Zihao Xu, head of future of money at Octopus Ventures says he didn’t find out about Bitcoin until “relatively late” around 2012/3, but had been “predisposed to find it interesting since 2009/10.”
He studied Economics and Management as an undergraduate and found his way from Austrian business cycle theory to Austrian monetary theory “and as a result have been enthusiastic about the idea of denationalised money for quite a long time.”
“So when I came across the Bitcoin white paper, I immediately found it compelling and started playing around with it.”
He says he takes his inspiration “as much from the old masters as I do from current thinkers. I think that Adam Smith is one of the most important individuals the world has seen and in my day-to-day discourse, I try to uphold the values of Hayek, Von Mises and Bastiat that were set out decades ago. At the same time I think that Naval Ravikant, Chris Berniske, Chris Dixon and Fred Ersham have a lot of wise words for today.”
He acknowledges the benefits of crypto are hard to see today “in the same way that when mobile phones first came about, we would never have guessed that people would use them to call a cab or find love.”
His view of the world is that almost everything that has happened in the world can be explained by incentive structures we build and that open systems of incentives “out-innovate closed systems of incentives by orders of magnitude.”
He cites examples of Microsoft Encarta (closed) versus Wikipedia (open) and AOL walled garden (closed) v the distributed web (open) or even just state-controlled production (closed) v free market capitalism (open).
“Prior to crypto it has been hard to create a genuinely open ecosystem where people can both be rewarded for contributing and trust that the rules of the game won’t be changed on them.
“As a result, I believe that the open incentive structures that we can build on crypto will unleash an unprecedented level of innovation that we can’t yet imagine. I think it will dramatically reduce the cost of living in many respects by making a number of markets more liquid and competitive while giving people the incentives to build truly innovative digitally scarce goods and products.
“For the first time we can really leverage the power of the internet (zero marginal cost and zero distribution cost) in a way that doesn’t concentrate power in a few corporations.”
Bring power back
He is inspired by freedom of the individual and voluntary association between humans which before the rise of crypto “the world has looked very bleak for the individual.” He hopes crypto networks will “bring power back to the ordinary woman and man on the street.”
There’s a systemic problem with lack of women in blockchain “and it’s the same problem that leads to there being too few women in tech, too few women in investing roles and in board rooms” he continues.
“The world does a bad job at giving young women an equal chance to pursue these things compared to young men and it’s a tremendous shame.
“Of course this is generalising in a big way, but there is a cultural bias in most parts of the world against being interested in technology and ‘competitive’ environments in the feedback loops that we subject young women to from a really young age.
“This not only affects the young women but it also affects the attitudes that are picked up by young men who often become gatekeepers to some of these roles later in life. That said I do think it’s improving and we’re on the path towards fairer representation in the blockchain world. As a society we are actually having this conversation, which is a good start, and I’m pretty proud to say that Octopus is well above the industry average in terms of investing in female entrepreneurs.”
Attitudes need to change, as does the way we educate young women “from a really young age – I’m talking from before they start going to school.” He urges educators to encourage young people to pursue whatever they find interesting and push them to be the best they can be while not trying to fit the next generation into the “socially-defined boundaries of what we consider ‘normal’.”
For blockchain to fulfil its promises of an open and competitive society, we need lots people to participate in its development and scrutiny. “Given how complex the technical aspects of blockchain are we need people to be educated enough to participate in and scrutinise the ecosystems in the same way that journalists present a check and balance on corporate and state power.”
We are getting closer to finding the equilibrium points in the crypto trilemma that people are happy to settle in. “We’ll probably see the first token raises start to show their heads again after the bloodbath of last year,” he continues. “Hopefully, we’ll also see more on-ramp/off-ra mp projects making it easier for regular folk to experiment with crypto.”
He believes ICOs will come back in some form or other but people will be “a lot more discerning.” It may take a few more years, but at some point tokens will bring “genuine economic value” and once people start seeing rewards, society at large will find ways to assess them.
Regulations will clearly provide “more certainty for institutions” but he thinks the role of regulation is to “get out of the way and allow people to play with the tech.” He adds: “There’s a balance to strike between giving people space to experiment and trying to stop nefarious actors from using the tech for bad, but I think that in a free society the benefit of the doubt should run in the opposite direction of those with the legal right to deny freedom.”
He believes the late Timothy May’s Crypto Anarchist Manifesto is “prescient in predicting the issues that will dominate the next few decades.”
Crypto will make software “truly unstoppable, but when I play this out in my head in a game-theoretic fashion, my only conclusion is that those who wield power will try to curb software by controlling hardware.
“You can’t block the spread of software but if you control the guns (ie you’re a government) you can control who has access to the hardware that you need to transmit software – I’m worried about this.”
Incentive structures and economic systems determine how we make decisions, he argues, they don’t determine what we “actually value and what kind of world we want to create.” As a society we are “not putting enough emphasis on the humanities right now – it’s so much harder for a student of the arts to make a decent living today than it is for a student of engineering, and we need to somehow fix that.”