Jerry Tang is an executive, blockchain entrepreneur, Wall Street strategist with years of experience, and co-founder & CEO at VCV Digital Group. His company is one of the first signs on the internet transformation horizon.
Tell us about your background. What brought you to blockchain?
Jerry Tang: So back in college, I took science and technology classes, and I was sort of interested in computers and philosophy my whole life. I was very interested in what’s known as analytic philosophy, so language, mind, logic and kind of foundations of mathematics. I like the history of ideas, the history of science, mathematics and how it happens.
I worked for a French bank called Natixis for 14 years. I have a long-standing interest in technology and have always been fascinated by the blockchain technology because it is transparent in nature, it offers digital freedom, it’s cost efficient since there is no need to pay for intermediaries, and it’s a state-of-the-art encryption technology that uses complex mathematical algorithms and combined with proof of work can protect the data on the blockchain network.
With the pandemic lockdowns, I began to reassess what I know about finance and economics. The result of an aggressive fiscal response by central banks expanded the money supply dramatically. I had the opportunity to talk to my now partner Matt, and at that point, I was thinking about quitting and doing what I do now, basically startups.
We saw an acceleration of digital transformation in two areas. The first area enabled companies to increase velocity and efficiencies to sell, market and service clients. The second area of digital transformation was the transformation of assets such as gold, silver, bonds, stocks and money. Recognizing loss of purchasing power and determining that Bitcoin was the strongest treasury asset is what I think what Bitcoin is all about.
You’ve built a brilliant career as a financier who saved companies from a severe crisis and has more than 14 years on Wall Street. What can you say about crypto markets in terms of financial attractiveness?
JT: Bitcoin is digital property on a big tech and open monetary network, it’s the best money created in the world. Every company on Earth is sitting on a balance sheet that is usually cash and credit, both are crumbling at a faster rate. Can we agree that the money supply is expanding in an unprecedented fashion for the past 24 months everywhere in the world? Any rational investor has to estimate the rate of monetary expansion for the long term. We know there is a commitment to run deficits evidenced by the stimulus.
Bitcoin is not a speculation, it is a new unique technology and a treasury reserve asset. It grew from nothing to a trillion dollars in monetary value in 13 years. I am going to say something crazy. I think the bitcoin price will hit half a million this cycle, it will be crazy but I think it will hit 500 grand by the end of 2022.
You once called bitcoin ‘the greatest invention of the 21st century.’ In your opinion, does the institutional sector mostly see opportunities for hedging, or do they appreciate the prospects of technology?
JT: When I left wall street and decided to start VCV digital, most of my institution fellows probably still weren’t familiar with crypto. The big ones and the smart ones know what crypto is going to do to them. They all know how crypto is going to impact the business.
In its formative years, Bitcoin was dismissed by institutions as a worthless digital asset favored by criminals. Can it be hijacked? Can it be centralized? Can it have a bug? Can it break? And every year, the Bitcoin survives, and it gets more valuable as people entrust it a little more. But along the way, there’s lots of hiccups, so people who are now participating in the crypto world are building a decentralized wall street, they call it DeFi. Unlike wall street, this one is 24-7 open, it’s 365 days a year, it’s available around the world to everyone. There is math and algorithms and code underneath that, not Goldman Sachs front-running your trades.
Today, more and more family offices, hedge funds, and traditional managers have a different perspective on cryptocurrency products and services, and some consider bitcoin as ‘smart money’ and are allocating it as a portfolio diversification strategy. This is because they now understand Bitcoin is a stored of value, a stored labor, and bitcoin has jumped from undesirable to undeniable.
Speaking of prospects, I want to ask about your relationship with Web 3.0 and AI. How do you think these areas are applicable at the moment, and why is the blockchain essentially a non-alternative platform for such projects?
JT: We are all connected by the internet, like it or not. I think the premise of 3.0 is with the advent of crypto technology.
Web 1 for the most part was good only for reading. It was dominated by an open protocol called HTTP or SMTP. Here, the websites were just information centers. Here, you were building E-commerce sites such as eBay and Amazon on top of the web. Thus, when they built a successful business, they would own it and control it. Then came Web 2: a far more interactive internet such as Facebook, Twitter and Youtube that made content creators out of nearly everyone with a smartphone. The way I think about Web2, the open protocols were just limited in what they could do. If you wanted to set up a website in 2008, you’d have to go get a web hosting provider, buy a domain name and do a whole bunch of other things. Essentially, domain name is the one thing you can really own and control.
So, Web3 is coming along. It’s an internet owned by users and builders orchestrated with tokens. This movement started with Bitcoin. It’s a very powerful computer that has new properties. You can create smart contracts, tokens, or NFTs. While web 3.0 is transitioning us into a future that will blend reality with virtual reality, incorporate aspects of machine learning and artificial intelligence to make our interactions with devices more human-like, the blockchain layer adds a very interesting proposition to what will be possible.
The company that you and your partners founded and manage, I mean VCV, essentially plays the role of the future decentralized Internet infrastructure creator. How did you get the idea to start such a complex project?
JT: I was under the conviction that decentralized internet and AI will change the world, and I want to be part of this massive movement. The bifurcation of the mining market comes down to power (electricity), real estate and accessibility to the capital markets. I spent 14 years on Wall Street as a senior executive managing its real estate and capital market business. At the forefront of a once-in-a-lifetime technological and financial revolution, my knowledge and the ability to scale prompt me to start VCV and create infrastructure for tomorrow’s digital asset finance.
Also, just jump back for a second. I said earlier that crypto is one of the greatest inventions in human history and the reason why they are interesting is because technology plays in unregulated spaces. It’s a digital frontier that is being created, and where do you go to create new things, free of interference and the kind of maximum creativity. Anyway, the best-known crypto asset is Bitcoin. Bitcoin is trying to be the new gold. It has some advantages, the value can be stored digitally so it’s hard to seize, and it’s very easy to verify, it’s easy to send across national boundaries and electronically over the internet. It’s easily divisible and verifiable, so you can put it inside smart contracts, and you can do some intelligent things with it. For me, it has a lot going for this store of value.
Tell us about the main goal of VCV? How do you select promising projects and what do you focus on, essentially developing the ‘internet of the future’?
JT: VCV will continue to focus on building tomorrow’s decentralized internet infrastructure that coins can be sustainably mined within the US, and managing cutting edge data centers for digital asset mining and 5G & AI.
The internet of the future has massive potential. For instance, why tokens are so important is they provide a mechanism by which value and control can be given to users and builders, as opposed to simply to centralized companies. You can build today a version of facebook by using open protocols, and the new kind of philosophy where the value and control accrue to the user of the network, not to a company because there is no company. This is how I believe the most important internet product will be created in the future through this kind of new means. Why will it be done this way? For one, it’s better to have – wouldn’t it be better if the drivers on the Uber network owned Uber and got to participate more in the value creation and in the governance of that system? For two, if you look at these Web3 communities, no crypto company spent a dollar on marketing. Why? Because tokens are self-marketing. When someone owns something, there is skin in the game. They inherently want to talk about it. The internet of the future is where we can finally each own a piece of the internet.
What promising projects are your company already working on? Can you share your results in this direction?
JT: We’ve probably deployed I’d say $50mm or so in the last 12 months in crypto mining around the country. That’s a decent trunk of our fund. It’s something we track closely.
Bitcoin mining is now actually understood to be something which is a component of the energy grid. In a sense, bitcoin mining is now like a money battery because on the power grid, you can’t store power that easily. You have to instantaneously generate it as being consumed.
So, we seek projects at different locations from a variety of sources of power like renewables. We believe not only it can be done sustainably but also it increases the profitability of the renewable energy. Think for a second that sun doesn’t always shine, and wind doesn’t always blow, it’s volatile. When nobody is turning on their appliances or consume the power, Bitcoin mining comes in because it’s a load that we can put basically in any location. Rather than store that energy in a battery, we can store it as money. Thus, finding renewable energy source is our main direction.
By the way, what infrastructure objects will become the most important in the future of Web 3.0? Without what further movement in this direction will be impossible?
JT: Blockchain technology couldn’t become reality in the 1990s. A big reason for this is that the hardware wasn’t robust enough to support the concept. The implementation of blockchain requires an immense amount of resources of these systems to scale. Simply throwing more resources isn’t a wide use of funds. Instead, businesses need to smartly allocate compute resources, and get more value out of every hardware component and better control blockchain infrastructure costs.
For instance, more processing power ensures blockchain scalability right? Not always. While you employ more powerful process, the energy and component costs inevitably increase which can make blockchain unfeasible at scale. But, one can choose processors to perform blockchain calculations more efficiently based on workload. ASICs is purpose-built and gives it an edge in performance but they can’t be optimized for a different purpose once they are set up.
Another example is storage. Blockchain cannot be deleted or edited, only added to. This means its storage requirement can only increase. Organization needs to think of ways to balance both speed and capacity.
In other words, compute infrastructure is a costly but necessary part of working with blockchain. If the components are carefully chosen such as processors, storage and network tools, scaling is possible.
In your opinion, is it fair to talk about IT giants deliberately rejecting decentralized models, as people said 20 years ago about the opponents of the internet in business: ‘If you are not on the internet, you don’t exist anywhere’?
JT: Look, if two computers are talking to each other, if two mini-Ais are talking to each other at high speed, exchange resources to run a company, how are they going to exchange money? They are going to use crypto. Crypto is the native currency of the internet. Bitcoin is not a coin sitting somewhere. Bitcoin is an entry to a virtual ledger that’s maintained by tons of machines running across the world. This is virtually communicating value securely across the internet with no third parties in the middle validating that, and you are communicating and transmitting scarcity value to the internet. That’s the new thing. What the internet gave us before was digital abundance. I can make copies of everything. I can make one podcast and ship it to everyone, I can make songs, videos or webpage and ship it to everybody. That was a very big idea and created huge fortunes and huge revolutions.
The same with digital scarcity is an equally interesting idea. If I have a Bitcoin and you don’t have that Bitcoin or vice versa. That ability to create and transmit scarcity and value through the internet is just as important as the ability to create abundance through the internet. Thus, the native language of the internet in communications and protocols around valuable things, around finance, is going to be in cryptocurrencies. It’s not going to be any other way.