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MetaMask is a terrific product. Can you invest in it? The short answer is no. The longer answer is yes, indirectly. The longest answer is ConsenSys, the parent company of MetaMask, will probably eventually go public—and then you’ll be able to invest directly. What is MetaMask? Unfortunately, the company’s "What is MetaMask?" video is terrible. (Top-rated user comment: "I just watched the video and now I don’t know what is MetaMask.”) They need some marketing help, so let me simplify. MetaMask is a crypto wallet and global authenticator that can be installed as a browser extension, or downloaded as a mobile app.
Two functions: crypto wallet + global authenticator. The crypto wallet part is easy: MetaMask safely stores your cryptocurrency, and allows you to buy, send, or trade (“swap”) one token for another. MetaMask only supports Ethereum-based cryptocurrencies (more on that in a moment), so you can’t use it to store plain old bitcoin. The global authenticator piece is more difficult to understand, until you use it – then it seems like magic. (MetaMagic) Instead of signing in (or “authenticating”) to your banking website, which usually requires a username, password, secret phrase, two-factor authentication, and identifying which of the squares have a blurry picture of a hobo at a railroad crossing, global authentication is one click. I’m talking one-click, like Amazon 1-Click. (Okay, technically two clicks: one click to “Connect to Wallet” and then another click “OK” to give MetaMask access.) But it is such a mind-blowing change from the usual terrible login experience for most websites – especially financial websites – that you really have to try it to believe it. |
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Who’s Using MetaMask? According to Fortune, MetaMask currently has over 3 million active monthly users. To put that into comparison, there are about 2 billion online banking users, so there’s lots of room to grow. Like the early days of online banking, MetaMask users are tech-savvy, early adopters. And they have money. This means MetaMask will become an increasingly attractive acquisition for the world’s largest banks and financial institutions – which is why Mastercard, UBS, and JPMorgan recently plowed $65 million into ConsenSys, the parent company of MetaMask.
It’s ConsenSys, not MetaMask, that’s the real investment opportunity.
Can We Invest in It? ConsenSys is one of the most interesting companies in the world. The origin story starts with Joe Lubin, one of the founding members of Ethereum, the #2 cryptocurrency in the world. In The Infinite Machine, Camila Russo’s excellent history of Ethereum, Lubin is portrayed as the “grown-up in the room,” the guy who helps the team of hackers and misfits find big-league funding for their fledgling idea. (Lubin also looks exactly like my brother-in-law Chris. One of my goals in life is to get them side-by-side for a photo.) |
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| That's me with Joe Lubin. Or maybe Chris. |
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That's me with Chris. Or maybe Lubin.
After Ethereum, Lubin founded ConsenSys, with the aim of turning it into an Ethereum venture studio. Since its inception in 2014, the company has created countless products around the Ethereum ecosystem, from Infura (think of it like Amazon Web Services for Ethereum) to CodeFi (which allows you to tokenize anything). And, of course, MetaMask. Like the wider crypto market, ConsenSys has gone through a few boom-and-bust cycles, hiring aggressively during market upswings and enduring layoffs during the downturns (current headcount is around 350 employees). Like any startup studio, many ConsenSys products do not make it. But occasionally, you produce a MetaMask. ConsenSys is thought to have been privately self-funded by Lubin, who is (or was) likely a multibillionaire, given his early involvement in Ethereum. If this is true, he’s put his money to good use, by actively building the tools and products that have grown the Ethereum ecosystem. Like MetaMask. The real investment opportunity, then, is in ConsenSys.
Can We Invest in ConsenSys? Not yet.
Unfortunately, ConsenSys is still a private company. Until we have a ConsenSys IPO (not guaranteed, but seems likely), the best way to “invest” indirectly in ConsenSys is to simply buy and hold Ethereum. Because the fortunes of ConsenSys are inevitably tied up with those of Ethereum, buying and holding Ethereum is a proxy (or substitute) for buying ConsenSys. In fact, if and when ConsenSys does offer shares to the public, we can expect a big price bump to Ethereum (just like bitcoin hit an all-time high on April 14, 2021, the first day we were all able to invest in Coinbase). You can use pre-IPO marketplaces like EquityZen to buy shares of ConsenSys, but they’re available only to accredited investors (read: kinda rich). Buying pre-IPO shares on these “secondary markets” is usually more difficult than just buying and holding Ethereum – which, in contrast, is easy to buy on a crypto exchange like Coinbase. Or, you can buy Ethereum directly from within MetaMask. |
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Spot the error in this stock photo. (Answer is above)
Who’s the competition? MetaMask is far from the only browser-based crypto wallet. Despite the early head start, it’s hard to see a MetaMask competitive “moat.” It would be easy for Google or Apple to create their own competitor product and just decimate MetaMask overnight. (Facebook already has its Novi wallet, which could sweep the world.) It feels like the early browser wars. First there was Netscape, which Microsoft spent millions to unseat with Internet Explorer. Netscape open-sourced Mozilla, which led to Firefox. This was followed by Safari, Chrome, and all the rest. Expect a similar drama to unfold with web-based wallets. We’ll call these the “wallet wars.” MetaMask is version 1.0 of the wallet wars, the prototype product that everyone will be fighting to overtake. It’s a good thing that ConsenSys has $65 million in the bank (plus whatever Lubin still has in his personal crypto wallet): they’ll need it. Again, MetaMask is more than a wallet, it’s also a global authenticator. That means whoever owns the wallet owns all the logins. That is a huge prize – maybe the ultimate prize – for the big tech firms. (If you think Facebook already has too much control, wait until they control your wallet.) These are big security and privacy questions: are we willing to give one company potential control of all our logins, in exchange for the convenience of one-click sign-in everywhere?
To be clear, MetaMask is a decentralized solution, where only you know the master password. This could provide the “competitive moat” that keeps Facebook at bay. But do most users really care? And who wants to have ultimate responsibility for your one-and-only password to your wallet? Facebook and other centralized solutions will probably end up winning the long-term wallet wars, because more people have a Facebook account. Privacy be damned; it’s just easier. But Facebook is old and boring; MetaMask is young and hot. In our view, the short-term investment opportunity is with MetaMask, even if the longer-term investment is Facebook (assuming their crypto ambitions pan out). TLDR: We buy and hold Ethereum, because it’s the closest we can get to investing in MetaMask. How do I try out MetaMask? Before you invest in Ethereum, try out MetaMask, if only because it gives you a glimpse into the future of the Web. In short: Go to MetaMask.io and download the browser extension (or the mobile app) Set up your account Buy a little Ethereum (optional) Then go to a MetaMask-enabled Web3 site like Uniswap, Compound, or Balancer Click “Connect Wallet” in upper right corner, and you're in!
Play around with these apps, noting how easy it is to send and receive money without a login. These sites literally don't know who you are, just your (anonymous) wallet address.
They say one of the best ways to find new investing opportunities is when you’re a huge fan of the company’s product. That’s why I’m bringing MetaMask (and by extension, ConsenSys) to your attention. Try it out, and see if you don’t agree that MetaMask is like a kind of MetaMagic.
Health, wealth, and happiness, |
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John Hargrave Publisher Bitcoin Market Journal |
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Dear readers,
It's with a tinge of sadness and a little relief that I inform you that this will be my last time writing to you...
....until next Thursday. Monday is Labor Day in the U.S., and Tuesday and Wednesday are the Jewish holiday of Rosh Hashanah, the Hebrew New Year.
As I literally drive off into the sunset on my way to Las Vegas with the family, I can't help but think about the awesome bull run we have been experiencing in the crypto market lately.
Recently, many pundits have noted the outperformance of ether when compared to the slightly older and more classic bitcoin.
This was highlighted in this Bloomberg article as well as this piece in Forbes, written by the editor of this very newsletter.
It makes sense, of course, that even though bitcoin is much more liquid, and also much cheaper and easier to transact with, the main areas of contemporary FinTech innovation are happening on the Ethereum Blockchain.
If we think about it, physical gold doesn't usually lead the traditional markets. So why should digital gold (bitcoin) decide the movements of digital assets?
In a way gold, both physical and digital, is pretty boring, which is great for many investors, and it remains approximately 50% of my personal overall portfolio.
However, when we think about some of the possibilities of other smaller coins that may play a much larger role in our daily lives, the opportunities for growth are simply much larger.
Sure, many will fail, but it only takes one major winner out of a diversified portfolio of dozens of assets to make you forget about the losers.
For everyone reading, all of our partners, clients, journalists, and everyone else, I would like to wish you a very happy and sweet new year and much less labor going forward. |
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| Mati Greenspan Analysis, Advisory, Money Management |
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