Michael Terpin: “Ethereum Will Become Bigger Than Bitcoin”br>
Michael Terpin has spent his career innovating in public relations, technology platforms, and the space in between. He currently run Transform Group, which comprises three divisions: Transform PR, SocialRadius (one of the nation’s first social media marketing firms), and Transform Events.
In 1999, Terpin spun off Internet Wire, which launched in 1994 as the first Internet-based company newswire, and raised $18 million from investors including Hummer Winblad and Sequoia Capital. Following a strategic investment by NASDAQ in 2003, the company became Market Wire (now Marketwired) and was sold to CCN/Matthews in April, 2006, which in turn was sold to OMERS Capital Partners in December, 2006 for more than $100 million. Marketwired (www.marketwired.com) is currently the world’s third-largest company newswire.
In early 2013, he discovered bitcoin and the blockchain, co-founding the first angel group for cryptocurrency investments (BitAngels), the first conference for bitcoin investors (CoinAgenda), and co-founding the bitcoin syndicate with Gil Penchina and Nick Sullivan as part of Flight VC.
He talked with Block Tribune about the state of blockchain and cryptocurrency.
BLOCK TRIBUNE: As someone who has been a successful Internet entrepreneur, what parallels do you see between the development of the blockchain and cryptocurrency industries to what you’ve experienced before?
MICHAEL TERPIN: I see many parallels. Most disruptive technologies go through this cycle of people dismissing it, and laughing at it, and saying it’s never going to work. Then you have the early core of believers that are considered a little crazy, and then you have the so-called crossing of the chasm, and then it takes off. Do you remember the web in 1993, 1994 – it wasn’t the web we have today. Marc Andreessen, who’s been pivotal in the development of the web and the development of the cloud, he got laughed at when he said the cloud was going to replace client server.
Andreesson actually was quoted a few years ago in an article as saying that when he first got out of college and was offered the opportunity to co-found NetScape and knew that was going to take over the world with the Internet and the web, he went around and went to Macy’s and said, “You need to do Macys.com.” They threw him out, and they said, “Why on Earth would we do that? We want people to come into our store. It’s not like anybody would ever put a credit card on the Internet.”
BLOCK TRIBUNE: Sure.
MICHAEL TERPIN: Went to New York Times. Similar thing. “We’re selling papers. Why would we give away stuff for free?” Everything that was considered impossible 20 years ago is now mainstream. I think you’re going to find that with blockchain, with cryptocurrency, with cryptoassets, that things that were hard to use are going to be integrated into the product. You’ll have your iPhone or your Android, and you’re going to use a very popular app and you’re not even going to realize that you’re using blockchain in the backdrop any more than you realize today when you’re surfing the web that you’re using a TCP/IP and you’re using hypertext markup language. Early people had to develop those, and had to be very conscious of what they were doing. But now it’s such a standard, it would be like me saying, “Oh, Block Tribune, is it okay if we talk on a cellular telephone?” We can just take it for granted now.
BLOCK TRIBUNE: What stage are we at right now? Are the scoffers still holding sway, or the true believers?
MICHAEL TERPIN: I actually think that we’re about two months after the NetScape IPO, so we’re not so early that it’s just the crazy people around. I remember 1994, being in a cocktail party with people who were bemoaning the death of CD-ROM, and, “What’s next?” If I said the Internet, I just got laughed at. It was just like, “No, no, no. Is it going to be CompuServe, or will it be America Online? These are big companies. They’ve got the deal.” I was like, “Well, the Internet’s got 20 million people already.” That was the big number that was quoted in 1994. Of course, it’s several billion now. Facebook alone has two billion.
Somebody from NBC just looked at me and said, “Yeah, these 20 million people though, none of them are Americans, and they’re all just college kids in Czechoslovakia.” That was true, but it wasn’t where the web was going. Same thing here. If you got into bitcoin when that was really the only game in town for the most part in 2013, as I did or the early people, it was around four years prior, there were really no exchanges except for Mt. Gox.
In the really early days, you had to go on Bitcoin Clock and hope you could find someone who had been mining that would sell you bitcoin, which the going rate in the early years was 1/10 of a penny, so you could buy 5,000 bitcoins for $5. If you had made a $50 investment…but most people who did sold it when it was worth $5,000 and said, “Oh, my God. I just made $5,000 on $50, and don’t know what’s going to happen here.”
The true believers were the ones that got in early, kept with it, and we don’t know how many of those there are. But I think right now that this run-up that you’ve had, where overall cryptocurrency markets, and ethereum and anything else that’s been happening to take us from a $14 billion market cap across all crypto in November to a peak before this most recent correction of $115 billion — so adding $100 billion to a small market in seven months or so is pretty impressive.
It reminds me of the disbelief when NetScape went public. It was like, “Oh my God, an Internet company with no revenues? We can’t believe they got funded, much less that they’re going public and worth $1 billion.” You had pull-backs after that. You had Alan Greenspan when he talked about irrational exuberance. He didn’t say that in March of 2000. He said that in December of 1995.
BLOCK TRIBUNE: Sure.
MICHAEL TERPIN: Way before things got irrationally exuberant. I think that you’re going to have a few more runs at things getting a little frothy, and then pulling back, and then getting frothy again. You got to remember, even though you have some obvious examples of assets that you could argue are wildly overvalued based on their usage and their potential against maybe older ways of evaluating assets – you could have said the same thing about Yahoo when they got $2 million in funding, or Ebay, or Amazon, but they disrupted entire systems. Even though a lot of bad dot-coms took down the whole market, the largest companies in the world now, probably half the top ten now, are large Internet companies.
BLOCK TRIBUNE: Are you one of those folks that thinks that some day bitcoin may be a half million to a million dollars in value for a single coin?
MICHAEL TERPIN: That’s probably on the higher end. People call it “The Flippening,” when bitcoin is no longer the predominant coin. I think a lot of people didn’t think that bitcoin would ever be below maybe 90% or 80% of all the value. It’s well below 50% now, and ethereum has had such a run-up that it’s widely predicted that by the end of the year, ethereum will be worth more than bitcoin. That’s not saying that bitcoin’s still not trading near all-time highs up until this recent correction. It’s just that ethereum’s growth has been even more exponential over a shorter period. You got to remember, it only hit the market in late 2015.
BLOCK TRIBUNE: What was your introduction to this world of cryptocurrency and blockchain?
MICHAEL TERPIN: I have always prided myself on trying to get ahead of the curve on technology. I obviously have Transform Group, which is the latest incarnation of the several PR firms that I’ve run over the years. That coupled out with being an investor in technology companies and an advisor and an entrepreneur of technology companies. My first agency was The Terpin Group. I spun Marketwired off of that, and that was obviously a PR firm. It was a news wire that’s now owned by NASDAQ that they paid $200 million for last year. We sold it for $35 million a decade earlier, and then NASDAQ was an early partner, bought the whole thing last year.
I go back and forth between investing operations and marketing. As somebody who’s been trained in communications, and has had PR as at least part of what they do over the last 25 years, I look at what’s new, what’s going to really grow, what’s really disruptive. I say in my entire career, I’ve really only seen three things that I’ve had that, “Oh, my God, this is going to change the world” moment. It wasn’t video games, and it wasn’t CD-ROM, even though they’re cool, and it wasn’t online video. The three things were the web browser … I was already familiar with the Internet, but you had to go and basically go into a Unix station in a university.
BLOCK TRIBUNE: Right.
MICHAEL TERPIN: The second one was social media. When I first saw Ryze in the early 2000’s, something like what Facebook became, and how it connected people, and you could then see interconnections between their friends, etc, I was like, “This is a new layer on top of the web. It will be huge.”
Then when I first saw bitcoin, and I was actually a little ticked that I didn’t learn about it earlier because I try to look at these things. I was first introduced, as many other people were, at the first Bitcoin Foundation Conference in early 2013. Brock Pierce, who’s now chairman of the Bitcoin Foundation, and who’s been a friend and a client for a lot of his video game things that he’s done over the years, for 15 years or so, he came into my office. We both had an office in Santa Monica about a block apart, and he said, “I’m dropping all the video game stuff and I want to focus exclusively on bitcoin.”
I’d heard about bitcoin. I thought it was another Second Life type thing, and I wasn’t quite sure of the whole essence of what it was at that point. He had first thought he was going to launch something at that conference, and then decided not to. He said, “But you should go and check it out. I guarantee you, you’re going to walk away with a lot of new clients and just see what I see.” I did.
I went in and it was ironically held in a little room in the back of the San Jose Convention Center. I think it’s one of the smallest areas you can rent. That was the same exact room that the first Internet conference was in in 1994, so I had this amazing sense of deja vu. I noticed a few guys from the early Internet days were there in a crowd of only 1,000 people. I was like, “Okay, if these guys are coming out and I haven’t seen them in a long time, and they’re the brightest guys in almost any room they’re in, there’s something going on here.”
I basically met the whole industry in a couple of days. I remember just standing and thinking, “What do I do now? What do I do now? Do I buy a ton of bitcoin? Do I just wait and try to meet people?” I did a little bit of everything. I bought bitcoin, I met everybody, and I started a group called BitAngels. I met David Johnston, who was maybe 25 or 26 years old at the time, a software engineer that was doing an email marketing platform and was investing in bitcoin for about six months longer than I was in. But six months later meant that you were getting $4 bitcoin instead of $100 bitcoin, which is still obviously around near what it is today.
BLOCK TRIBUNE: Sure.
MICHAEL TERPIN: We basically struck up a fast friendship on the rooftop party the first night, and basically I noted that I saw a couple of VCs there. But I saw so many startups that were starting up and I didn’t really talk to a lot of angel investors, and I was like, “Is there an angel group in the ecosystem?” He said, “No.” Then he said, “Why don’t we start one?” The very first day we met, we started BitAngels. He’s still a big supporter of BitAngels, but I’ve taken that over and grown that now into what’s CoinAgenda, the conference series.
I’m still looking to expand BitAngels to physical events in the next year in different cities because things have changed in the way that people invest. It’s now about ICOs. I think it was just this quarter that funding of blockchain companies by the crowds through token sales passed venture capital investment, and I think that’s going to be one of those tipping points that you look at in the future and say, “This is where the whole essence of how entrepreneurship happens at a huge tipping point, where crowdfunding got really real.”
Kickstarter started it. But Kickstarter was really about just pre-building a product the way you like the product. Crowdfunding for equity was always much more difficult, and you have all the constraints that securities have, and still it was the same old paper stock and this and that. With token sales, you have this unique thing where you’re buying the ownership of the product, and it’s tokenized, has a resale value.
That whole run-up to what’s been happening today has been quite the ride. We together worked on the very first ICO with Mastercoin in August of 2013.
BLOCK TRIBUNE: What should a balanced portfolio include these days? You just mentioned ICOs. Should they be part of your strategy?
MICHAEL TERPIN: I basically am completely out of the stock market. I think it’s way overvalued right now. The last time I got completely out of the stock market was in early 2008. So I think there’s going to be a similar correction of helicopter money, and quantitative easing, and sovereign debt problems that are happening right now.
Bitcoin completely became a small player because it became the MySpace of the cryptocurrency world. It still created something that enabled ethereum, that enabled all the public blockchains and all the private blockchains and all the permission blockchains still came from the concept of the blockchain that Bitcoin created. It’s always hilarious when I hear people saying, “Well, I believe in the blockchain, but I don’t like bitcoin.” It’s just like, “Blockchain would not be possible without bitcoin.” I think bitcoin simply got stuck with a lot of baggage, just like MySpace did. MySpace was considered a place that child molesters would be. The state of Connecticut tried to ban it. You didn’t really get that from Facebook. You didn’t get that from LinkedIn.
BLOCK TRIBUNE: Right.
MICHAEL TERPIN: Same thing, “Oh, bitcoin. It’s that place where you can buy drugs on dark markets and ransomware.” You can do the same thing with ethereum. It’s just that that’s not it’s reputation. Any public blockchain has the same capability for doing bad things as bitcoin does. There’s nothing unique about bitcoin that isn’t kept possible in all the other things that came since. But what everything that’s come since has done has improved it, at least in principle, in a different area. Ethereum basically looked and said, “We want to be able to execute entire transactions within a blockchain. We want to be able to make it complete. We want to be able to do certain things that are different.”
We launched ethereum, my agency. This was in January of 2014, when (Gavin Wood) was 19 years old and just writing this white paper while he was also working at KryptoKit, which was a predecessor of Jaxx, the online and offline wallet company for multicurrency. They became co-founders of ethereum with four others, and had a crowd sale in June of 2014, raised $18 million. It took 42 days to do it. When they finally launched, the price went up to about $3 and it crashed down to 79 cents. You still could have bought ethereum for under $1 in early 2016, and it hit up as high as $400 this year.
There’s just a tremendous amount of innovation happening right now, and a lot of it is around platforms that you could build things on top, and then the other coins are being referred to as app coins, where your application does a specific thing, like Matchpool is decentralized dating. There’s other ones that are being built for real estate, and for medical, and for pretty much anything that you can do in the Cloud.
BLOCK TRIBUNE: What we just talked about here is about a universe of 500 coins/tokens and growing. Is there room for all of these?
MICHAEL TERPIN: Naval Ravikant was at a cryptoconference in 2015 that I was also speaking at, and he was asked the same question. He said, “How many apps can be in the app store?” I think that’s the answer. So as many apps as the user base can support. Now, everything in the app store is not Angry Birds, so there’s going to be some big hits. How many songs can you put in Spotify? I think particularly when you end up having easy-to-develop asset creation platforms, like Counterparty has been and like Aspire is aiming to be, you’ll be able to have hundreds of thousands of cryptocurrency assets that can be for very unique, small applications.
Bancorp, which just had the largest ICO in history, $153 million, a client of ours and I’m an advisor to them as well, they have created a unique platform that has asset creation that then values it using some algorithms they have that are based on where every coin that comes off of it has at least some ethereum in it, and they have algorithms to figure out, without having active trading yet, what the value would be. They have this local coin concept where every town can have a coin, and you can then use the coin and trade it. Even if it’s not very actively traded, you know what rate to trade it if you’re talking your Silver Lake coin, which is mainly a local currency in the Silver Lake community of Los Angeles, and you want to go and use it from your wallet to buy local coins in Israel.
There are going to be thousands to hundreds of thousands of tokens in the future, just like there’s hundreds of thousands of apps in the app store, but it’s the long tail approach. When you get past the first 200 apps, you’re probably talking a very minimal value in terms of market cap. But you may have something that’s a token that’s just around a certain type of video game fan, and they’ve developed a great digital asset component for it, and it’s just rabidly used by people who are into that genre, and it’s got a $100,000 market cap, and it stays constant because people use that. We’re still really in the early days. This is all still just trying to look ahead based on where it’s been and based on what other markets have done when they grow.
BLOCK TRIBUNE: Put on your communications hat for a second and tell me what mistakes new companies are making when they’re trying to tell their story to a wider audience?
MICHAEL TERPIN: Typically, if the engineers are also the CEOs, or there’s too many of them and nobody has really been in business or marketing before, they make the mistake of just really going through the weeds about, “This is important because the TX ID is going to be feeding into the oracle, and this is going to do the …” It’s like, all their initial press releases will look like a white paper, and we have to be the ones to advise that if you’re trying to get mainstream media, you have to say, “What problem does this solve?” “Why does the average person care about it if they do?” Or if it’s going to disrupt an industry, tell us why. Then you can get into the technical things that they ask. But unless you’re writing for Scientific American, you want to know what the business application is and maybe what the human interest story is.
BLOCK TRIBUNE: Give me some predictions. What do you see happening in six months, next year?
MICHAEL TERPIN: You know, it’s a very interesting time to be in the market. It’s amazing to think that the ethereum ICO and people wondering if they’d ever even get off the ground was only three years ago. They’ve only been trading for a year-and-a-half. I would say my predictions would be that I think that ethereum will become bigger than bitcoin by the end of the year.
I think that you’re probably going to have several $10 billion-plus tokens that do different things. Dash, which is a group that we’ve worked with before. In fact, we worked with them when they were about $2 and they’re almost $200 now. Digital cash is what Dash stands for, and it’s trying to be very fast and very usable on smaller transactions to keep them off of the bitcoin blockchain. You don’t want to go and buy a cup of coffee on the bitcoin blockchain. Use something that’s more intended for that purpose.
You’ve got other ones like NEM, which is New Economy Movement. They’ve been very popular in the last year. They moved up from about a $30 million market cap to about $2 billion. We’re currently working with them, and they are looking to be more a innovative and broader-based platform for the enterprise. Ethereum didn’t really start out being for the enterprise, but since they’ve created, along with Consensys and some other private companies that work with the Foundation, the Ethereum Enterprise Alliance. NEM is looking to do a similar type of alliance with bigger companies who want to build more efficient stacks on top of blockchains.
I think that another analogy, when we were going back to saying, “Where are we at with bitcoin versus where the web was at,” you didn’t really have stacks in the 90s. You had the web, and people built simple websites on top of it. What happened in the 2000s was that you ended up having stacks. You ended up having Facebook as its own interface that you really interact directly with the web. You interacted with it and your data was stored, and all the terms and conditions were with Facebook. It just happened to work on top of the web. Same thing with Google. Same thing with Netflix.
The largest companies have built their own walled gardens on top of an open system, and I think that stack approach is what’s going to happen in crypto. You’re going to have the fundamental underpinnings, not the private blockchains. They’re just not economically sustainable. They’re just never going to have the development resources that a public blockchain is going to have. But just like the profits from Linux don’t come from the Linux Foundation, you’re going to have stacks that are built on top of bitcoin, that are built on top of ethereum, that are built on top of new platforms like Aeternity
There’s a lot of different ways of doing the things that blockchain can do for business, which is a multi-trillion dollar opportunity. It’s not about FinTech. It’s about where are you going to access and secure your medical records in the future? Do you really want them in the Cloud, when all these great hackers hack in and take 160 million records out? With the blockchain, that doesn’t happen. Blockchain, you go in, you get one record maybe if you’re able to go in and steal a private key or something like that, but you would not be able to go and get all these different records if they’re individually secured.