This is an entry in CoinDesk’s Most Influential in Blockchain 2017 series.
Ask Naval Ravikant his proudest accomplishments of 2017, and he mentions a 37-part tweetstorm about blockchains, networks and markets – almost in the same breath as his business activities.
“I’d been thinking about the problem for a while. I went to sleep, woke up in the middle of the night, 3 or 4 a.m, and I just regurgitated that entire thing on Twitter,” the founder of San Francisco-based AngelList tells CoinDesk.
The thread began with a bold prediction: “Blockchains will replace networks with markets.” Then it laid out a sweeping view of human history, in which money (along with religion, corporations, roads and electricity) are all different kinds of networks, in the sense that the more people join one, the more valuable it becomes to all participants.
Markets of the 20th century were the first networks that were both open to all comers and meritocratic, yet with limited applications, Ravikant wrote. And now blockchains would “port the market model into places where it couldn’t go before.”
Thinking back on it all, Ravikant says:
“At some level, my brain had been working on the problem of, ‘What does this all mean?'”
It’s a fitting response, since Ravikant’s influence on the blockchain space this year – laying the groundwork for the emergence of a new token economy – has been intellectual, as much as it’s been financial or political.
In all three dimensions, his impact has been profound.
Blueprint for ICOs
Take for example Ravikant’s 2014 blog post, “The Bitcoin Model for Crowdfunding.”
That essay, “I think it’s fair to say helped lead to the later concept of token launches and ICOs,” said Ravikant’s friend Balaji Srinivasan, a board partner at the VC firm Andreessen Horowitz and the CEO of Earn.com.
In it, Ravikant describes how cryptocurrency could serve not only as an alternative store of value and medium of exchange, but also as a way startups could raise money without jumping through the usual hoops.
“Bitcoin is more than money, and more than a protocol,” Ravikant wrote. “It’s a model and platform for true crowdfunding – open, distributed and liquid all the way.”
This vision became reality across the globe in 2017 – but not without a bit of controversy.
Startups and software developers raised more than $2 billion through ICOs, an eight-fold increase over the previous year, according to CoinDesk’s ICO Tracker. But beginning in the fall, regulators from China to Washington D.C. began cracking down on the frauds and unregistered securities offerings among these transactions.
Hardly a Pollyanna, Ravikant readily acknowledges the excesses and envelope-pushing in the frothy market.
“A lot of these ICOs are just bypassing securities laws and just doing fundraising for classic startups,” he said. “There’s a small set that are really creating a brand new group of protocol tokens. It’s in the incentive of the companies to sort of obfuscate the two.”
To many observers, the regulatory arbitrage and the scams are the whole story. But Ravikant has continued to wax eloquent about the long-term promise of blockchain tokens on social media and at conferences, lending gravitas to the chaotic scene.
“Naval brings a certain amount of Silicon Valley credibility to what is otherwise sort of a weird, strange crypto community phenomenon,” says Peter van Valkenburgh, director of research at Coin Center, a Washington crypto think tank and advocacy group.
Placing bets
To be sure, Ravikant hasn’t just been stroking his chin and pontificating; he was an active participant in 2017’s budding token market.
For starters, he became a general partner at MetaStable Capital after three years as a limited partner there. The crypto asset hedge fund backed two of the most ambitious debuts of the year – Basecoin, an attempt to create a stable-value cryptocurrency (which may sound like an oxymoron to some) and the Orchid project, which seeks to restore online privacy by using tokens to compensate exit and relay nodes on a Tor-like network.
Separately, Ravikant himself backed what may have been the first index fund in the cryptocurrency space, managed by BitWise.
Also, reflecting his cypherpunk-tinged worldview (his favorite books include the sci-fi novel “Snow Crash” and the prescient 1997 manifesto “The Sovereign Individual”), he became a board member of the Zcash Foundation, a nonprofit dedicated to supporting not only its namesake anonymized cryptocurrency but online financial privacy in general.
Landing Ravikant for that role “was a big victory for the open blockchain community,” said Van Valkenburgh, who also sits on the foundation’s board. It was important to have a respected business leader alongside the cryptographers and digital-rights advocates, he said, adding:
“The future’s not going to just be built by hippies.”
But of special significance among Ravikant’s 2017 accomplishments is the launch of CoinList, which debuted in May.
It’s a spinoff of AngelList, the online platform Ravikant co-founded back in 2010 to help early-stage startups raise seed funding from accredited investors, defined by the SEC as individuals with a net worth of at least $1 million or earning $200,000. CoinList, similarly, connects ICO teams with such investors, the platform vetting prospective token buyers to make sure they are accredited.
Path for compliance
By limiting the audience to these (presumably) sophisticated investors, CoinList allows companies to market their tokens without having to worry about registering the offerings with the SEC – an expensive, time-consuming and generally burdensome process for fledgling businesses.
Of course, for most of the year, the vast majority of token issuers seemingly did not worry about registering anyway.
“Many tokens have taken the view, rightly or wrongly, that they are not ‘securities,’ and therefore that general solicitation limitations would not apply to them,” said Lewis Cohen, a partner at the law firm of Hogan Lovells.
That may help explain why so far only three major token sales have been completed on CoinList. First was Filecoin, a distributed storage network, which raised $205 million from more than 2,100 investors in September. Then came Blockstack, a decentralized identity and browser startup, which raised $50 million from more than 800 token buyers. (Ravikant was an early investor in both companies.)
A third sale was completed in December for mobile video platform YouNow’s launch of props, a tokenized answer to YouTube.
But perhaps displaying even further that CoinList has merit, about a dozen smaller issuers have used its compliance API without running their ICOs on the site, according to Andy Bromberg, CoinList’s CEO. (Ravikant tends not to get involved in the day-to-day activities of his ventures, preferring to empower his people and step back.)
But with the SEC starting to take enforcement actions, it’s conceivable that CoinList, and platforms like it, will be increasingly important to getting sales done.
“Securities law still apply,” Ravikant said. “That’s why we built CoinList. It helps bring ICO asset and protocol tokens into the same legal compliance that AngelList provides for startups.”
Political capital
Yet even the accredited investor route might not have been available for ICOs in the U.S. were it not for the campaigning Ravikant did on Capitol Hill more than five years ago, before he even heard of bitcoin.
Under a law enacted during the Great Depression, companies raising money were prohibited from “general solicitation,” or public advertising, of unregistered securities. By the early 2010s, this was a problem for Silicon Valley, since it meant that startup demo days were in a legal grey area.
More broadly, in an economy still recovering from the 2008 financial crisis, many in the business community felt that decades-old investor protections were impeding capital formation and due for a digital-age update. Ravikant helped lead the effort to lobby Congress for reform, including a petition signed by 5,000 investors and entrepreneurs around the country.
“I spent six months of my life calling in favors left and right,” he later recalled.
Those efforts paid off when President Barack Obama signed the Jumpstart Our Business Startups Act, or JOBS Act, into law in April 2012. At the time, Ravikant said, he thought the biggest impact would come from Title III, which allowed mom-and-pop investors to put money in companies through crowdfunding sites.
But today, he says it’s Title II, which lifted the ban on general solicitation for accredited investors, that has made the most difference, though in a way that he didn’t imagine back then.
“If Title II didn’t exist, the first ICO would be shut down and that would have been that,” Ravikant told CoinDesk, adding:
“It would have been open and shut, no debate around utility tokens or the Howey test.”
‘No more establishment’
As such, Ravikant’s influence as a startup investor goes well beyond writing checks.
Ryan Shea, a co-founder of Blockstack, rattled off a litany of ways (beyond those already mentioned) Ravikant has mentored his company, from spotting potential pitfalls in its token sale plan to recommending a former SEC official as legal counsel.
“Naval has this constellation of the best people, the right companies, who are actually making a difference,” Shea said. “He is really good at building that whole ecosystem around him.”
But for all his charm and diplomacy, Ravikant also has an iconoclastic streak.
Well before Donald Trump’s November 2016 presidential victory shocked the coastal elites who’d assumed right up until Election Night such a thing could never happen, Ravikant observed on his blog that technological and cultural changes were rapidly altering the political landscape.
“There is no more establishment,” he wrote in January of that year, as Trump and Bernie Sanders were drawing crowds, but still being mocked by the pundits. “Like all things Internet, social media and crowd financing are unstoppable. Every large future election will have outsiders out-organizing, out-raising and out-raging the establishment.”
Odd future
Despite this anti-elitist sentiment, Ravikant sees a growing role for experts in the market whose rise he foresaw and helped make possible.
“I find it harder to evaluate a protocol token or an ICO than I do a classic tech company. There’s a lot more room for error, a lot more places to go wrong. It ends up being less about figuring out the market, less about a team, less about sales force,” he told CoinDesk, adding:
“It ends up being almost all about technology. I wonder how many people in the world are really qualified to assess a high-quality ICO and a low-quality ICO.”
Don’t take that for snobbery, though – Ravikant admits he’s almost as bemused as anyone in this rabbit hole.
“I don’t actually think of myself as qualified to invest in crypto,” Ravikant said at Token Summit II in December. “The deeper you get into this, the more you realize how fundamentally ignorant most of us are.”
For this reason, he said, he expects something like the classic investment syndicate model to eventually take hold in the token market.
That’s also one of the reasons why he put all his personal crypto holdings into MetaStable, after deciding that picking winners and handling custody of keys was too hard (and dangerous: Ravikant initially hesitated to give an interview for this article, because he was concerned his already-high profile in the space made him a target for criminals).
One irony of crypto, he told CoinDesk, is that “anybody who is a small player can be their own bank,” but prominent figures like himself cannot without driving themselves crazy.
Zooming out the lens, though, he sees cryptocurrency as a bulwark for personal freedom around the globe.
“‘Be your own bank’ is always a backup. It’s always there,” he said. “If your government turns oppressive … you can be your own bank.”
This is where Ravikant sounds most animated and inspiring – when he talks about how a platform like Filecoin might help people route around censorship, or how solutions like Blockstack’s might free individuals to port their identities and data across different internet services, breaking the stranglehold of today’s walled gardens.
“I’m not even into the money aspects, I’m not even into the finance aspects, even though that’s what I’ve done career-wise,” he said. “I’m really interested in how this is the next generation of the internet. It’s a fundamentally decentralized Internet.”
And if you have a hard time squaring this lofty, futuristic idealism with his cold realism about politics and investing, Ravikant fused them together almost perfectly in one of his most popular tweets this year:
“Bitcoin is a tool for freeing humanity from oligarchs and tyrants, dressed up as a get-rich-quick scheme.”
Original artwork by Luis Buenaventura II, creator of the CryptoPop website. Click here to view more by the artist, and to check out the official CoinDesk Most Influential T-shirt.