Thomas Carroll: “If there was a true bubble in bitcoin, you would have seen it by now.”

(As featured in BlockTribune- June 6, 2017)

Written by: Bruce Haring

Thomas J. Carroll is Avant Global’s Chief Investment Officer, where he leads investment strategy, portfolio company management, and research. The firm was an early backer of Ripple.

Carroll joined Avant Global in May, 2013, and previously served as the firm’s Chief Financial Officer and Chief Operations Officer. In these dual roles, Carroll was charged with the management of the holding company’s overall financial operations, investment due diligence, and strategic vision. He is also responsible for developing many of the business’s now central strategic processes that have allowed the company to rapidly grow and diversify.

He talked with Block Tribune about the state of cryptocurrency and blockchain technology.

BLOCK TRIBUNE:  What is your take on what’s going on in the bitcoin world right now? Are we seeing some irrational exuberance?

THOMAS CARROLL:  I think when you look at it over the long term, it’s becoming more confident. The community’s becoming a lot bigger, and I think there is some irrational exuberance, but not enough to rebase the value by more than 20% or 30%. We’re also seeing an upward trend, as well, with XRP and ethereum.

I think if there was a true bubble in bitcoin, you would have seen it by now. But given that the other digital currencies are supporting the momentum and they’re not necessarily tracking or taking from one another, I really don’t see it. XRP, even locking up 55 billion in escrow, I think those are good supports for bitcoin as well. And I think the price, there’s been a lot of talk that the price is going to be upwards of $6,000 by the end of the year. Some people think there’s gonna be a correction and it will be $3,000, but it all comes down to velocity. The more people that begin buying bitcoin, I think will ultimately make them drive up the pricing further, given that we do know it is a finite resource, for now.

BLOCK TRIBUNE:  You were early on Ripple XRP. What was the attraction there?

THOMAS CARROLL: We were really early on it, since Ripple was open coin. And our attraction there is what underlies our entire best thesis.  We’re extremely relationship-driven investors, so we build relationships with the best people in their respective verticals, even though the vertical may be an outlying category that didn’t fully develop. So Chris Larsen founded E-loan and Prosper, and he shared the vision of Ripple with Demetri (editor: Demetri Argyropoulos, Avant Global CEO) and Demetri really understood where the company could go and the technology that is underpinning bitcoin, the blockchain. Also, the rail platform that Ripple uses. It’s kind of every invention investor’s destiny, I think, to always find something that could change the world 15 to 20 years down the line. Sometimes you get lucky and you find one and you just believe in the model that you worked from. We’re just extremely relationship driven and we happen to have one of those happen.

I think that’s definitely the unicorn in our portfolio and we’ve had many others. But this is a position that we haven’t exited from yet, but we’re very very excited every day the news comes out.

BLOCK TRIBUNE:  There’s somewhere between 150 and 500 cryptocurrencies or tokens out there right now. Where do you see it heading in, say, the next five to 10 years? Will there be a massive shakeout that will reduce it to a manageable number? Or will this just keep expanding?

THOMAS CARROLL: It’s a good question. I’m not too sure it’ll infinitely expand, because then you don’t have the critical mass that will drive adoption, right? You don’t really have the trust and people have a hard enough time deciding whether to pay with Apple Pay or cash. I think the people that will hold onto a ton of different currencies will be the engineers and developers of the community. They’re very entrenched. But I think there’ll be a strong five to seven digital currencies out there that people will transact with on a regular basis. But you really need a platform or critical mass to really drive adoption. If every state had a different dollar bill, we’d all lose our minds.

BLOCK TRIBUNE:  Your firm is also big on blockchain. Explain your reasoning there. 

THOMAS CARROLL: Yeah, there’s a lot of hype. Everyone wants to apply blockchain to everything. And it’s very early, but in a lot of ways, it’s correct for certain industries. We’re just foolish on it, given the fact that there doesn’t need to be a central party. Trust can be verified very quickly. It’s just on a timestamp and recording it. I think one of the most interesting articles I’ve read lately and I think why the block will be important … I think of technology for many developing countries where they don’t necessarily have accurate property or land records. So individuals aren’t able to leverage an asset. I was just reading somewhere where the land record wasn’t correct and the person, their home was taken from them and bulldozed, and then by the time they were able to get the records, the house had been destroyed. When you don’t have private property records that are protected and recorded and everything is verified, it’s tough. And you go outside the United States and it’s pretty prevalent.

I think industries like that, I think blockchain is the ultimate self-check for the government. You could even see court cases eventually, that are logged, all the details on there. I think that’s going to be where you see a lot of efficiency driven in our government, because it’s necessary. It’s ridiculous we live in such an advanced world and the system that we are high on is so inefficient. I see a lot of opportunity there.


THOMAS CARROLL: But I do think there’s a lot of people that are saying blockchain for insurance, blockchain for FinTech and you just … I don’t think the developer base is interested enough and the business models aren’t flushed out enough yet. It’s really hard to go build a blockchain for a vertical and begin selling a software right now.

BLOCK TRIBUNE: So who’s doing it right in blockchain, in your opinion? Beyond the people that you’ve obviously backed financially.

THOMAS CARROLL: There’s an interesting program called Blockfreight, which is part of an MIT venture with the Australians, which I think is gonna be a particularly interesting project to pay attention to, given that they’re in the import-export business of international trade, which inherently is kind of an old boy’s world, where you have freight workers and shippers and you’re dealing with pretty archaic uses of communicating information, which is just filing papers, or really antiquated systems. And they are creating a blockchain for all cargo. I think that’s an imagery that will speak on its own chain and we’ll adopt it because there’s, as you saw, the consolidation recently after Hanjin. My family’s in the maritime business. There’s further consolidation to come ,and I think, obviously, we’ll see a few players, and they all want to squeeze out the last bit of margin. They’re gonna look for technologies that will allow them to communicate, track, and authenticate faster.

I think logistics is gonna be a really nice home for blockchain. But I don’t think there’s enough companies out there right now that I can list that are doing what I think they should be doing, building out a blockchain for logistics.

BLOCK TRIBUNE: What makes a company attractive to you? Beyond what you mentioned before about the management.

THOMAS CARROLL:  I think it’s two things. I love to see a real problem being solved. Over the past few years, we sat back and watched FinTech startups get written checks. Just constantly on these on demand services and it’s a First World problem. I want to see a true problem in the world that you’re solving with a quick-to-revenue business model and a pain point that’s being relieved. Show me true friction that you’re creating efficiency for. And also, do it with technology and save time. That’s the most common thing most people talk about is their time. The more time you free up, the more opportunity you can identify and the better you can usually make things.

So I like a real problem to be solved and also look at the global market. It’s unfair, I think, to the rest of the world to develop technology if you’re not able to put it on a global scale. So business models that are incubated, particularly in San Francisco or the Valley, and that can only live there, New York or LA, It’s not something I like. I like to look at things that can be scaled globally. Those are kind of the main points, I think, from an initial screen, and then we go into a full due diligence process as well. And always having strategic investors on board. You know, it’s our MO. Money’s, money. Unless you can add value all the way up until exit, it’s gonna be a longer ride and a risky one.

BLOCK TRIBUNE: What do you think of the emerging world of initial coin offerings and tokens?

THOMAS CARROLL: Yeah. I think if you wanna talk about irrational exuberance, that’s where it lays. Most of them right now. I mean, you’re watching companies get funded $25 million in minutes of ICOs. And I truthfully have been trying to absorb as much as I can about what’s been going on there. I just don’t … it’s pretty recent, what’s been happening. Or at least what’s been gaining attention from the media. It’s not something I feel comfortable enough to identify a pulse on.

I think it’s a neat way for companies to get funding from a community that is trusting of itself in the model. Anytime something new happens, there’s gonna be a clean out or a failure, and that comes with innovation and destruction, you know? There has to be failure in that. But it’ll be interesting to see. I’m kind of taking the sit back and wait approach on the ICO.

BLOCK TRIBUNE: Give me a one year from today picture on blockchain and cryptocurrencies. Where do you see it heading?

THOMAS CARROLL: I think bitcoin will easily be in the $3,300-$3,500 range. I’m pretty confident of that. And from a blockchain perspective, I think what I’ve been paying attention to is a blockchain group within the government that I’ve been doing some research on. And I really wanna understand how the United States Government is going to look to the blockchain for, perhaps, Department of Defense applications and where the business models the government’s going to look towards, and the rules and regulations that they’re going to have for people they engage. And then build out my investment pieces for future investments that way.

I worry about people going out and developing chains that may not be approved or that may end up fighting against regulation down the road. I think that was something we saw with one of our prior companies. We’ve seen an entrepreneur that built a peer-to-peer lending company and struggled with regulation and learned that sometimes it’s better to watch new technologies get approved and learn the rules around them before you go build something. But you kind of have to work in tandem, and you have to work fast, because you have to be a few steps ahead of the government, but also checking yourself. And checking them. That’s a model I’m going to stick to because I’ve seen it work. You don’t want to get too far out ahead. You just want to be just enough there and in line with what’s being approved.

BLOCK TRIBUNE:  Walter Mossberg is a well-known technology journalist who, in his last column before retiring, said of the Internet, “The whole field was new and engineers weren’t designing products for normal people who had other talents and interests.” Do you feel that way about the blockchain now? That a lot of what’s coming out is so esoteric that any adoption by consumers is going to have to include some kind of radical revisions?

THOMAS CARROLL: I think it’s one of those pieces of technology that won’t necessarily be consumer facing, where consumers are like touching it, you know? How we touch our iPhones and how we deal with them every day. I think it’s something that will just hum along in the background. Much like people don’t go, “Hey, I’m using AWBS” when I’m on all these applications that I use every day. But in the background, that’s such a prevalent platform and I think that’s where it’ll lay. I think the people that might know about it will be the ones that operate and design it. But it’s not really a consumer technology that we’re going to be using. Or I think just be aware that we’re using.

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