Hash Power – Ep. 3 - Funding, Forking, and a Creative Future

At a Glance

This is the third episode of the Hash Power series, hosted by Patrick O'Shaughnessy, exploring cryptocurrency funding, forking, and the future. Multiple industry leaders participate in the discussion. The most impactful insight of the entire episode comes from Naval Ravikant: personal wealth creation depends on the combination of "specific knowledge, leverage, and accountability," and specific knowledge can only stem from genuine passion and curiosity—it cannot be trained or replicated.

Decentralized Funding: Evolution from Foundations to DAOs

Olaf Carlson-Wee (Founder of Polychain) argues that the funding structure of ICOs will rapidly evolve from traditional non-profit foundations to fully decentralized autonomous organizations (DAOs).

• Current State & Pain Points: Currently, project teams raise funds by setting up foundations or LLCs in Switzerland or Singapore to open bank accounts, pay salaries, and manage cryptocurrency volatility risk. Carlson-Wee notes, "Many teams raised cryptocurrency but didn't properly hedge their financial risk, ending up either very lucky or encountering unfortunate events."
• Evolution Path: With the emergence of native financial products (e.g., stablecoins) and more complex governance smart contracts, future ICOs will directly use DAOs. Funds will enter a pool controlled by smart contracts, with token holders deciding allocation and usage through voting mechanisms, completely independent of traditional legal entities and bank accounts.
• Profound Impact: DAOs will usher in an era of "codified governance" experimentation. Carlson-Wee believes this could disrupt traditional hierarchical organizations because "you can encode voting systems with software," enabling more complex expressions than simple US-style democracy. He predicts that within 5-10 years, individuals might be employed by a DAO, serving and being compensated by a global group of token holders.

Regulatory Tightrope: Balancing Innovation and Investor Protection

Naval Ravikant (CEO of AngelList) and Peter Van Valkenburg (Director of Research at Coincenter) agree that cryptocurrency regulation is at a critical and delicate stage, where excessive intervention or laissez-faire both carry risks.

• Naval's "Wild Growth" Argument: Ravikant believes the ICO model breaks Silicon Valley's monopoly on innovation and is "a beautiful thing." However, the current phase is rife with fraud and irrational behavior. He argues the market needs a "painful learning cycle," where investors become more cautious after losing significant funds and actively demand regulation. He predicts, "Two years from now, ICOs will be much more cautious, with full disclosures, governance structures, and milestone-based investments." He warns regulators not to "overreach," or innovation will simply move to other countries or go underground.
• Van Valkenburg's "Baseball Game" Analogy: Van Valkenburg compares regulatory progress in different areas to different innings of a baseball game.
• Anti-Money Laundering (AML) Regulation (7th-8th inning): Most advanced. FinCEN explicitly required exchanges to perform KYC and report suspicious activities like banks in 2013.
• Money Transmission Regulation (3rd-4th inning): Slow progress due to the complex regulatory structure across 53 US states and territories, requiring companies like Coinbase to explain what Bitcoin is to state regulators unfamiliar with the technology.
• Securities Regulation (Early innings): The biggest unknown. Van Valkenburg believes many token sales meet the "Howey Test" definition of an investment contract and should be considered securities, but "none of these token sales have registered with the SEC." He predicts "interesting moments" ahead in this area.

Security and Valuation: Real-World Challenges in Crypto

Ari Paul (Co-founder of Blocktower) and Juan Benet (Founder of Filecoin) reveal the extreme realities and inherent contradictions in cryptocurrency security storage and valuation.

• Extreme Security Measures: Ari Paul describes extreme measures to protect massive crypto assets, including using Faraday cages, never-connected "air-gapped" computers, multi-signature hardware keys, and "glitter nail polish" to create tamper-evident seals. The core logic: "When you're dealing with $100 million, it becomes rational for an attacker to spend $1 million to intercept your operations." The key to security is not preventing intrusion but ensuring you can detect it.
• Filecoin's Valuation Challenge: Juan Benet acknowledges that Filecoin's value comprises multiple complex components: the actual value of its underlying cloud storage service, its utility value as a medium of exchange, and its speculative value as a store of value. He notes, "The huge valuations of many tokens don't match the underlying value they should provide," partly because "there is real utility in having a more liquid token," but most of it "is just hype." He advises investors to carefully scrutinize the team, technology, and market changes.

Forking and Evolution: The Core Innovation Mechanism of Blockchains

Fred Ehrsam (Co-founder of Coinbase) compares blockchain forks to genetic mutations in biological evolution, arguing this is the core reason for their rapid iteration and ability to experiment with vast governance models.

• Evolutionary Analogy: Ehrsam points out that forking creates a "parallel universe," allowing a community to modify and experiment on the original protocol. These "mutations" are tested in the real world, and the fittest survive. Since blockchains are software, their evolution speed far exceeds the millions of years of biological evolution.
• Market Structure as Leverage: Ehrsam cites USV partner Brad Burnham's view that "market structure is the highest leverage point." Blockchains allow us to experiment with hundreds of economic and governance systems at unprecedented speed. He reminds us that this is a "rare historical window" to define these underlying structures, with profound and difficult-to-reverse impacts.

Personal Success Framework: Specific Knowledge, Leverage, and Accountability

Naval Ravikant proposes a framework for individual success in the future world, arguing it is more important than any investment strategy.

• Three Elements:

1. Specific Knowledge: Knowledge that cannot be trained or replicated, stemming only from pure passion and obsession for something.

2. Leverage: Amplifiers that allow you to "work while you sleep," such as code, capital, media, and brand.

3. Accountability: The willingness to "stick your neck out," take personal risk, and thereby earn corresponding rewards.

• Core Logic: In knowledge work, output varies enormously (0x, 10x, 100x) and cannot be measured by tracking inputs (e.g., hours worked). Therefore, only those with specific knowledge can create irreplaceable value, amplify it through leverage, and ultimately achieve outsized returns. Ravikant emphasizes, "Curiosity should drive your life," as it is the only path to acquiring specific knowledge.

Position Moves

Position	Guest Sentiment	Key Data
Tezos	Risk Warning (as an example of overvaluation)	Raised $232 million in 3 days (66,000 BTC + 360,000 ETH)
Ethereum	Neutral (as background and comparison)	Created by 19-year-old Vitalik Buterin, current value $28 billion
Filecoin	Bullish (technological potential), but warns of valuation complexity	ICO valued at $262 million; 40%-60% of global storage space unused
Blockstack	Bullish (infrastructure value)	Analogized as "the operating system for a decentralized internet" or "infrastructure for a new city"
Bitcoin	Neutral (as a store of value and comparison)	Explicitly considered unlikely to be classified as a security

Memorable Insights

1. Olaf Carlson-Wee on the Future of DAOs: In 5-10 years, you might be employed by a DAO, serving and being compensated by a global group of token holders, which is more efficient and global than traditional corporate structures.

2. Naval Ravikant on the "Golden Window" for Regulation: Regulators should not "overreach" and stifle innovation but give the market 2 years for investors, after paying their "tuition," to naturally foster a more regulated and cautious ICO model.

3. Peter Van Valkenburg on the Security Nature of Tokens: Many token sales meet the "Howey Test" definition of a security, but none have registered with the SEC—this is the biggest powder keg for future regulatory conflict.

4. Ari Paul on the Core of Security: Protecting $100 million in assets is not about preventing intrusion but ensuring you can detect it (e.g., using nail polish as a tamper-evident seal), because an attacker would be willing to spend $1 million to breach your defenses.

5. Juan Benet on the Complexity of Token Valuation: Filecoin's value must be broken down into the value of the underlying cloud storage service, the utility value as a medium of exchange, and speculative value; most tokens' valuations are disconnected from their underlying value.

6. Fred Ehrsam on the Evolutionary Power of Forks: Blockchain forks are like biological genetic mutations, allowing us to experiment with hundreds of economic and governance systems in a short time—this is the core of their disruptive power.

7. Naval Ravikant's Three Elements of Wealth Creation: Wealth = Specific Knowledge + Leverage + Accountability. Specific knowledge cannot be trained, only derived from passion; leverage (code/capital/media) is the amplifier; accountability is the price for outsized returns.

8. Naval Ravikant on Curiosity-Driven Action: In an age of information overload, the only way to stay ahead of the market is to follow your curiosity, because by the time everyone thinks something is "hot," the returns have already disappeared.