Michael Novogratz believes the race is on to find the winning protocol as the evolution of Web 3.0 finally takes off.
Web 3.0 is the next stage of the web evolution, which is making the internet more intelligent, processes information with near-human-like intelligence through the power of AI systems.
Progressive smartphone apps adoption, which is part of Web 3.0, has grown exponentially over the last five years, with apps now used for a wide range of functions from banking, trading, socializing, and everything in between.
Moreover, it is cryptocurrencies with utility, blockchain protocols that are the building blocks used by developers for building a burgeoning digital ecosystem in the digitalization of everything.
“Web 3.0 is the next stage of the web evolution, which is making the internet more intelligent, processes information with near-human-like intelligence through the power of AI systems”
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Michael Novogratz was recently speaking at the Digital Assets And The Future Of Financial Innovation, a network Forum in November, and it is here where Michael Novogratz believes the race is on to find the future winning blockchain protocol that satisfies developers requirements to build applications that are secure, fast transacting and low cost.
“If you have ever been at a Nascar race, the cars go around for a while, and they have a green flag, and all of a sudden a checkered flag comes out, and they go for real,” said Michael Novogratz.
The warm-up lap towards developing a blockchain protocol for Web 3.0 is over.
“The checkered flag just fell. We just started the race,” said Michael Novogratz.
“People didn’t believe in web 3.0, and quite frankly, a lot of the ecosystem that you see right now is not built to scale,” he added.
“If you have ever been at a Nascar race, the cars go around for a while, and they have a green flag, and all of a sudden a checkered flag comes out, and they go for real”
Put simply Michael Novogratz believes the race is on to find a scalable blockchain network, a protocol
“So why is Solana so exciting all of a sudden, is that Ethereum is on this path to scale speed complexity over time, but it is not fast enough to process as much as crap as the world wants to process,” said Michael Novogratz.
The idea of a decentralized internet of value exchange of value is so exciting everyone wants to do it now, and computer scientists with Ethereum have not figured out how to do it fast enough today on a decentralized form.
“So, all the other blockchains Solana, Luna are much faster and you are seeing adoption” – Michael Novogratz
Michael Novogratz explains;
“So, there are thousands of nodes in Ethereum, so what do you do?” asked Michael Novogratz.
You say hey, I am going to create the next system that is less decentralized, less secure,” he added.
In other words, the downside of using a faster protocol is that the network can be hacked. But the obvious advantage is that transaction speeds are faster. Moreover, development costs, gas fees are cheaper.
“So, all the other blockchains Solana, Luna are much faster and you are seeing adoption,” explained Michael Novogratz.
So, protocols can be price estimated based on their network effect (number of users in a network). Quite simply, the more people use the network, the more valuable the network.
For example, October 2017 Ethereum active addresses amounted to 142,000 and by January 2018 Ethereum active Addresses increased to 531,000.
Over that period of three months, the number of Ethereum users grew by 273%, and the price of 1 Eth increased 348%.
Michael Novogratz believes the race is on to become the most valuable network
“The market will tell over time how much we care about decentralization regulators
The regulators will make the way in when they understand it,” he said.
“Do we want the future of commerce, finance that might be manipulated, probably not? I think even a protocol like Solana if it is going to survive long term, it is going to have to find a way to be much more decentralized than it is,” added Michael Novogratz.
“The simple way to think about these different protocols is that there is a trade-off between speed and security, speed and decentralization” – Michael Novogratz
Michael Novogratz then confessed that he might be getting out of his league because he was not a computer guy.
But as a former investment banker, he is able to shed light on where the value of cryptocurrencies lies.
“The simple way to think about these different protocols is that there is a trade-off between speed and security, speed and decentralization,” he said.
“But what I am telling you is why they are all working is that everyone wants to build on them right now,” he said.
“Every conversation I have now is how do I build on Web 3,” he added.
There is so much you can do. We are monetizing communities for the first item ever.
Games, art, and it is global. We are monetizing social prestige for the first time,” added Michael Novogratz.
As we write this piece, cryptocurrencies are experiencing a sharp sell-off, and there are the usual chants that cryptocurrencies are worthless.
But as we reiterate, it is the cryptocurrencies with utility, measured by network adoption, which will do well long term.
During the Dotcom bubble burst, Amazon lost 90% of its value, and some investors were calling dotcoms junk. Yes, we could be in the bubble of everything. After all, when central banks create trillions of dollars and keep doing it for a decade, a correction is inevitable. When the central bank’s funny money creation stops, we would not be surprised if the correction turns into a panic and even a crash.
Identifying cryptocurrencies with the most utility is likely to work out profitable for investors in the long term.
Michael Novogratz believes the race is on to find the winning protocol, which are those cryptocurrencies that are likely to do well long term whatever happens.