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.

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More from @BillAckman

Jan 27
In late 2012, we shorted @Herbalife and delivered our initial 342-page deck centerforinquiry.org/wp-content/upl… . In sum, we said that HLF was a pyramid scheme that was causing enormous economic harm. HLF has declined by 24% since then. The S&P has ~tripled over the same period.
We made numerous other presentations about @herbalife identifying new issues and addressing false and misleading statements that HLF made in response to our presentations. The @FTC launched an investigation of HLF in March 2014. In July 2016, HLF settled with the FTC for $200m.
In March 2014, we made a presentation about HLF China. In sum, we said that HLF was violating China anti-pyramiding law and had inaccurate SEC filings. HLF said: "The presentation reflects Mr. Ackman’s continued failure to fundamentally understand Herbalife’s business model."
Read 16 tweets
Jan 13
Many have expressed surprise about my interest in the FTX situation and my openness to the possibility that @SBF_FTX may be telling the truth as I have no economic interest or relationship with any of the parties. Perhaps some background on my life experiences will help explain.
20 years ago on 12/9/02, I released a white paper entitled ‘Is MBIA Triple-A’ where in 55-pages I questioned the AAA credit ratings of the largest bond insurer. I disclosed on page one that my firm, Gotham Partners, held a short position in the company.
A few weeks later, then-NYAG Eliot Spitzer launched an investigation accusing me of market manipulation. As a high profile hedge fund manager and with this being Spitzer’s second major initiative after his successful Wall Street analyst investigation, it was front page news.
Read 23 tweets
Jan 2
My issues with KO/PEP are more with their advertising, health disclosures (not), and the buying off of critics. The harm is born by less health-aware consumers who are disproportionately kids or from low income groups. When was the last time you saw an obese person in a Coke ad?
And then think about all of the negative externalities. What have Coke/Pepsi contributed to our health care costs? And think about all of the plastic bottles in the ocean. Why haven’t KO/PEP invested some of their massive profits in developing a truly biodegradable bottle?
In reality, neither company is as profitable as their public filings suggest because the real costs, if they were properly burdened with their negative externalities, are much, much higher than reported. The problem is that society, rather than Coke and Pepsi, bears these costs.
Read 4 tweets
Dec 23, 2022
It appears that @FTX_Official was a legitimate profitable exchange started by an MIT grad with backing from top VCs at a massive valuation. Why would @SBF_FTX commit fraud at Alameda and blow up FTX and risk a lifetime in jail? This reminds me of Madoff
who had a profitable trading operation that generated more than he could ever spend on his lifestyle. Why would he get involved in a ponzi scheme? A theory: Both lost money and were embarrassed. Rather than acknowledge the losses, they assumed that they could ‘borrow’ customer
funds, invest them and earn back the loss, and then repay the borrowed funds. All to avoid embarrassment and admission of failure. But then the market crashed and the losses were too large to recover from. At that point, they were stuck. If you admit the loss and the theft, you
Read 6 tweets
Dec 8, 2022
For the last few years, I have agreed to do a lunch auction for @LynchFoundation that was managed by @charitybuzz. Only this year did I learn that @charitybuzz takes 20% of the auction price from the charity plus a 10% fee from the winner of the auction.
I asked @LynchFoundation to negotiate a lower take rate. @charitybuzz initially offered to reduce the rate to 15%, and then they reneged. @charitybuzz should be shut down and return the $150 million+ in fees that they have taken from donors.
It is extremely misleading to consumers that @charitybuzz uses the word charity in its name and presents itself as a do-gooder organization while quietly taking 30% off the top of each donation.
Read 7 tweets
Nov 26, 2022
In a recent thread on crypto, I argued that crypto and tokens enabled the formation of businesses that heretofore could not be created. Some responded that cash could be used in place of tokens, and therefore the ‘innovation’ of crypto was not meaningful. I beg to differ.
Others assumed that I was advocating or perhaps even ‘pumping’ specific tokens, but I was doing no such thing. Rather I was trying to make the case that crypto and tokenization were useful technologies for business formation. I will try to make the case clearer here.
Stock options have been a powerful tool for business formation and growth as they enable the recruitment and alignment of incentives of a talented workforce for a startup with limited cash resources. But options have their limitations.
Read 25 tweets

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