Thread by @BillAckman

The telephone, the internet, and crypto share one thing in common. Each technology improves on the next in terms of its ability to facilitate fraud. As such, I was initially a crypto skeptic, but after studying some of the more interesting crypto projects, I have come to

believe that crypto can enable the formation of useful businesses and technologies that heretofore could not be created. The ability to issue a token to incentivize participants in a venture is a powerful lever in accessing a global workforce to advance a project. The problem

with crypto is that unethical promoters can create tokens simply to facilitate pump and dump schemes. It may in fact be that the vast majority of crypto coins are used for fraudulent purposes rather than for building legitimate businesses.

Despite crypto’s ability to facilitate fraud, with the benefit of sensible regulation and oversight, crypto technology’s potential for beneficent societal impact may eventually compare with the impact of the telephone and internet on the economy and society.

Initially, I assumed that there is no intrinsic value to any of the tokens and therefore they simply represent a modern-day version of tulip mania without the aesthetic benefits. But after examining a number of interesting crypto projects, I began to

understand how a token could build intrinsic value over time. Two examples may help to explicate my view: @helium created a global Wi-Fi network used by @limebike and others to track devices globally as well as for other uses which benefit by access to global Wi-Fi networks.

Helium’s global network of 974k hotspots was crowd created by individuals who purchased and deployed Helium hotspots to mine HNT, its native token. Customers who wish to use the network must purchase HNT and burn it, ie, remove the ‘consumed’ HNT from its total supply of tokens.

As a result, over time, a two-sided market for HNT develops in which miners buy hotspots and deploy them around the globe to earn tokens. Users, in turn, purchase HNT tokens in order to use the network. The more demand for the network, the more demand for HNT.

Given HNT’s ultimately finite supply, the balance between supply and demand yields a market price which increases or decreases over time along with the success of the Helium Wi-Fi network. As such, HNT becomes a valued commodity whose price is determined by supply and demand.

DIMO collects valuable auto data from data ports in cars. It does so by allowing car owners to mint tokens by capturing data from their own car. The data are valuable for the car owner as well as for auto manufacturers, suppliers, insurers, municipalities, etc. One can envision

a two-sided market for DIMO tokens developing over time where data-users buy and burn tokens that are minted by car owners with DIMO data collection devices. (Disclosure: I am a small investor in DIMO and am uninvolved in Helium.)

To understand the benefit of crypto-based business models, imagine how difficult it would be to create Helium’s million-node network of global hot spots where each node is placed in a location to optimize the coverage of the network. Helium miners earn more tokens for siting

their nodes where they are most needed as miners earn more tokens the more their node’s signal is demanded by users. Consider the capital investment and time required for Verizon or ATT to create the same network. Consider the regulatory hurdles and international coordination

that would have to be overcome compared with the Helium model. While @Tesla can build DIMO’s dataset for its own cars, how can any other automobile company create a similar dataset for their own vehicles that were manufactured before connectivity and data collection became

feasible. Furthermore, how can any company create a dataset of all cars on the road today? While all cars made since 1996 have OBD (onboard data) ports, other than DIMO’s token-incentivized model, I can’t envision how a company in a non-crypto world can create real-time access

to this data. Disclosure: I am a small direct investor in crypto projects. The other two are @ORIGYNTech and Goldfinch Finance. I am also an investor in seven crypto VC funds and a small investor in companies that help with tax compliance and/or reduce fraud in crypto

i.e., @TaxBit and @trmlabs. In total these investments represent less than 2% of my assets. I invest more as a hobbyist trying to learn than as a careful investor as I minimize the time I spend on non-Pershing Square investments so please don’t rely on my due diligence or

take any of the above as an investment recommendation. All of the above said, I think crypto is here to stay and with proper oversight and regulation, it has the potential to greatly benefit society and grow the global economy. All legitimate participants in the crypto ecosystem

should therefore be highly incentivized to expose and eliminate fraudulent actors as they greatly increase the risk of regulatory intervention that will set back the positive potential impact of crypto for generations. As always I welcome your feedback.