Video - David Johnston from DApps Fund

Jay Addison Technical and Media Advisor for CryptoBizMagazine with David Johnston from DApps Fund at INSIDE BITCOINS Las Vegas. David has been a 10X serial entrepreneur developing companies in various different fields from software to biotech. He is currently co-founder of the BitAngels (the world’s largest angel group) and serves as the Managing Director for the Decentralized Application Fund.

Transcript

Transcript auto-generated. May contain errors.

This is Jay Addison live from InsideBitcoins and we're here with David Johnson, Managing Director of Dapps Fund. What is Dapps Fund, David? It's the Decentralized Applications Fund. So we're a venture capital firm that focuses just on decentralized applications.

Now what key elements do you look for in a company when you plan on investing in it? We're sort of unique in the fact that the only projects we look at are open source projects that have a token for their monetization, that are completely peer-to-peer and decentralized, and that use a cryptographic consensus mechanism. So really emulate the model of Bitcoin itself. I think those are really the four characteristics that made Bitcoin so successful is because it was an open platform.

It had this elegant way to monetize its use by the use of the token. It was completely peer-to-peer. There were no inhibitions. There were no points of failure in the system.

And it had this strong cryptographic proof where you could actually show that someone was adding value to the network by adding mining power. And so those are the projects that we're really looking for. The industry evolves very quickly. Are you at all concerned that something will replace Bitcoin in the near future and render a large portion of your investments move?

No, not really. I mean, if you look at the core blockchain technology, there will certainly be advancements made. But I think a lot of the ecosystem will end up being built on. On top of the Bitcoin blockchain because of the strength of its network, because of the amazing number of people involved in that ecosystem, it really has a huge advantages over other blockchains.

Where I would draw the distinction is I think there can be other blockchains if they have a radically different use case. So if you're just doing another payment network or you're just doing another duplicating what we already have, that's not as interesting as, let's say, something like MadeSafe, where they have a wholly different use case. Right. Right.

So I think that's a really important consensus mechanism for proving that a node has added storage to their network. So it's a completely decentralized storage network, if you will. That's, I think, where it becomes interesting, where there can be alternatives. But even in the case of MadeSafe, they issued their tokens on top of the Bitcoin blockchain.

Right. So it all ties back to that value transfer protocol that Bitcoin has. So I think those will be complementary protocols. Sounds great.

What company that you've invested in do you think will have the largest impact on the Bitcoin ecosystem? It's hard to say. We really focus on infrastructure level projects. And so what I've been saying this year is I want to really see three things.

Decentralized storage, which is what we've seen with MadeStase and Storage.io. I want to see distributed compute. And I actually put Ethereum in that category of a distributed compute application. You're paying to run a program.

It's essentially a narrow version of distributed compute. And I'd really love to see distributed bandwidth. Something like a mesh network. That's incentivized with a token would be really amazing.

I'm still looking at a lot of great options there. Open Garden is doing some work in that area. And there's other people working on that, too. But those are really the three building blocks for anything we want to build in the future.

We need storage. We need compute and we need bandwidth. So I think that's where you start building those on top of Bitcoin as a value transfer protocol. And then we can build amazing things from there.

Fantastic. How long after learning about Bitcoin did you start investing in companies? I got involved in Bitcoin. I started in 2012.

That's when I first found out about it through a friend and immediately started buying coins. I mean, for me, it was a very straightforward thing. You're telling me there's a non-governmental currency that doesn't have inflation. Sign me up.

And so, you know, but you get beyond that and you really dig into the technology and you realize how amazing and powerful the idea of a blockchain is. And now you can have this permanent, immutable database that is kept in the cloud. Forever. And you can store different types of records.

And so, you know, for me in 2013, I really made the switch to the investor side. Ended up founding the Bit Angels with Michael Turpin and Sam Yilmaz in May at the San Jose conference. And it all sort of just came together and everybody wanted to reinvest in the Bitcoin ecosystem. I mean, it was a really basic philosophy.

Hey, we all own all these Bitcoins. Let's reinvest them into the startups and in the open source projects that are going to accelerate this ecosystem. So that was our basic philosophy. How much consideration have you given to investing in altcoin development or the so-called Bitcoin 2.0 technologies?

So for the venture fund, for the decentralized applications fund, we only focus on the quote unquote 2.0 stuff. And that's really what I defined earlier with being open source, having a token, having a consensus mechanism and be fully decentralized. So for me, it's really about the infrastructure at this point. I think we're still really in the early days of this thing.

So that's that's my big focus. When it comes to altcoins, I think it's really difficult to differentiate and to compete with Bitcoin's larger network effect. So I'm usually skeptical of the value of a lot of altcoins, though there are a few exceptions where I think they've created enough differentiation. For instance, I think of Dogecoin as a tipping application.

Yes, that's a really specific use case that they've really pioneered. And so that that makes it interesting. And others are really focused on how do we build algorithms that keep things fully decentralized. But for the most part, I mostly focus on Bitcoin as a ledger, as a way of transferring value, because I think the network effect over time will really win out.

So let's say somebody's got a really interesting project and they're looking for someone like you, an investor that also is a strategic investor because you're very well versed in this whole community and the whole protocols and all the technology and everything else and the financial part of it. How does somebody get a hold of you and what do they need to to present their project to you? Well, the best thing to do. Is just go to our website, www.dappsfund.com, and you can see the other projects that we've gotten involved in.

It also has a link to my white paper about decentralized applications. And if you really read that, you can evaluate pretty quickly. Does your project fit this criteria? And is it something that would be really interesting?

I'm really easy to find. My email is all over the Internet. It's just davidadappsfund.com. So no secret.

And I welcome I respond to every email. I am you know, it may take me a couple of days if I'm traveling, but I try to get back to it. I try to get back to every single person I hear from. And I'd love to hear about things at the earliest possible stage.

Like I want to be involved in writing the white paper. I want to help you find developers. I want to be involved early. So don't wait till you're six months down the line.

I'd love to hear about it when you got the white paper and you need some help with the direction and you really want to figure out how to build the strategic value. That's fantastic. One question that we ask everybody. January 1st, 2015.

What do you think the price of Bitcoin is going to be? This is random. Well, on a such a short timeline, right? It's impossible.

It is, especially with the price being going down here in the last little bit. I don't know. Five, six hundred dollars, something like that. I'm bullish, very bullish long term on Bitcoin.

But I only really look out 12, 24 months because I think it's a high, most highly correlated with Metcalfe's law. So if you look at the correlation between the network effect, right, the user adoption averaged over time in the price, I've seen some studies that say there's as high as zero point eight nine to one point eight million. So there's a really high correlation to that aspect. So what I really watch is wallet adoption and number of users.

Last year we moved from five hundred thousand to five million wallets. I know a thousand percent growth or so. And so if we see something similar this year and go to twenty five, fifty million wallets, I think the price will naturally follow. But I really don't worry about it in the short term.

It's really hard to tell what's going to happen, isn't it? Yeah, well, in the short term, as Warren Buffett would say, the market is a voting machine. They're happy tomorrow. They're not.

But in the long term, it's a weighing machine. And if you really just focus on the fundamentals, I really only invest over the long term. I don't do any day trading. I don't try to speculate when it's going to be next week or next month.

But if you look at the fundamentals, those are the only things I really focus and worry about. And if I see them moving in the right direction, which I certainly do with Bitcoin, then I don't worry about the short term price. David Johnson, it's been a pleasure speaking to you today. Thanks kindly for your time.

You too. Thank you. This is Jay Addison from Crypto Biz Magazine, live from Meckler Media's InsideBitcoins conference in Las Vegas. Remember to subscribe to Crypto Biz Magazine at CryptoBizMag.com.