Through the lens of traditional finance, Ed Cotler knows the challenges facing blockchain before it is accepted by the mass market. He has had an illustrious career that spans more than two decades, taking him from Merrill Lynch to Deutsche Bank, and most recently to a role as VP of investment banking with a focus on new business development at Goldman Sachs.
It was in this role that Ed first entertained getting investment for a Bitcoin-related idea, some time before the currency reached the dizzy heights and relevance that it enjoys today. However, it was ultimately “too early for companies the size of Goldman Sachs to get involved.”
Ed left Goldman Sachs this summer to focus on advising blockchain entrepreneurs on business strategy, fundraising and building key relationships. Now, in his advisory role for LEXIT, he is tasked with helping to sell an image of blockchain tech beyond its most sensational form—most specifically, away from the Bitcoin market’s extreme volatility.
There is no straightforward answer to this but it may begin with how the fledgling technology is portrayed in the media.
“In my opinion, from both the tech world and the traditional finance world, we are in the stage right now of blockchain where the engineers understand how it works, the entrepreneurs envision what it can do, but the majority of people in business are still waking up to what blockchain is,” says Ed. “When the press cover blockchain it’s traditionally Bitcoin and now Ethereum, which is thus what blockchain tends to mean to the average person.”
“Cryptocurrency is an important aspect of blockchain, but it is one of many, many use cases. Many people compare cryptocurrency to a ‘gold standard’ because just as there is a finite amount of gold, it’s possible to programmatically limit the maximum available number of crypto tokens such as Bitcoin. But it’s this idea of a microeconomic gold standard that is not one that people tend to understand—why would a company such as LEXIT purposefully limit the amount of tokens they are ever able to sell? The public discourse is only about the macroeconomic stuff, like Bitcoin and Ethereum, that their proponents want to become the world’s currency. Certainly that’s the publicly stated goal.”
What Would a Microeconomic Gold Standard Look Like?
“I use ‘gold standard’ as a shorthand for finite amount of tokens,” Ed explains.
“There are many examples throughout the course of human history for a macroeconomic gold standard. Gold is the most famous, but ancient civilizations also used beads and seashells. I can’t think of one that was a microeconomic ‘gold’ standard applied only to private enterprise.”
This is a key distinguishing aspect for a platform such as LEXIT; they’re not trying to become a global reserve currency, but instead want to use blockchain in a microeconomic capacity for a specific business purpose.
“You have LXT tokens and you can use them on the LEXIT platform. I guess you and I can trade them but really they’re meant to be used on the platform. That application doesn’t exist in human history and that is the part of the blockchain a lot of people are not focused on. When has a bakery or a coffee shop ever issued their own currency?”
This is an important concept to not just communicate to the mass market, but also to reach into the world of business.
“A lot of sophisticated investors, when they hear the word blockchain, they think of Bitcoin and wonder ‘why would I ever want to buy a cryptocurrency?’ The biggest challenge right now is perception, because this is an emerging asset class and is not yet accepted as a fundraising mechanism for traditional businesses.
“These are smart, successful people in charge of a lot of money but right now they are trying to understand what ‘blockchain’ is and what it can do for them beyond Bitcoin.”
Focusing on the Solutions That Blockchain Can Offer
"Don’t tell me how beautiful the algorithm is, tell me what problem it seeks to solve. My advisory focus is the strategy of: should it exist, how should it exist, what problems can it solve?”
“Then [it’s about] really bridging the gap of what the technology allows us to solve and what the market needs us to solve.”
This logic can be applied to LEXIT which, in Cotler’s eyes, perfectly marries the concept of the technology with the problem that it seeks to solve: that of reliably listing and selling business assets and intellectual property while incentivizing experts to give trustworthy advice.