What if crypto is to value as the internet was to information? It seems like crypto is changing the nature of value itself. Just as the internet enabled people to easily create and share information, crypto enables people to easily create and share value. The internet led to an explosion of information. Is crypto leading to an explosion of value?
Information is infinite. But what about value? Crypto enables the definition of value where it was not previously defined. It increases the percentage of all existing value in the world that is made quantifiable and tradable. It also facilitates the creation of new value by materially decreasing the friction inherent in value creation.
So what does this mean for legacy industries where value creation is much more difficult, for companies with market caps based on multiples of hard-earned profits from “real-world” business activities? The normalized use of revenue multiples (as opposed to earnings multiples) for valuing technology companies already moved us one step away from the tangible and towards a more abstract understanding of value. Dot-com boom era multiples based on non-financial, attention-based metrics like clicks perhaps previewed an even further abstraction more representative of what’s to come. Could crypto’s impact on value do to traditional companies what the internet’s impact on information did to traditional media?
The nature of value is evolving and it is hard to wrap your head around because it hasn’t really happened yet.
It’s still just starting.
