2021 was a big year for cryptocurrency. Bitcoin hit multiple new all-time high prices over the past year (followed by big drops) and more institutional buy-in from major companies. Ethereum, the second-biggest cryptocurrency, also reached its own new all-time high late last year. All the while, U.S. government officials, entrepreneurs, celebrities and everyday investors have expressed a skyrocketing interest in cryptocurrency and digital assets. In this episode of The Agent of Wealth Podcast, host Marc Bautis is joined by Mark Basa, Global Brand and Business Manager at Hokk Finance. An early crypto-evangelist, Basa’s decade of experience and expertise established him as a thought leader in creating and building crypto brands. Together, they talk all things cryptocurrency and digital assets – from NFTs, to meme tokens, and everything in between.
In this episode, you will learn:
- The meaning and application of decentralized finance, including advantages and risks.
- The difference between cryptocurrency and digital assets, such as NFTs.
- Future predictions for cryptocurrency and digital assets, including possible government intervention and tax regulation.
- How – and why – businesses and brands are creating cryptocurrency coins/tokens.
- And more!
Resources:
Hokk Finance | Bautis Financial: 7 N Mountain Ave Montclair, New Jersey 07042 (862) 205-5000
Disclosure: The transcript below has been lightly edited for clarity and content. It is not a direct transcription of the full conversation, which can be listened to above.
Welcome back to The Agent of Wealth Podcast, this is your host Marc Bautis. On today’s show, I brought on a special guest, Mark Basa. Mark is the global brand and business manager for Hokk Finance. An early crypto evangelist, Mark’s decade of experience and expertise establishes him as a thought leader in creating and building crypto brands. Mark, welcome to the show.
Thank you so much, Marc. It’s great to be here.
I’m excited about today’s episode because we get to talk about cryptocurrency and digital assets, which there’s a ton of interest in right now. I’m not sure how well this space is understood. Can you start off us by just giving an overview of digital assets, decentralized finance and what it actually is?
What Is Decentralized Finance?
The best way to understand decentralized finance is to think about it’s opposite – centralized banking. Centralized banking systems are controlled by governments, and they are basically what the entire financial banking system has been built on.
Decentralized finance replicates how you send money, spend money and invest money in a centralized banking system, but the difference is there is no third party. There’s no middle man – like a financial institution – that can stop you from using the currency the way you want to. On a greater scale, decentralized finance really means that you own your money.
Ethereum or Bitcoin, for example, run on a network. Imagine a computer network, and there are thousands of different computers all over the world that support that network. If I buy a car from you, for example, using Ethereum or Bitcoin, that currency goes directly to you. It doesn’t have to go through to a bank and then to another bank and then to you, which is how many of the world’s banking systems operate.
What Are Digital Assets (NFTs)?
The next layer of decentralized finance is digital assets. You’ve likely heard of NFTs, non-fungible tokens, it’s all the craze right now.
The best way to think about NFTs is comparing them to a JPEG or a PNG file on your computer. Let’s say that file is a picture of your family, that can be copied and pasted – it can be shared. And there’s many, many copies, but the only original one is the one that you took on film or on Polaroid, for example.
Now let’s take this one step further by thinking about a piece of code. It’s a string of numbers and letters, and it’s unique on the blockchain. It can never be changed – it can never be edited or altered. So when you attach something to that, it becomes a non-fungible token (NFT). It becomes the only one that’s ever going to exist of that type.
If you’re a creator or you’ve got some sort of contract, you can store assets on the blockchain, use them and share them. Each asset is the only one to ever exist.
Bored Ape Yacht Club NFTs as an Example
A very popular NFT collection right now is called the Bored Ape Yacht Club. The collection is so famous that celebrities are paying millions of dollars for these cartoon images of monkeys that look bored. The assets are stored on a blockchain and they’re tradeable.
These Bored Apes are one of a kind – they’re traded and collected – so they cannot be copied and pasted.
At a top level, that’s an explanation of decentralized finance and digital assets. What you can do from there is anyone’s game.
Cryptocurrency Transactions and Blockchain Issues
Yeah, it’s interesting. Let’s take a step back… you gave the example of buying a car using Ethereum or Bitcoin. Is that record kept on a ledger? Is it totally anonymous? How does an actual transaction work?
The standard way to think about it is as decentralized wallets. I have a plugin on my Google Chrome browser, MetaMask. If I were buying a car from you, you’d have MetaMask on your computer as well. MetaMask creates different addresses, which are numbers and characters – they’re unique.
So if I send you $1,000 for this car, that $1,000 goes through the network. I pay a fee to the network to produce that transaction, and you receive the money. There’s a transaction record there that can be found. It can be traced.
However, where it gets interesting in terms of privacy and control is who owns those wallets. Do you own the wallets? Do I own it? That’s one of the things that decentralization brings.
This, compared to if you were to give me your bank account details. Obviously, it’s a name and address that’s essentially tied to your whole identity. That’s where your money is stored. With decentralization, your money can be stored in thousands of wallets, if you will, that all contain $1 or $1,000,000 each. I can spread it across many, many accounts.
Basically, as long as I have access to the wallets with private keys, no one can figure out who owns it – because it’s a random piece of code, if you will, from the blockchain, locked by me. So there’s a whole nother level of privacy.
Now, that’s also good and bad, because if I interact on a centralized exchange and send money to a shady character and then they take off, I can trace that money back in. In the cryptocurrency world, we’ve seen many cases of people getting scammed because they send money to wallets of unknown owners. Then the funds get liquidated, and it’s impossible to find out who was responsible. So that’s a fundamental issue, and the next challenge decentralized finance needs to address: Privacy, trust and security. Eliminating bad players.
Cryptocurrency and Regulation: Possibilities and Predictions
Is there any chance of the reverse? That governments could come in and say, “We don’t like this being anonymous,” and they start forcing some kind of control?
Oh, absolutely. I’ve always said that decentralization – Bitcoin, Ethereum, blockchain – are the cure and the disease to the centralized financial system.
There’s a lot of freedom… A lot of people are going to make gains and do really well in their portfolios. They’re going to experience transactions in whole new ways. But there’s another level, which is, if I start controlling my own money, how does the government collect tax? If I send you money because you provide a service, you’re supposed to claim that on your taxes. But do you? Eventually, I think governments will crack down.
They’re also now trying to compete with their own stable coins – their version of the U.S. dollar – but it’s centralized. I’ve read some of the white papers on these centralized currencies, and they’re not very good. It basically means the government can turn your money on and off if they don’t like you, for example. That’s a whole nother level of control.
My prediction is that, at some point, there’s going to be too much money in the blockchain and not enough in centralized banking. So at what stage does the world bank say, “Hey, there’s actually 25% of the world’s money now in blockchain that we don’t control.” They can’t just print trillions and trillions into the economy to make up for that… it’ll cause inflation. So that’s a scary day for decentralization.
I think governments know that this is coming, eventually. But they’re not sure what to do just yet, because it’s so experimental. Blockchain devs and people working in crypto, we work so fast – around the clock – whereas banks are open 9-5, so you could say the government works 9-5… regulation is never going to be able to keep up.
Cryptocurrency Supply, and Demand
On the topic of money supply, but applying it to crypto… Let’s take the example of Bitcoin, is there a finite amount of Bitcoin available for purchase? What about other forms of cryptocurrency?
With Bitcoin, there’s a limited supply – 21 million coins have been created. It’s not like you can just add more Bitcoins, like you can to the U.S. dollar.
Now, the more Bitcoin that you actually buy, or I should say the more money that’s pumped into the Bitcoin network, that obviously increases volume and liquidity. So it becomes more scarce, which is what drives the value up.
Ethereum is doing something right now that’s very interesting. Ethereum is the second biggest coin/token behind Bitcoin. They’re predictions that it may flip Bitcoin at some stage, in terms of price. Most of the biggest brands and businesses in the world are building decentralized applications on Ethereum.
Ethereum has changed their mechanisms where basically, it will start to become a deflationary style of blockchain. So now, they’re actually burning more Ethereum than Ethereum is being issued and used, which is really interesting.
There are tokens out there that have enormous supplies. Meme tokens, for example, you like Dogecoin or Shiba Inu. Shiba Inu has something like 100 trillion coins/tokens, it’s enormous. Some others have quadrillions and quadrillions. So, when you buy $100 worth at 0.00000 something, you get quite a lot for your money.
The Next Steps for Cryptocurrency: Popularity, Volatility, etc.
As far as next steps, is the goal for cryptocurrency to become more accepted within the global marketplace? I know you hear more and more about it being used to make purchases and trades. Do you think the volatility needs to get under control for it to move forward in popularity?
Great question, Marc. I compare Bitcoin to gold, right? Digital gold. I don’t know if people who own gold want to spend their gold. The people that I know that own Bitcoin don’t want to spend it at Walmart… they don’t want to actually go to their wallets and move the Bitcoin. Instead, they want to hold onto it until institutions get in. It’s their 401(k), their superannuation, their ticket out of the system.
With Ethereum, it’s hard to say. I’m a big fan of Ethereum, I use it all the time – in fact, it makes up almost my entire portfolio. I love to use it because you can build on it, you can do all sorts of things. Sending and accepting Ethereum based tokens, yes. That’s basically where this whole NFT craze is coming from, Ethereum.
I think the forms of currency themselves will be more accepted when people really begin to understand them.
For example, let’s talk about what’s called an ICO. Your listeners know what an IPO is, an initial public offering for a company. In crypto, an ICO in crypto is an initial coin offering. Essentially, it’s the same thing: Companies offer coins, which basically replicates what stocks would do at an IPO. Typically, these companies are trying to raise money based on a token that they give you in exchange for USDC, Ethereum, etc.. Now, they issue the token – give it to you – and promise you that they’re going to build out this roadmap.
The interesting thing about this is that an NFT may be a form of currency. So if I buy an NFT and I stake behind it one Ethereum, and Ethereum becomes less volatile over time, I can use that NFT to enter a nightclub, to buy groceries, to do something else. Then, all of a sudden, it’s not that the actual token itself needs to become less or more volatile for people to accept it, it’s what the token represents.
The same thing can be applied to loyalty systems. In my opinion, I think frequent flier mile cards will eventually be replaced with NFTs, because NFTs are unique. And that form of currency will give the owner certain access.
For all of these coins and tokens, is there currently a way to see the value as compared to other currencies, not just the U.S. dollar? Perhaps the Japanese Yen or the British pound… All I hear about now is the coin or token compared to the US dollar, do you think that will change going forward?
I really don’t know. When I speak to people about this, everyone has their own preference. So I pay people who accept USDT – although that tether coin or token really has some interesting background that people should also look into – but it really depends.
So we’ve been talking a lot about cryptocurrency. You mentioned meme tokens earlier. Can you give a little bit of an overview of what’s different about a meme token? And then it would be great to discuss some of the projects that you’re working on at Hokk Finance.
What is a Meme Token?
To explain meme tokens, you have to start by talking about memes. Basically, creating memes is this viral movement. Memes are virtual images shared and transmitted because of their humor or relatability. It can be unintentional, like a funny picture of a politician, or intentional, like something that a clever artist creates. Memes are recognizable, and they’re basically viral branding.
Tokens take the viral branding of the meme to use on actual digital currency. An example is Dogecoin, the token is actually this Japanese dog. It’s fun, exciting and creative. But digging even deeper, I think it highlights that people are so disconnected from central banking that they’d rather put their money into something fun.
Hokk Finance created one of the original meme tokens, soon after Dogecoin. I reached out to the company a couple of months ago because I bought their meme tokens and I did surprisingly well, which made me take a look at their brand. What I saw was such a strong community with a powerful social media following – both fans and fanatics – that just adored the brand.
I now know that all of the biggest blockchain companies spend hundreds of millions of dollars on marketing and can’t even get the same level of fan base. I wondered how it was even possible.
So I looked into it, but then I also tracked and followed meme tokens. I saw that when Bitcoin or Ethereum take a correction, these meme tokens get dumped on. Why? Because they have very little utility. You buy them and then what? What do you do with them? You’re actually buying them, like I said before, as your way out of your 9-5, right? It’s your one shot out.
So I pitched myself to the Hokk Finance team. I said, “Hey, I have an idea. Why don’t you build the ultimate meme utility? Build a financial ecosystem where you can purchase this token and you could send it and spend it any way you like.” If you wanted to buy pizza, a coffee, a NFT, whatever I want.
I believe that if you build a financial ecosystem for your audience, you’ll win this race. Most of the people in the meme token industry right now are focused on hype marketing. They’re waiting for a celebrity to endorse them so the price shoots up 1,000%. They’re doing massive billboards in New York City.
So anyway, the team was on board and I joined as their Global Brand and Business Manager. Right now, Hokk Finance’s meme token project is a volunteer project, and I’m trying to turn the company into a legitimate DeFi company, registered with crypto licenses. Day to day, I build systems and processes, and help tech teams some of the product marketability and design.
We just launched an NFT collection, which is for sale right now. They’re cute little inu dogs, 4,444 total.
As regulation changes, you’ll be able to use an NFT just like securities – stocks and bonds. So that’s really exciting. Hokk Finance is really a mover in the space right now.
Is someone creating a meme token similar to someone creating a company? They build the business, and at some point they IPO? Then, there’s different investors that come in and buy stock, and the stock price fluctuates?
Yeah, exactly. If you’re a legitimate player, you need to design what’s called tokenomics. Tokenomics is very similar to traditional banking, where you determine how shares are divided amongst shareholders.
What happens is these blockchain devs, they make a token on Ethereum, and then they split up the tokens. Let’s say the blockchain dev has 2% of the total supply of all tokens ever issued, and there’s like one wallet in which those tokens will be distributed to. Then he or she lists those tokens on the open market, where people can find the token and buy it.
Those people swap their Ethereum, for example, for this token. Then, that liquidity pool, the amount of money inside that token, gets bigger and bigger – just like how much money Google has in cash reserves, for example.
So when you create a meme token, your goals are really twofold, right? One, you want popularity and buzz around it. But two, you need to create some kind of utility – use of it – to get that popularity. You’re creating a company, the goal isn’t to create a currency.
Exactly.
I just saw something either yesterday or today about how Kim Kardashian and Floyd Mayweather were involved in a pump and dump with a crypto token. I know Coinbase is a popular exchange. Very quickly, someone can go to Coinbase and open up a digital wallet, then invest in some of these tokens. Are there other ways to do it?
Yeah, Coinbase is a centralized exchange. It’s regulated, and they have front-facing staff. In short, they abide by the law.
The difference between a centralized system and a decentralized system (DEX), is that a decentralized exchange is not owned by anybody. It doesn’t abide by the law. It’s just code running in sync with other code. So if you want to interact with a decentralized exchange, you just have to get a trust wallet, a MetaMask. Again, this is an extensions that you put on your browser. It’s totally free.
It’s from there where you need to understand where you get your Ethereum. I believe MetaMask allows you to get Fiat to Ethereum, you can actually buy from your credit card and add it onto your wallet. It’s then that you can access a decentralized exchange to swap tokens.
From the investment side, are you seeing the equivalent of a day trader, where people are swapping tokens in and out, trying to follow a trend or momentum to make short-term money?
Look, I see a lot of irresponsible people putting everything they have into meme tokens or other projects that they have no real knowledge about – like who owns the project. That’s very risky to do. But there are people looking for that short-term money, yes.
I think a lot of people feel like they’ve missed out on major cryptocurrency gains in Bitcoin and Ethereum. I recall seeing that if you invested $1,000 in Shiba Inu, a meme token, back in 2020 or 2021, your $1,000 today was recently worth $750 million, which is completely insane. That’s what people are looking for, and that’s what many try to achieve. The term is called to ape in, like a monkey flying in on a vine. It means to rush into something and throw everything into a token. Many times, that’s when most people lose. But they’re doing this because they think they missed out on Bitcoin and Ethereum.
In my opinion, Bitcoin and Ethereum have a long way to go. It doesn’t matter what age you are. In the next 5-10 years, there’s going to be a lot of money to be made on both of those coins and tokens.
You mentioned Silicon Valley startups. Is it similar in the sense that Dogecoin or Shiba Inu hit, but there’s others that didn’t make it?
Absolutely. For the ones that you hear about that do well, you also hear about failures and scammers.
If you look back at the top 100 coins over the last five years, many of them don’t even exist anymore. At one time, they were really promising projects that raised a ton of money and had brilliant teams behind them, but they just couldn’t hit it. It’s not just to do with the market, but I actually think the big thing in crypto is marketing. The highest paid people in cryptocurrency and blockchain right now are people in marketing and branding.
Interesting. So, we’re just about out of time. Mark, I want to thank you for being on the show. You provided some really valuable information on decentralized finance and digital assets. How best can someone find out more about you and Hokk Finance?
Your listeners can go to Hokk.finance to find out more about the cool things we’re doing. You can find the social media links there as well. Anyone listening can add me on LinkedIn to chat more, too. Just search my name, Mark Basa.
Awesome, we’ll link to all that in the show notes. Thanks again, and thank you to everyone who tuned into today’s episode. Don’t forget to follow The Agent of Wealth on the platform you listen from and leave us a review of the show. We are currently accepting new clients, if you’d like to schedule a 1-on-1 consultation with our advisors, please do so below.
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