Balaji Srinivasan: belief

Transcript context

…A question about tokens. Here’s a statement. Tell me if you think it’s true, false, or uncertain. The role of the ICO is to aggregate dispersed information about a company. ICO, initial coin offering. I wouldn’t necessarily agree with that. I think we’re in very, very early days on tokens and so on. One useful thing that I heard from someone on a panel was, she believed that tokens were going to become an integral part of every company’s capital structure over the next 10 years. Her argument went as follows. She said, “OK, what is debt? When a company issues debt, it’s a claim on the future cash flows of the company. What is equity? When a company issues equity, it’s a claim on future liquidations of the company. What are tokens, or what are network tokens? They’re a claim on the company’s future digital asset value or digital network.” In the same way, the interplay of equity and debt is something where a competent CFO knows how to trade off between them. Not every company is suitable for debt financing. If you don’t have cash flows, you’re not suitable for it. Not every company is suitable for equity financing. If you’re not going to do 10X, if you’re a mom-and-pop grocery store, equity financing may not be for you. Finally, with tokens or network tokens, unless you have a network effect, token financing may not be for you. On the third hand, some of these companies are suitable for those means of financing. I think, in addition to network tokens, you’re going to see tokens that are basically debt tokens, equity tokens, and other kinds of financializations. All the regulations need to get worked out. We’re at very, very early days on the whole token thing. And an ICO bundles a lot of different concepts together that are going to get unbundled and separated out in the years to come. Let’s say I’m an old style company. I’m Nordstrom or I’m Macy’s. Those companies — for a long time, they’ve issued gift certificates, which in a way raises money, brings in capital, maybe a small amount. We’re familiar with how this works. If we wanted to, we could trade those gift certificates amongst ourselves. We could even trade them on blockchains, but that probably wouldn’t be seen as a major innovation. Maybe the price of the gift certificate would tell you something about how good is the merchandise at Nordstrom or Macy’s. ICOs are more than that, somehow. What’s the element they bring to the problem that you don’t get just by trading, say, gift certificates of Nordstrom or Macy’s?…

Stored transcript either side of the excerpt. The highlighted words are the published quote; the surrounding text is unedited source, never generated.