Understanding the untapped potential of blockchain and crypto, Tradecraft Capital is a conservative multi-strategy thesis-driven blockchain-focused investment firm that invests in the next long-wave economic cycle, which we classify as the Age of Autonomy®. Though Bitcoin is gaining traction as a new form of currency, there is much confusion, doubt, misinformation and misunderstanding about blockchain technology, crypto, and this new class of investment in general, and the fact that Bitcoin is just one small part of it. Diorio’s focus at Tradecraft is to “Decrypt Crypto” help people understand the technology at play and thereby harness the value that will be created in this next economic cycle.
James Diorio’s other passion is The BELLA Organization, a 501(c)3 he co-founded to honor the life of his daughter Bella Diorio, who was diagnosed on the autistic spectrum and whose life was unexpectedly cut short in 2020 at age 19. Understanding the special needs of neurodivergent teens, The BELLA Organization offers mentoring programs, scholarships and support for highly functioning autistic high school students as they begin their college journey.
Tell us about your new book Crypto Decrypted, that’s coming out in May 2023.
I co-authored this book with my business partner Jake Ryan and its primary focus is to dispel a lot of the myths in the space, understand the blockchain breakthrough, and explain why this breakthrough is so important. Most don’t really talk about that, and we think people should have a basic understanding of what’s going on with this technology that will affect all of us. It’s even more important if they’re considering it as a potential investment.
The book has been well received and we’re proud to have endorsements from Skybridge Capital founder and managing partner Anthony Scaramucci, former CFTC chair Chris Giancarlo, “The Godfather of Crypto” Michael Terpin, and many other luminaries in the space. Blockchain is a technology – this is the first thing that people don’t understand. They simply think it’s all money, and its just not the case. Understanding this opens up a whole new world, but for us it’s not just blockchain. We think the power is in how blockchain relates to the three other novel technologies today, artificial intelligence, robotics and the internet of things. This is The Age of Autonomy®. It is based on 100 years of economic theory and derived from the premise that long wave economic cycles are a function of revolutionary technologies. For example, oil, gas, railroad, electricity, the internet were all breakthrough technologies which created boom economic periods after their deployment.
AI, robotics and IoT can give us a self-driving car. That’s interesting, but when you add blockchain, you now have the ability to have a self-driving business. Now, that’s a breakthrough, and that’s where we’re going. There’s just too much data in the world for humans to process, so we need to bring in technologies. Just as all of these technologies are growing quickly, when you look at what the market cap is going to be, it’s going to be almost unforeseeable because it will touch every business and every aspect of our lives. We’re seeing this convergence even more clearly today, for example, when we consider the rise of ChatGPT, which takes an immense amount of data and then crunches it to give us something digestible, as if speaking to a human being. As blockchain is a technology and an essential part of the Age of Autonomy® we encourage investors to look from this purview as well. Autonomy is the ultimate competitive advantage.
What do you think is the potential size of the blockchain market?
It’s massive. It’s like trying to say what will the size of the internet be when it was just coming out of the gate. Blockchain technology solves one of the top 10 computer science problems of all time, which is called the Byzantine Generals Problem. Simply stated, if there are 10 generals who are trying to attack a city and there is no one in charge- no central party and no counterparty in charge – how do the generals, as peers, work together without someone directing all the actions? And that’s the breakthrough that blockchain solves. It allows us to operate as peers, but in the digital world, and without having to go through a counterparty.
Let’s look at money for a moment. Everything in the digital world is managed by a governor and in the case of money is usually a bank. With the recent implosion of the banks that we have seen, it’s made it even clearer that you don’t control your money, the banks control your money. And if they’re leveraged, and they don’t have sufficient reserves lined up, you’ve got a problem. This is why we need things like blockchain technology, which allows us to actually possess and manage a digital object like bitcoin, ourselves, without necessarily being reliant on a counterparty. This concept expands as now we can operate in the digital world just like we can in the physical world. In the physical world I can hand you a $20 or a book or a cup, but in the digital world that was not possible, at least not without going through a controlling entity. Now with the ability to exchange digital assets, money or otherwise, as peers, and to have provable uniqueness and provable ownership of a digital asset, amazing possibilities come forth such as the Metaverse. Without going into that too much, I will say that it’s going to change the way we do business. Many believe this as well, as Dubai is sinking billions of dollars into being the metaverse capital of the world, and Japan is hot on their heels.
Do you think regulation could be a threat to the blockchain industry?
Rather than a threat, we think regulation is actually going to benefit blockchain technology. Over the past few years, we’ve built a landscape and we saw that crumble over the last period with flawed projects such as Terra Luna, centralized finance companies like Celsius and most recently FTX, which was pure fraud. We’ve shown that we haven’t been able to really regulate ourselves very well. I think regulation will establish some guardrails that we need. We think there should be a wall between banks and exchanges, and that you should have a qualified custodian. These are basics but are important because the institutional capital really isn’t in this space yet and we need that to grow. Regulation will make it safe.
What are some of the biggest myths in investing in crypto?
One of the biggest myths is that is that blockchain technology is primarily used for crime. And it’s just not true. In fact, it’s about the worst system a criminal could use because everything is transparent on the blockchain and is very traceable.
According to a 2022 report from Chainalysis, criminal activity represented 3.4% of all cryptocurrency transaction volume in 2019. In 2020, the criminal share of all cryptocurrency activity fell to just 0.62% and again to 0.15% in 2021. There is far more crime involved in the use of dollars; it’s just not new or sexy. Criminal networks continue to rely on traditional fiat money and transactions to a large degree, because cash isn’t trackable through the Internet.
What are measures that investors should always apply to investing in blockchain and crypto?
I think there’s a real need for diligence. Generally you would want to do diligence on a company before you purchase an equity or make a direct investment. In the crypto world, you want to look at that as well. Does the project have a team that can execute? Does the project do something unique in the marketplace that adds value? Does it have a proper market cap? Does it have people using it? Does it have a means for value creation? Unfortunately many investors are subject to FOMO and just jump in and invest in crypto for crypto sake without understanding any of the fundamentals of the underlying blockchain. What is important to realize is that crypto assets are representative of blockchains, and it’s the blockchain that warrants investment. This brings us to the concept of Liquid Venture. You can be participant in a blockchain that you believe in by holding it’s token, however because tokens are liquid, you’re not stuck holding for years waiting for a transactional event. It’s an interesting concept and one that we think will change the face of Venture investing.
Overall education is everything to us. We want to cut through the noise and give investors an understanding of what this technology really is. This allows individuals to make an educated choice, and then decide based on facts if they want to participate and, if so, how to participate. We think that’s critical. Just in going through the basics I’ve seen a lot of light bulbs go off, and that’s important. This is happening. We see adoption quietly happening all around us. The simple fact is that The Age of Autonomy® is upon us and we don’t want people to miss this opportunity.
To preorder Crypto Decrypted click here
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