Great article as always Santi! I completely agree with your argument that you’ve made before comparing crypto to the internet. Perfect metaphor IMO. Your points always seem sensible in a world of chaotic narratives within crypto!
Well written, Santiago. Point made. But you say it yourself — regulatory reform could let tokens retain and reinvest like equity. At that point, the thesis becomes a timing call, not a structural one. We`ll see how this plays out as well as your bet with Rob (Western Union vs SOL). So far you are way ahead on that one.
Real estate reinvests rental income into renovations, new units, and debt paydown. Tobacco stocks like Altria have compounded at ~10% annually for 50 years through buybacks and pricing power. Utilities like NextEra reinvest into rate base expansion and have compounded at 15%+ for two decades.
Low growth ≠ doesn’t compound. These are some of the best compounders in history precisely because they generate predictable cash flow and have management teams that reinvest it.
The distinction in the piece isn’t about growth rate. It’s about structure. Does the asset have a mechanism to retain and reinvest earnings? Real estate, tobacco, and utilities all do. Tokens don’t. That’s the gap.
What about DUNAs and the clear regulatory improvements that have made it possible, and even desirable, for decentralized projects to hold treasuries, own assets, etc.? The thesis of this piece is based on an outdated view of what's possible.
DUNAs are progress. I’m glad they exist. But a DUNA is a nonprofit association. It lets DAOs hold assets and sign contracts. It doesn’t let them distribute profits, do buybacks, or allocate capital the way a corporation does. There’s no retained earnings mechanism. No fiduciary obligation to token holders. No ability to hire a CFO who can look at the balance sheet and say “we’re buying back tokens this quarter and investing in R&D next quarter.” That’s the compounding engine. DUNAs don’t have it.
I’m not arguing tokens are permanently broken. I’m arguing the structure and reg framework isn’t there yet. DUNAs are a step in the right direction. But the gap between a nonprofit wrapper and a real capital allocation framework is still wide.
I kept hearing Buffett and Munger while reading the article, so the quote near the end seemed appropriate. As Benjamin Graham said "In the short run, the market is a voting machine but in the long run, it is a weighing machine." To date, crypto has lived and died by the vote of vox populi. It is inevitable, as you suggest, that the great weighing machine of compound earnings will eventually determine its fate.
Most accurate article I’ve ever read. Shaped in words what I have been thinking for years now, but couldn’t explain this well. Bravo sir!
Can I anyhow contribute to this?
You might be gradually winning me over
Maybe
Great article as always Santi! I completely agree with your argument that you’ve made before comparing crypto to the internet. Perfect metaphor IMO. Your points always seem sensible in a world of chaotic narratives within crypto!
Well written, Santiago. Point made. But you say it yourself — regulatory reform could let tokens retain and reinvest like equity. At that point, the thesis becomes a timing call, not a structural one. We`ll see how this plays out as well as your bet with Rob (Western Union vs SOL). So far you are way ahead on that one.
The most pragmatic take in crypto! Is Inversion Cap pursuing any businesses in APAC / India or there are too many regulatory hurdles ?
noice article
Excellent insight as always. How do you deal with art owned in ETH ? Or will this come to an end too ?
not every investment has to compound, tho. Real estate, tobacco stocks, utilities...
All three of those compound.
Real estate reinvests rental income into renovations, new units, and debt paydown. Tobacco stocks like Altria have compounded at ~10% annually for 50 years through buybacks and pricing power. Utilities like NextEra reinvest into rate base expansion and have compounded at 15%+ for two decades.
Low growth ≠ doesn’t compound. These are some of the best compounders in history precisely because they generate predictable cash flow and have management teams that reinvest it.
The distinction in the piece isn’t about growth rate. It’s about structure. Does the asset have a mechanism to retain and reinvest earnings? Real estate, tobacco, and utilities all do. Tokens don’t. That’s the gap.
What about DUNAs and the clear regulatory improvements that have made it possible, and even desirable, for decentralized projects to hold treasuries, own assets, etc.? The thesis of this piece is based on an outdated view of what's possible.
DUNAs are progress. I’m glad they exist. But a DUNA is a nonprofit association. It lets DAOs hold assets and sign contracts. It doesn’t let them distribute profits, do buybacks, or allocate capital the way a corporation does. There’s no retained earnings mechanism. No fiduciary obligation to token holders. No ability to hire a CFO who can look at the balance sheet and say “we’re buying back tokens this quarter and investing in R&D next quarter.” That’s the compounding engine. DUNAs don’t have it.
I’m not arguing tokens are permanently broken. I’m arguing the structure and reg framework isn’t there yet. DUNAs are a step in the right direction. But the gap between a nonprofit wrapper and a real capital allocation framework is still wide.
I kept hearing Buffett and Munger while reading the article, so the quote near the end seemed appropriate. As Benjamin Graham said "In the short run, the market is a voting machine but in the long run, it is a weighing machine." To date, crypto has lived and died by the vote of vox populi. It is inevitable, as you suggest, that the great weighing machine of compound earnings will eventually determine its fate.