Adam Ludwin - A Sober View on Crypto - [Invest Like the Best, EP.66]

Here is the translation of the provided Chinese investment research notes, following all specified rules.

At a Glance

Guest Adam Ludwin (Founder & CEO of Chain) is a VC-turned-entrepreneur who entered the crypto space early. The main thread of this episode is a calm, balanced examination of the current state and future of cryptocurrencies and decentralized applications (dApps) amid a fervent market. Adam Ludwin argues that decentralized applications are worse than centralized applications in nearly every dimension, and their only irreplaceable advantage is "censorship resistance," a feature that lacks appeal for most ordinary users. Therefore, the current market valuation (approximately $200 billion) reflects "a huge outcome with a very small probability," rather than real-world application.

The "Curse" of dApps: Worse, Yet Unacquirable

Adam Ludwin argues that decentralized applications (dApps) are structurally inferior to centralized applications in performance, scalability, and user experience—an inevitable result of their design intent.

• Performance & Scalability Gap: The Bitcoin network processes approximately 7-10 transactions per second, while Visa can handle up to 60,000 transactions per second during the Christmas peak. Ludwin points out that this gap is not an "early-stage" issue but a fundamental design flaw of decentralized systems. Any attempt to significantly improve performance (e.g., increasing block size) tends to re-centralize the network, thereby losing its core value.
• User Experience Dilemma: To truly enjoy the benefits of decentralization, users must manage their own private keys, which is extremely complex and high-risk ("If you lose your private key, your money is gone, no recourse"). Entrusting assets to centralized exchanges like Coinbase means "you're back to PayPal, exactly the same," losing the point of decentralization.
• Unique Paradox: Cannot Be Acquired: This is a key insight from Ludwin. Traditional tech giants (e.g., Facebook) can eliminate emerging "killer apps" (e.g., Instagram, Oculus) through acquisition. However, dApps have no corporate entity and cannot be acquired. "If Mark Zuckerberg decided today to buy Bitcoin, the question doesn't even make sense." This means that once a dApp truly succeeds, existing giants cannot co-opt it through capital; they can only face disruption.

Censorship Resistance: The Sole Advantage and an Uncertain Future

Adam Ludwin argues that the only irreplaceable advantage of decentralized applications is "censorship resistance"—the fact that no one can stop you from using it. However, this is not a necessity for most people living in stable societies.

• Two User Groups: Ludwin divides the target users for censorship resistance into two categories: the "offline" population (e.g., the unbanked, those living in countries with hyperinflation or capital controls) and those who "want to be offline" (e.g., criminals, tax evaders, those seeking anonymous transactions). He frankly admits that the latter is the primary current use case, which makes traditional finance skeptical of such assets.
• Uncertainty of Social Acceptance: Ludwin believes that the evolution of the technology itself (e.g., performance improvements) is relatively easy to predict, but how society adopts a technology is extremely difficult to predict. Using encrypted communication (Signal, Telegram) as an example, he notes that its shift from being "for hackers and paranoids" to mainstream use was a result of changing social attitudes in the post-Snowden era. Therefore, the core bet in investing in crypto assets is: Will society embrace this "internet counterculture" in ways that are hard to foresee?
• Comparison with the Early Internet: Ludwin offers a sharp observation: In the early internet era (1991-1993) and the PC era, people could already see the prototypes of "killer apps" (e.g., chat rooms, email, spreadsheets); the question was simply "will ordinary people use them?". In the current crypto space, aside from the "offline" and "want to be offline" groups, he sees no such seeds of applications. This struggle makes him believe it is the biggest risk in the current market.

The "Winner's Curse" of ICOs: Why You Shouldn't Launch or Invest

Adam Ludwin strongly opposes launching or investing in ICOs, arguing that while it seems like "picking up a $100 bill on the ground," it is actually a "winner's curse" with long-term negative consequences.

• Warning for Investors: Ludwin points out that the vast majority of ICO buyers are not looking to use the service but to speculate. "They want 10x returns in 10 weeks." This gives project teams a "false signal of product-market fit." He advises following Buffett's principle: "Only invest in what you understand." Using Bancor as an example, he notes that the first question in its FAQ—"Why does asset exchange have a double coincidence of wants problem?"—is incomprehensible even to professionals, let alone ordinary buyers.
• Warning for Issuers (Self-Interest Perspective): Ludwin provides a highly persuasive, self-interest-based (rather than moral) reason for not launching an ICO:

1. Angry "Mob": Once the market corrects, you will face thousands of angry Reddit users ("They will write you letters in blood"), which will become a lifelong burden.

2. Inability to Exit: His co-founder believes that any company that has done an ICO will never be acquired or go public. Facebook wouldn't want to inherit your "angry mob," and investment banks wouldn't underwrite a company with such a "stain."

3. Legal Risk: After a market crash, someone will inevitably be made an example of, facing class-action lawsuits.

• Core Principle: Ludwin believes that you should only issue a token when you truly need to create a decentralized application. Most projects do not need a token; they need something like "Facebook Credits" or a modern payment system.

Position Moves

Position	Guest's Stance	Key Data
Bitcoin	Bullish (as a store of value)	Network ~7-10 tx/sec; Market cap ~$100B; First block contained "Chancellor on brink of second bailout for banks" metadata.
Ethereum	Bullish (as a platform)	ICO raised only ~$18M; It is a dApp created by Vitalik and others.
Zcash	Bullish (as a privacy coin)	Offers stronger anonymity than Bitcoin; potential value for "dark pool" trading in capital markets.
Filecoin	Neutral/Risk Warning	Mentioned as a decentralized storage project, but Ludwin questions its pre-ICO valuation and actual demand.
Tezos	Risk Warning	As an ICO risk case, investors only received a "promise of future tokens" before issuance.
Bancor	Risk Warning	As an ICO case "nobody understood," its FAQ was obscure, yet it raised $150M.
Litecoin	Risk Warning	Founder Charlie Lee faced immense public pressure on Twitter, serving as a preview of the post-ICO "angry mob."

Judgments Worth Remembering

1. "Decentralized applications are worse in almost every dimension. That's by design." — Adam Ludwin. The gaps in performance, scalability, and user experience are structural; any attempt to fix them risks sacrificing decentralization.

2. "If Mark Zuckerberg wanted to buy Bitcoin, the question doesn't even make sense." — Adam Ludwin. dApps cannot be acquired, posing a fundamental challenge to the monopoly of existing tech giants and representing their unique value.

3. "The 'winner's curse' of ICOs: You get the money, but you trade it for an angry mob on Reddit and forever lose the chance to be acquired or go public." — Adam Ludwin. From the issuer's self-interest, he gives a more powerful argument against ICOs than moral condemnation.

4. "The current $200 billion market cap represents 'a huge outcome with a very small probability,' not real-world application." — Adam Ludwin. The market is pricing in the possibility (1%-10%) of decentralized technology disrupting financial and tech giants, not its current use value.

5. "The early internet had chat rooms and email. In crypto, aside from the 'offline' and 'want to be offline' groups, I see no seeds of a killer app." — Adam Ludwin. This is his powerful rebuttal to the optimistic "you just can't see the future" argument, noting that disruptive technologies in history had clear application prototypes early on.

6. "'Censorship resistance' is not a selling point for most Americans. 'I'm finally fed up with Venmo censoring my Starbucks transactions.' — Nobody thinks that." — Adam Ludwin. He uses a vivid example to explain why the core advantage of decentralization lacks appeal for mainstream users.

7. "Crypto assets let you 'go long' on an entire technological trend, like buying an index of the entire 'drone future' instead of betting on one company." — Adam Ludwin. He points out a unique advantage of crypto assets as an investment tool: betting on the entire sector rather than picking winners.

8. "The crypto market is 'leapfrogging' traditional capital markets: It starts with retail investors on the fringe, and institutional investors might be the last to take the baton." — Adam Ludwin. He points out the peculiar phenomenon of a completely opposite issuance path to traditional financial products, hinting at a possible "sweet karma."