A prominent crypto economist has explained how growing up in 1990s Russia shaped her belief that cryptocurrencies could one day become a multi-trillion dollar asset class.
Anya Nova, who is a crypto economist with Perth-based blockchain project Power Ledger, says she experienced extreme hyperinflation during her childhood and realised that money is a “resource that the government controls, and occasionally – mismanages.”
“The Russian government printed too much of it, and it devalued right before my eyes,” Ms Nova said.
“I remember my mom sent me to buy a loaf of bread from a local store.
“The day before, one loaf was the equivalent of 60 cents, today it was $3.40. This was not an immaterial change for my single mother and me.”
Path to crypto
Fast forward to 2019, and Ms Nova can’t understand why people aren’t taking Bitcoin more seriously.
“I hear people say Bitcoin will never replace fiat money because ‘it’s not real,’ but fiat money is somehow ‘real.’ This rings false to me,” she said.
“If you’d ever held a large bundle of worthless cash in your hand, you’d know the feeling.”
Ms Nova says she has become fascinated by cryptocurrencies and the questions they raise about traditional finance.
“How does money work? Who controls it? Why do some people have more than others?” she asked.
The evolution of crypto
Ms Nova says she has watched closely the evolution of cryptocurrencies: from Bitcoin, to Initial Coin Offerings and now Security Tokens (STOs).
“The real reason we are seeing the insurgence of security tokens is because the regulators, such as the SEC, are cracking down on projects that have not complied with the existing fundraising regulations,” she said.
“So fundamentally what security tokens are is a return to compliant ways of fundraising.
“To be clear, a token sale that complies with the fundraising regulation is not a better investment compared to the one that doesn’t.
“Fundraising regulations have a lot of issues, from how your level of sophistication as an investor is determined (it’s your net worth, not your investment skill), to how product disclosure statements work (they don’t because people don’t read them).
“A good investment is one where the right team is solving the right problem, at the right time, regardless of whether the investment itself complies with the capital raising regulations or not.”
Will security tokens work?
Ms Nova says she’s been following security tokens closely and in the process has been exposed to some “pretty controversial ideas … and pretty colourful characters.”
“Some claim that security tokens will end poverty as we know it,” she said.
“It’s a nice thought, but poverty has many causes and access to investment opportunities, or lack thereof, is just one of them.”
“If you take a bad investment and put a token on top of it, it is still a bad investment.
“A pessimistic view is that security tokens will give rise to many useless investments that’ll compete for our attention in an already crowded space.”
A multi-trillion dollar asset class
Ms Nova says security tokens will not democratise finance and lift millions out of poverty right away, but they will transform how we live.
“There is just so much to tokenise,” she said.
“$217 trillion dollars in real estate, $55 trillion dollars in equities, $6 trillion dollars in gold.”
Could security tokens have saved Russia in the 1990s?
“The 90s was not a good time in Russia,” Ms Nova said.
“In addition to hyperinflation, billions of dollars were stolen via botched privatisation of public assets such as factories, mines and farms.
“Privatisation was fractionalization on steroids, an economic experiment on an unprecedented scale, where everyday citizens received certificates representing a portion of the national infrastructure.”
Ms Nova says if security tokens existed then, “privatisation would have been the best use case to demonstrate the attributes of transparency and immutability that we love in blockchain technology.”
“Anyone with access to a blockchain explorer, such as the openly available etherscan, would have been able to verify that a particular factory or a mine site or a farm was fractionalized into a fixed number of fractions, that each fraction was accounted for and, most importantly, that the fractions were fairly distributed among all citizens, as was intended.
“Instead, because the process was murky, it was abused and the ownership of the country’s assets ended up in the hands of the few, giving rise to the emergence of the oligarchs and some of the worst financial inequality seen anywhere in the world.
“In fact, you could argue that that theft of public infrastructure was worse for my family and my generation than the hyperinflation that preceded it.
“The promise of security tokens is that such episodes in our common economic history will never have to repeat.” M
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Read more from Anya Nova here.