off decentralised finance. How do you think about these? I guess relatively new finance players in like Square and PayPal. Obviously, Visa's a little bit older, but how do you think about their efforts to, I guess, adopt decentralised finance? 

Mark Carnegie: [00:31:55] I just think you get to this whole Christiansen Innovator's dilemma, which is when you look at the margins available, it's just really, really hard for those guys to jump and to disrupt their business as effectively as they think they're going to. Yeah. So I I'm not rushing to invest in Square or any of these others at the moment because I just not sure that they're not essentially trying to manage by press release as opposed to resolve to genuinely do what needs to get done. Yeah. And this goes back to why I have such a, you know, so enthusiastic for Aether because Vitalik started with nothing. He doesn't really care about the money he's trying to change at all. You look at the amount of innovation that's happened off the strength of it. Yeah. And the number of models that are competing on sort of level two protocols. But on top of Aether, you field yourself, that's real. And as I say, I think you guys are right about, do you want to own some chunk of stripe because those guys started claiming they started in the shadow of PayPal. They don't care if they're in a death fight with the dollar it, they're like, we're going to win and we're resolved to do it. I'm just not sure quarterly analyst reports and other things and everyone sitting there and going, Oh my God, you're going to ruin your next quarter's earnings isn't going to stop PayPal and everyone else. So I'm not a huge enthusiast for the guys who are sort of half in half out of this. I like the title like a like stripe. The other stuff? Not so much. 

Alec: [00:33:44] Fair enough. Yeah, it is a fascinating one. I know Jack Dorsey has made a number of comments about how much easier, I guess, or how much more efficient Square would be as a business if bitcoin and cryptocurrency was adopted generally, just because, you know their their business plan is to go to every country, one by one, engage with the regulators, get all the approvals, launch in that country and then start that process all over again. And if they want to be a global business, they have to do it. What? One hundred and ninety six times. 

Mark Carnegie: [00:34:17] And yeah, but also, I mean, you look at what belag says about that is a mechanism for actually using crypto. And I agree with him, which is get the customers first and then run a reverse auction amongst your regulators as opposed to sitting there and knocking on the door. You ever tried to deal with an emerging market regulator as financial services? Trust me, there ain't many things that are less pleasant, both in conception and execution. 

Alec: [00:34:44] Yeah, well, luckily, the podcast business doesn't require us to do that. 

Mark Carnegie: [00:34:49] You go and you say crypto. 

Alec: [00:34:52] They say, we just need to start getting advertisers to pay us in crypto. And then then whether 

Mark Carnegie: [00:34:58] it's coming May one 

Alec: [00:35:00] other, I guess, interesting adoption story that I'll be honest, I don't know enough about, but I've read a little bit about recently is that as well as the public Ethereum blockchain, there's also a number of enterprises looking to use, I guess, private Ethereum blockchains. Companies like JP Morgan, Microsoft, Amazon, IBM are all investigating how they can, I guess, incorporate non-public Ethereum blockchains into their processes or into their products. How do you think about that sort of, I guess, vector of adoption? 

Mark Carnegie: [00:35:34] I don't mind. I think that small management by press release. I think India is real, right? Which is, oh yeah, we'll have one of them. You know, it's like that whole thing about when you and your wife are running around the supermarket and it's like, Oh, yeah, I've heard about that. I'll have one of them in cars. Just because I don't know what I'm going to 

Bryce: [00:35:51] do is that when Kodak said they were going into crypto, well, wasn't exactly right. 

Mark Carnegie: [00:35:59] Where is this thing called sort of halfway house called Hedera Hashgraph, which is a real thing? 

Alec: [00:36:04] OK, I haven't heard about that one. I'll have to look it up there. 

Mark Carnegie: [00:36:07] I mean, they're they're genuinely coming up with something that looks like it might well be a plausible alternative. It's got a set of governance systems that really, really thought through, well, 

Alec: [00:36:19] OK, nice one. That's that's definitely, definitely one to look into. It's a fascinating space. There's so much. I guess there's so much happening in that space, so much activity, so much money flowing into it. You know, for people I guess like Bryce and I who are trying to get our heads around it, trying to think about how to invest in the space, maybe not privy to the private deal flow. What what are some of the best ways you would suggest someone like Bryce or, I guess, go about learning and investing made? 

Mark Carnegie: [00:36:49] I think you've got to go and talk to Asik and the regulator. I think it's a terrible. I think what will happen to Australia as a consequence of the regulatory framework is going to be nothing but a catastrophe in that the sophisticated investors get the ability to invest in funds at the moment because Asik will allow regulation for sophisticated funds, sophisticated investor funds. But neither the SEC or the ASX will let a listed investment company go public in Australia, and they're still tangled up on trying to create Bitcoin and Aether ETFs without any sort of anticipation for whether they're going to be staked ETFs or not. The moment you ask them, Are you going to be able to stake your bitcoin in your Aether in the ETF? You just get this. The regulator's eyes sort of roll back in their head. The Cole Computer says everything starts going, so it's like six to eight hundred basis points of return that nobody knows whether you're getting it or not. So I think the biggest problem you've got at the moment is that if you go crypto native, you've got a particular type of really, really poorly regulated pond scum giving people advice. And that's really the sort of thing you know how you're pissed at Melbourne Cup Day and you're down to the Melbourne Cup race? And if you had two or three to go and you have to get back to square and you're chasing. And so you get more and more desperate to find any idiot who's got you something on the seventh road. And so that's my concern about traditional ways of figuring out what to do in crypto space. At the moment. You get a crypto native account, you go to some terrible guy late in the day, half pissed and go, Tell me what I should put on here. My friends are making all the money is not a good way to do it. And I think it's going to be an absolute travesty. So I don't really know what to do because that is the way to invest at the moment is in the coins and in the DeFi staking and stuff like that. But you can't go and do that without some sort of sensible professional and all the regulator professionals can't give advice to the individuals. The only people who can give advice to individuals are people who aren't regulated. They are just, by their nature, the worst class of people. 

Alec: [00:39:19] Yeah. Well, I guess the silver lining is if if you know what you said before, if we're in 1992 to ninety six in terms of relative to the internet bubble, it does mean that we're early in the journey and more and more companies will be coming online. 

Mark Carnegie: [00:39:34] And also just one advice that would give you is with 10 basis points of investable money, just get off zero start and account. Put some money into BTC and Aether or Aether if you'd like that story and learn how to stake it. Yeah, because just swimming around in the pool with some amount of money is going to mean you understand 100x what you understand, just doing it theoretically. So don't go crazy. But my advice to everybody is just get off zero, right? In no world, go to 100 basis points if you're doing it this way, but 10, 15 or 20 basis points. 

Alec: [00:40:19] Yeah, I think I think that's great advice. And you know, that's what we've learnt from investing in equities as well. It's just as soon as there's, you know, real money, no matter how small. All of a sudden the interest goes up massively.

Mark Carnegie: [00:40:33] Yeah, I'd say, look, just go and have a look at XY and a couple of these other things at the moment. Yeah, these pay to play gaming systems. Yeah, understand how you stake your BTC in your Aether. You'll know more than 90 per cent of people in a couple of weeks if you understand DeFi staking and paid to play gaming. 

Alec: [00:40:55] Yeah. Now, Mark, we could talk about this all day, but unfortunately we are running out of time. I don't want to end the interview without asking you one final question, though offline. You were talking to us about fiat currency and the state of, I guess, you know, where we are now. And, you know, the Fed would love to would love to get you on the podcast, just sharing some of those thoughts because I think although they were particularly true. 

Mark Carnegie: [00:41:26] Yeah, so I just it's really simple, which is I think the Fed and the world financial system has completely and utterly lost its ability to control itself, as I say. Everyone says, well, bitcoin's rubbish. Crypto's a scam. Look at the Fed, how big a scam is, American money printing. You could take a rusty bicycle to the Fed and get a 90 per cent repo against that during in the eye of the storm here. Yeah, they will. Here you go back 100 years in terms of what the Fed was meant to do, which was to lend provide liquidity against first class security. Look at the stuff that they ended up lending against during this crisis. Yeah, and they start talking about any sort of tightening the 50 basis point move. Yeah. And the whole world is going to come completely unglued. So the question I ask everyone is assume just for a moment, and I know you've got to take a weird cocktail of drugs to believe it, but just assume that interest rates mean reverting. Just think about a 350 US 10 era or a 450 US tamia like think what that does to the US deficit or anything else? I mean, it is like it is a blowing up world. So if you're never going to be able to let interest rates mean revert, yeah, then you just keep on printing forever. And everyone's answer is, well, Japan's kept on printing forever. It's all fine. Yeah, but the Japanese created, you know, had a particular set of demographics of this particular set of efficiencies and had this unique ability to meet demand to China for their goods. I'm not sure the US is the same. And then the second part I've got is just for a moment assume I'm completely and utterly wrong on that. Why is it when the Chinese are the ascendant global power and the US clearly and Afghanistan's the best example of it are clearly a global power that's in complete and utter freefall. Do you have a situation where the Chinese markets halved and the US markets doubled? It ain't going to stay that way made? 

Bryce: [00:43:58] Well, lots of think about the mark. And as Ren said, I think there's a whole nother episode in that on the podcast at some stage. But unfortunately we have run out of time. But you've certainly left us a lot to consider and and highlighted, I guess, the opportunity that is being opened up with blockchain and particularly Ethereum as well. So certainly a watch this space and we very much appreciate your time this afternoon.

Mark Carnegie: [00:44:24] Well, take care, guys. I really enjoyed it. 

Bryce: [00:44:29] Hey, thanks for listening to this episode of Equity Mates. We love hearing from you, so drop us a line at contact@equitymates.com or even better, go to your podcast player and leave a five star review. Also, a reminder that the Equity Mates content train doesn't stop when you've run out of episodes to binge. We've got a brand new website, a Facebook discussion group where on Instagram, YouTube and slowly making our way as an influencer on Tik-tok. That's Ren. So come and say hello and join the community. We'd love to welcome you. Until next time.

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