Miko Matsumura is Co-founder of the Evercoin cryptocurrency exchange and serves as General Partner with Gumi Cryptos, a venture capital fund focusing on early-stage blockchain startups, and Venture Partner with BitBull Capital, a cryptocurrency fund-of-funds. He is also an advisor to Arrington XRP Capital, the Liechtenstein Cryptoassets Exchange, and an LP with Focus Ventures, a firm with over $800M under management, 9 IPOs, and 44 exits.
As chief Evangelist for the Java Language and Platform he participated in the first wave of the Internet, and is now fully engaged in the crypto-fueled Internet of value. As a 25 year operating executive in Silicon Valley, he has raised over $50 million in capital for Open Source startups. He currently advises cryptocurrency startups which have cumulatively raised over $250M, including Guardian Circle, WiFiCoin, Lottery.com, and Hub. He’s an investor in Pantera Capital and previously advised AI startup Sentient during their $100M series C. Mr. Matsumura holds an M.A. in Neuroscience from Yale University.
The Politic: Tell me a bit about your background in blockchain/crypto!
Miko Matsumura: I was actually trained in neuroscience at Yale, and along the way, I fell in with an emerging technology platform. That’s why I became interested in Silicon Valley and technology more generally; I got exposure to programming and development, and I became interested in software development more specifically. So, I worked for 25 years in Silicon Valley, mostly on open source software.
Bitcoin projects were pretty much the extent to which I was seeing cryptocurrencies and blockchain technology. I thought, “Here’s an open source project, and it’s essentially a decentralized financial infrastructure.” That’s how cryptocurrencies have crept up on me. If I continue to look at cryptocurrency through the lens of an open source software project, I think what I’m really doing is applying my knowledge of open source software to this space. That’s ultimately brought me to a position where I’m the co-founder of Evercoin, which focuses on advancing the technological infrastructure around custody and exchange. I’m also a venture capital investor with Gumi Cryptos, a Japan-domiciled venture fund that invests in blockchain and cryptographic assets.
I wasn’t one of the earliest people to the space. The first time the technology hit me in the face was probably when I was checking out at the Cooper Cafe in Palo Alto, and I saw a Bitcoin checkout. This was about five years ago, but it wasn’t so early that people hadn’t started building solutions to that degree. I’m not an “OG Bitcoiner,” but at that juncture, I decided–much as with any new technology infrastructure–that I should play. So, I actually started mining Bitcoin with the purpose of buying a cup of tea. Eventually, someone who I would later co-found Evercoin with approached me about starting this project. We had previously worked together at another open source company. In some ways, that was the real pivot for me– the point at which I was all in on this technology: Evercoin is when this became really serious for me.
Evercoin is a venture-backed startup. Essentially, we provide the full stack of exchange services while allowing the customers to retain custody over their cryptographic assets. I would say that we’re functionally similar to Coinbase, but we allow users to retain that custody. We like to call it a “fully non-custodial version of Coinbase.” What that means is you have everything you would expect, including a fiat gateway; the infrastructure to do an Automated Clearing House (ACH) payment; to connect your bank account; to buy, sell, spend, and trade; and Evercoin effectively appears like a mobile wallet.
At the moment, because of licensing regulation, the fiat-banking component is not yet available everywhere. That being said, the rest of the application is available worldwide; You can grab Evercoin as a mobile application, and it’s pretty much ready to go. There are lots of fairly major players in the space like Coinbase, Abra, and Circle, but we’re the player that offers full custody experience, which is really central to this new asset class. I think without custody, you’re pretty much missing a lot of the potential benefits the asset class can offer.
Do you find that your experience in VC contributes to the way you look at and manage your own product?
I would say this, which is that being a general partner in a venture fund is certainly useful for any startup, because you get to understand startups and how they work. For example, you understand things like access to capital. I think that’s an advantage.
You’re the expert, so I’ll turn the questions over to you. What do you have to offer the readers of our publication?
What I would really like to push for and impart is the perspective that I refer to as “open source” mind. What I’d really like to make sure people understand… I think it was recently noted in Congressional testimonies around Libra that Bitcoin is essentially unstoppable. I think that is actually a very accurate assessment, because what we’re talking about is open source: a self-improving and planetary matrix, competing for people’s consent. Unless you live in an oppressive government, it’s very hard to block people from doing things that they deem to be in their best interest, especially when it becomes mass action. What I want to say is that from my perspective, if you take the history of open source software over the past 20-30 years, it’s clear that open source will commoditize most of the functions of money as well. I think that’s an inevitable conclusion. In the words of the U.S. Congress, “That’s unstoppable.” That’s sort of broadly speaking my perspective.
Many people agree that cryptocurrencies will co-opt the roles of central banking and fiat currency in the future, but one of the difficult questions is time frame: when will that shift happen? John McAfee, for instance, is pretty confident that the price of Bitcoin will hit $1 million in the next couple of years.
What I will say is that it probably took 25 years for open source software to essentially take over the software industry. You can see evidence of it through the $34 billion acquisition of Red Hat by IBM, the $7.5 billion acquisition of GitHub by Microsoft, or the $6.5 billion acquisition of MuleSoft by Salesforce. I think there’s ample evidence that this is a big deal. To me, when I look at that time frame, I consider that open source software managed to accomplish that without really having any meaningful incentive-model for the developers. There’s no commercial incentive; it’s truly a sharing economy, true sharing, in the sense that you’re opening the doors for other developers to work on your project for free, and all of you together are benefiting from your open collaboration. I don’t think it will take 25 years, and I’m really not one to make price predictions. But, I really feel that the market is very big, and it’s quite hard to tell.
In 2013, Bitcoin had 90 percent of market share, whereas now that’s down to 66 percent. That being said, there are still fewer than five cryptocurrencies which take up a significant amount of the market. Do you think the space will continue to be so heavily dominated by one player, or do you think a wider spread of relevant players will emerge?
My personal theory is that Bitcoin dominance should approximate a sort of classical power law distribution, and as a function of that, it should be about 50% of the total market. I think we should see the classical power law distribution, which should follow the Pareto principle, but generally-speaking, several altcoins (non-Bitcoin cryptocurrencies) will continue to dominate.
That being said, I think in this Bitcoin “Game of Thrones,” the number one position should have an emergent dominance of about 50 percent. I believe the market is currently pulling back and reacting to the high degree of under-proven and under-developed products. But, we basically have a censorship-resistant (open and unfettered), store-of-value, governed by the open source community; it’s proven that fact, on the order of a $100 billion-range of value, without being professionally breached. Bitcoin is certainly the most long-lasting and durable of these cryptocurrencies. I’m not predicting that it will continue to be that way, but I anticipate that additional projects will continue to vie for the “Iron Throne” of digital assets.
I’m a “thesis investor,” so I try to read about this space on the basis of first principles. I think investing in the short-term doesn’t get you very far in this space, but in the long-term, reason will prevail. What we’re seeing, with respect to Bitcoin pricing over the long-run, is a network effect- as you would expect; we’re seeing growth commensurate with the network effect. And, I think the market is still figuring out what it means for dependency on a third-party provider of financial infrastructure to dissipate.
I think people are very confused, because they think Satoshi Nakamoto solved second-part trust, first-party trust. He didn’t solve both of those things; he really only successfully solved the third-party trust issue. The untrusted network is able to transmit transactions in a so-called “trustless” way, and that’s basically been proven up to the current levels. The current levels are close to $150 billion in total value, and they’ve peaked as high as $300 billion in total value. But I think we’re really talking about something that works as advertised. As a caveat, when I say “works as advertised,” it’s not necessarily as advertised by Satoshi. It says peer-to-peer cash. I don’t think it has cash-like properties, but if you do understand what it is, it does successfully store and transfer value, and it’s quite resistant to attack. So I think so far, so good.
Any final words for our readers?
To me, I would just provide words of encouragement. I would encourage people to read the Bitcoin whitepaper. If they have additional curiosity, I would have them read The Book of Satoshi, a compilation of Satoshi Nakimoto’s email archives. I encourage everyone to study the fundamentals, because it’s really only from a robust understanding of the fundamentals that we can move forward. I think people who are part of the Yale community have a great obligation to take the privileged education they receive and put it to use in the real world.
I think what we’ve all come to realize, with the introduction of Facebook Libra and other projects, is that we’re in a very exciting period of transformation of the financial industry. I think open source money is inevitably going to be a dominant player, and I think we’ll certainly see this play out in our own lifetimes; I think it’s probably the single-biggest technology shift since the birth of the World Wide Web and the Hypertext Transfer Protocol (HTTP). I think Libra is the next big moment, analogous to when web browsing became a thing. I think it’s even bigger than the World Wide Web in terms of impact; it’s shifting more fundamental infrastructure. It’s more than just informing people, “Hey, this thing happened.” It’s actually a transition of economic value. As an underpinning to society, it’s going to be pretty huge.