Adam Ludwin - A Sober View on Crypto

**Patrick O'Shaughnessy** (0:00)
This episode of Invest Like the Best is brought to you by Paxos. I have personally interviewed Paxos' CEO, Chad Cascarilla, on this podcast before, and I'm excited about how they're changing the crypto landscape. Whether you're a small fintech or a large financial institution, with Paxos crypto brokerage, you can offer your customers crypto buying, selling, transferring and more, all with Paxos' easy to integrate APIs. Paxos takes care of everything in the backend from licensing and compliance to custody and exchange.
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Hello and welcome everyone. I'm Patrick O'Shaughnessy and this is Invest Like the Best. This show is an open-ended exploration of markets, ideas, methods, stories, and of strategies that will help you better invest both your time and your money. You can learn more and stay up to date at investorfieldguide.com.

**SPEAKER_2** (1:23)
Patrick O'Shaughnessy is a principal and portfolio manager at O'Shaughnessy Asset Management. All opinions expressed by Patrick and podcast guests are solely their own opinions and do not reflect the opinion of O'Shaughnessy Asset Management. This podcast is for informational purposes only and should not be relied upon as a basis for investment decisions. Clients of O'Shaughnessy Asset Management may maintain positions in the securities discussed in this podcast.

**Patrick O'Shaughnessy** (1:55)
My guest this week is Adam Ludwin, the founder and CEO of Chain, a blockchain technology company targeted at large enterprises. Before shifting his career to focus solely on crypto, Adam was a venture capitalist focused on fintech, which is how he came across the Bitcoin white paper earlier than most. I called this episode a sober view on crypto because Adam's take is so balanced. He's certainly long crypto both in his portfolio and career, but he is very skeptical of much of what is happening today in the ecosystem. For example, he offers the best reason that I've heard for not launching an ICO or investing in them.
If you haven't read Adam's widely shared open letter to Jamie Dimon, it has become a must read piece for crypto enthusiasts. Read it as soon as you can.
I edited out an earlier chunk of our conversation as it was largely introductory. If you need a broader introduction to cryptocurrencies, I suggest starting with episode one of Hash Power and working your way forward. Like the Hash Power documentary, this episode and other Hash Power singles are brought to you by Fidelity Investments, a company that is constantly researching and experimenting with emerging technologies like crypto assets and blockchain to improve the lives of their customers. Fidelity provides a comprehensive set of products and services to individual investors, employers, and financial advisory firms. For more information, please visit fidelity.com.
One key insight from Adam in our offline discussion was how cryptocurrencies function very much like equities or bonds. Just as equity financing enables the activity of joint stock corporations, cryptocurrencies enable activity in decentralized applications. We pick up our discussion with Adam discussing whether anyone really uses these decentralized applications today. Bye.

**Adam Ludwin** (3:33)
The big question in the market right now is, will anyone ever use these decentralized applications?
Will anyone actually buy things with Bitcoin at scale? Will anyone actually do meaningful computation on Ethereum? Will traders begin to enter into high value contracts and run them on Ethereum? Will people store files in Filecoin instead of in Dropbox, instead of on S3, if you're a company? And so far, the evidence is that very few people are using these services. The shorthand of this is just to say, nobody's using Bitcoin. Everyone's investing in it, 100 billion market cap. But if you talk to 10 people who have purchased Bitcoin and ask them, how many of you have spent Bitcoin to buy something in the last week, usually the answer is zero. If you say the last year, maybe it's one or two.
But that is the stated purpose of Bitcoin. The stated purpose in paragraph one or two in the first page is this is a means to have commerce on the internet be more seamless.

**Patrick O'Shaughnessy** (4:42)
So there's so much to explore in all of that. The first of which is the features of decentralized applications. And I think of application, like a lot of companies are just applications, Facebook's an application. The ways in which that might be better today or in 10 years versus a centralized version of the same thing. And in your piece, you highlight how really, if you boil it down today, we can talk about 10 years from now as well, censorship resistance is the one sort of undeniable advantage that a decentralized app has over a centralized one. So can you please explain what censorship resistance is and why that's so important?