Scarcity Cred

Any firm that approaches $1T in value has tapped into a basic human instinct. Consuming, signalling, loving, and praying have been the fuel of Amazon, Apple, Facebook, and Google’s ascents, respectively. That the crypto asset class universe has reached $2T reveals, I believe, that it taps into two attributes we instinctively pursue: trust and scarcity.

 
Trust

Our superpower as a species is cooperation, which requires trust. It’s the reason banks, traffic lights, and anesthesiologists exist. Even before crypto, creative minds have been drawn to finance, as trust creates opportunities for leverage and securitization. In 1997, seeking more control over his songwriting catalog, David Bowie raised $55 million with Bowie Bonds. The bonds paid 7.9 percent interest over a 10 year-long term — a scant premium to a U.S. 10 Year Treasury Note at 6.4 percent. What made Bowie Bonds unique was the collateral, or source of trust: future royalties on Bowie’s music, which the bondholder felt people would continue to value. Moody’s rated the bonds A3 and Bowie used the proceeds to buy out his former manager, shoring up the bonds and securing long-term control of his music.

Though innovative in its collateralization, the Bowie Bond was on its face a vanilla financial instrument, no different in form than a bond issued by GM or P&G. In order to connect his art and potential investors, Bowie had to rely on the (expensive) apparatus of traditional gatekeepers in finance and entertainment to imbue his bonds with the essential attributes of trust and scarcity. The royalty stream (trust) was mediated by lawyers and accountants in big publishing houses, and the legitimacy of each individual bond (scarcity) was dependent on the financial powers of Wall Street.

Συνέχεια ανάγνωσης εδώ

Πηγή: profgalloway.com