Cuban to Crypto: Get Competitive, No Copycats

Mark Cuban has looked at the state of the crypto industry and found it dull.

The billionaire investor and “Shark Tank” star revealed at the beginning of the year that outside of televised pitches, 80% of the investments he makes now “are in or round cryptocurrencies” — and they’re apparently getting harder to find.

Cuban, who made his fortune in the late ’90s/early 2000s’ dot-com boom, tweeted out this week that crypto is going through an “imitation phase.”

Crypto is going through the lull that the internet went through. After the initial surge of exciting apps, NFTs, DeFi, P2E, we saw the imitation phase as chains subsidized the movement of those apps to their chains (ala bandwidth and storage subsidies by startups in the 2000s)

— Mark Cuban (@mcuban) May 9, 2022

He called it the same “lull that the internet went through,” when dot-com startups were using bandwidth and storage subsidies to attract customers.

“After the initial surge of exciting apps, NFTs, DeFi, P2E,” Cuban complained, blockchains are now subsidizing “the movement of those apps to their chains.”

That’s rarely a successful strategy, he warned.

“The chains that copy what everyone else has, will fail,” Cuban predicted. “We don’t need NFTs or DeFi on every chain … We need Smart Contract apps replacing SaaS apps,” he said, referring to Software-as-a-Service.

“What we have not seen is the use of Smart Contracts to improve business productivity and profitability,” he said. “That will have to be the next driver. When business can use Smart Contracts to gain a competitive advantage, they will. The chains that realize this will survive.”

Who Needs It?

For the payments industry, however, the question is, “Do we need crypto to gain that competitive advantage?”

Between the Federal Reserve’s soon-to-launch FedNow real-time payments service and its private sector competitor The Clearing House’s existing Real Time Payments product — to say nothing of enterprise blockchains like ConsenSys’ Quorum, which can tokenize fiat transactions without using public blockchains or investable cryptocurrencies — there’s a real question about whether crypto is not simply imitating services that are, or will soon be, up and running.

See also: Real Time Payments on the Way to Becoming ‘Commonplace’ with FedNow Pilot

For one thing, both the Fed and The Clearing House actually use fiat, so while they’re putting down a new set of high-speed rails, they aren’t reinventing the locomotive with a new type of currency that is — a few stablecoins aside — backed by nothing and no one.

For another, one is provided by a company jointly owned by large banks with a track record dating back to the 1850s and the capability to settle nearly $2 trillion in payments on a daily basis.

As for the Federal Reserve, well, if you don’t trust the central bank of the Unites States, pretty much the entire world economy goes down in flames. Which isn’t to say that FedNow will or won’t be the best product, but the company sure isn’t going under.

That said, crypto can provide the foundation for a virtually real-time payment rail that has — depending on which blockchain is used — next to no transaction fees, and no legacy infrastructure to support.

However, they have a high bar to clear to get to scale when their fiat-based competitors are already there with other products.

Web3 Gets Sticky

For all that, Cuban did get defensive of crypto when Aaron Levie, CEO of SaaS collaboration software provider Box, replied that many of the old internet boom companies were useful and technically sound — something a fair number of crypto decentralized apps (DApps) are not and others have yet to prove — they just weren’t economically viable.

There are plenty of creative DApps and projects out there, Cuban said, pointing to decentralized finance (DeFi), tokenizing carbon credits and decentralizing things like weather insurance.

Read more: Smart Contracts Get Weather-Savvy With AccuWeather on the Blockchain

“Web3 is generally technically unsound, not broadly useful, and not economically viable,” Levie countered.

While Cuban chose not to argue the case for Web3 — a future blockchain-based internet that is mostly vaporware — he did cite several useful DApps.

Related: Web3: Is There Any ‘There’ There? And if so, Where Is It?

Levie said that the useful companies were not nearly enough to justify crypto’s (sometimes) multitrillion-dollar market capitalization, and Cuban argued that crypto is no different than the internet was to the copycat websites of the dot-com boom.

“The good companies got stronger and are the leaders today,” Cuban said. “Crypto is the same. The good companies got stronger and are the leaders today.”