Why are so many people talking about Web3?
Emmy Sobieski, COO of satschel, draws us into the intricate realm of Web3, dazzling us with personal tales of instant wealth while also warning about the dangers of arriving late to the party.
What is Web3 in your mind?
Even back in 2017, a lot of people would say, “I like blockchain, but not Bitcoin.” But the whole reason it’s called crypto is because it’s all secured by cryptography, which goes back more than a century before computers. It’s just a way to send secure codes and communications. What Satoshi Nakamoto figured out with Bitcoin was how to secure transactions such that you can trust the result of the transaction. You can trust that the transaction happened and that it’s accurate – even if you don’t know or trust the person on the other side of that transaction.
That opens up all kinds of international-transaction opportunities. It’s really exciting. The way he did it, basically, was that each block gets secured by these computers. It’s called proof of work, such that you know and can trust the provenance. You can trust where it’s come from, and that blockchain technology is useful with or without you deciding to invest in or speculate on Bitcoin. That blockchain technology can be used in all kinds of enterprise applications, financial applications, inventory, supply chain – and it’s all available for people to view if they want to if it’s a public blockchain.
The way you’re describing it is that there’s blockchain and Web3 and these are synonymous terms. Is that the way people should be thinking about it?
So this is going to belie my age, but this is kind of marketing 101: if people really start to hate something, rename it. So, ‘private equity’ used to be ‘leveraged buyout firms’ until they destroyed a bunch of jobs and pissed off a bunch of people. The face of leveraged buyout, my old boss Mike Milken, went to gaol and so they renamed themselves private equity. Now private equity is the place where everyone wants to work.
It’s the same with Web3. We started off saying Bitcoin or blockchain. Then people started to call it crypto. Then in 2018, a lot of people lost 95% of their money when smaller altcoins – not Bitcoin or Ethereum – went down a lot. So they lost everything. Then a lot of financial institutions wanted to distance themselves from crypto. This was the next evolution, the next upcycle – it’s no longer crypto, it’s Web3.
The idea is that Web2 is the social web – LinkedIn, Google, Facebook and those companies. In contrast to that, part of Web3 is saying everything should be decentralised. We shouldn’t have 85% of things going through Google and we all should be able to take back our own identity, which is called self-sovereign identity. But all of that was still the case when we were talking about blockchain. Those were all the use cases we were discussing in 2017 with blockchain. So it truly was just a way to rename it.
In terms of regulation and compliance, cryptocurrency seems to get the most attention in the mainstream media. But given what’s happening at the moment – the crypto market peak was $3 trillion in November 2021, and since then it’s absolutely tanked and we’re sitting at around $1 trillion market cap across all coins. What does that mean for Web3 more generally in terms of innovation?
There are market cycles that we see in Web3, and they are similar to what I’ve seen throughout my 30-year career in equities. Every time the tide goes out and you have a crash, then the bad players who were taking too many risks or breaking the law, they all get exposed. It’s not that they weren’t there before, but they were hidden by a stronger economy, a stronger market.
We saw during the 2001 recession, Enron and WorldCom blew up. We also saw a lot of that in 2008. This is the same type of thing that we are seeing in crypto – there are so many different players that are having problems right now. Even stablecoins are now being questioned. Part of it is that when things pull back, crypto is at the highest end of the risk scale. It’s going to come down more and you’re going to see a lot more problems.
When a lot of individuals lose money, they will go to Washington or call their senators and say, “Oh my god, I got ripped off. I put my life saving into this.” And so then the regulators come in and, to me, this is actually an opportunity. We’ll get more regulatory clarity and we’ll have more time because things don’t move as fast during a downturn.
So in some ways, a crash is good?
It’s bad because I hate to see people hurt. When I was using 1800-GOT-JUNK to pick up some things from my house, the driver and his helper both owned a bunch of different crypto coins. I hope they got out at the right time, but it makes me sad because it’s this typical thing where if you just hear about something that’s brand new and no one else is doing it, you’re going to do a bunch of research and think about it. If everyone around you is buying it, then you’ll just buy it without doing any research. That’s what happens at the height of these markets.
But I do feel like this will bring more regulatory attention and maybe we’ll get more clarity, which is what we’re seeing in the EU.
What was the moment when you thought, “There’s something to this technology”?
It’s funny that you ask that. I’m writing a book called $100 Million Careers: The 5 Paths to Wealth Beyond Your Wildest Imagination. In that, I say you’ve got to look for moments where you can skip the line, where you can take a shortcut, because those moments do exist. That happened to me with Web3. I was going along, minding my own business, running a half-a-billion-dollar tech portfolio for Nicholas Investment Partners, and in the space of a week I had two mentees call me.
One was 27 and one was 29. The 27-year-old says to me, “Emmy, I’m leaving Coinbase and I’m starting a crypto hedge fund. How can I reach institutional investors?” I gave her some advice. The next one calls me out of the blue two days later and he says, “Emmy, I made so much money investing in crypto that I’m retiring at the age of 29.” And by the way, he came out of retirement and now runs Genesis Volatility, which is a Web3 crypto options analytics platform. And a third friend of mine calls me and says, “Emmy, I think I want to fund my software company using an ICO.”
I’m thinking, “What is going on?” This is a great lesson for anyone who’s young and growing in their career. There are going to be these moments where you’re like, “Wait a minute. I need to stop, get some books on blockchain, Bitcoin, Web3 and figure out what in the world this is.” I’d now had three crazy calls in the space of four or five days, so that was the moment.
I was flying to Hawaii the next day, so I didn’t even have time to order books on Amazon. I ran over to Barnes & Noble and got everything off the shelves. My entire suitcase had no dresses in it. It was all books. I went to Hawaii to be with friends, but I spent the entire time until 2am every day reading all of these books. When I came back, I met a bunch of people in Silicon Valley to learn more, then I went back to Nicholas Investment Partners to restructure the entire portfolio, which greatly outperformed over the next six months.
I was off to the races. This was something I hadn’t seen since the internet in 2000 and I said, “I’m not going to miss this off-ramp. I’m going to Web3.”
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