Unbounded Capital: BTC, ETH investors’ ‘flawed consensus’ will be their downfall

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“The crypto/blockchain industry is on the wrong track,” says Bitcoin VC firm Unbounded Capital. The company has released an ebook explaining their views on supporting only BSV startups, timed to coincide with the BTC halving.

Unbounded Capital said the increase in hashrate for BTC after the BSV and BCH halving events in April surprised them. However they noted the effect would be temporary, and put the BTC ecosystem at even greater risk. Should BTC become less profitable and suffer a hash rate drop post-halving, the BTC network could again become clogged and its users would suffer a transaction fee rise.

This lack of capacity forms part of Unbounded’s thesis in the book, titled “Why Multicoin Capital and the Crypto Consensus are Wrong.” It stemmed in part from a discussion between managing partners and principals Zach Resnick, Jackson Laskey, and Dave Mullen-Muhr and the need for a rebuttal to a Forbes article about another investment firm in the digital asset space, Multicoin Capital.

Unbounded sees Multicoin Capital as a standard bearer of a “flawed consensus” the wider digital asset industry holds. This consensus is based on “several faulty foundational assumptions” about what Bitcoin can and can’t do, leading to a circular reasoning based on the belief that Bitcoin can’t scale, must remain “decentralized” and “censorship-resistant”, and that it should exist outside existing legal and financial structures. In hodling these views, the BTC community has trapped itself into a decline.

BSV can ‘eclipse the internet in scale’

In what is still unfortunately a contrarian view in the digital investor community, Unbounded Capital rebranded itself in October 2019 and decided to focus only on Bitcoin SV (BSV). The book states:

We expect this version of Bitcoin to be so successful that it eclipses the internet in scale, efficiency, and value generation. At Unbounded Capital we anticipate Bitcoin fundamentally reshaping the internet and enabling the creation of even more essential tools and businesses than the internet has yielded to date.

The book takes aim at several digital asset industry shibboleths, and explains why taking a refreshed, critical look resulted in the view that only BSV will remain economically viable in the longer run.

That said, investment in the space tended to be “driven by emotion and speculation” than other markets, meaning BTC, ETH and other alternative blockchains could retain their market value for some time.

CoinGeek interviewed Zach Resnick about the book and the reasoning behind some of Unbounded Capital’s strategies. We will publish a more detailed review, but read on for a preview.

Interview with Zach Resnick, co-founder and managing partner, Unbounded Capital

Have you spoken to anyone at Multicoin Capital about writing the book?

ZR: We have not yet, we plan to reach out once the book is out. We’d love to have some type of public conversation with partners Kyle Samani and Tushar Jain. A big part of our purpose in writing this book is to get other investors interested in a scaled version of Bitcoin, BSV. Our approach is a bit combative as is evident from the title, but it’s all with the goal of seeing progress quickly.

Do you think there are investors in the digital asset industry who believe BSV’s scaling technology/economic model actually works, but continue to support BTC for other reasons?

ZR: Some surely exist. In some ways, there isn’t anything that prohibits the simultaneous existence of scaled Bitcoin and other blockchains with goals such as government-proof money. Investors could certainly support both. From our perspective, scaled Bitcoin has such better product market fit, both in theory and increasingly in practice, that it would be difficult to want to invest in some alternative.

Have you encountered other investors or groups outside BSV who support your views?

ZR: For the most part no, although this book has already started to help change that. Our experience has always been that explaining our thesis is a mouthful, and not a very welcome mouthful to many. For those reasons, doing something in comprehensive written form made the most sense. We are hopeful that people in our network who have been receptive but skeptical about our thesis will come to fully see what we see in BSV with this book.

Is BTC’s current market value irrational?

ZR: Yes, although it may be more uninformed than irrational, at least by retail or CNBC type investors. The market value is more rational (still not fully rational) if one is under the impression that Bitcoin cannot scale. Maybe some Bitcoin is a couple hundred billion dollars better than no Bitcoin. But, with BSV demonstrating scalability and the fact that there is no theoretical barrier to scale, BTC’s design and goals certainly cannot justify its market value in a world where Bitcoin exists.

The BSV benefits you mention in the book are pretty familiar to anyone who’s spent time in the BSV community. What will it take for those outside to shift their thinking too? (eg: better marketing? marquee-name users? etc.)

ZR: We certainly hope that our book provides some new ways for people already in BSV to think about the benefits of Bitcoin or the problems with the crypto consensus. But to your question, from my conversations with many prospective investors, the single biggest thing that would move the needle is to have more companies begin to gain traction solving billion dollar problems by leveraging BSV. We are confident that this is coming, but in the meantime one has to take a more theoretical approach to explaining BSV’s commanding position in the blockchain space.

We are not concerned about other blockchain’s outcompeting BSV, but we would like this book to get more money into the space as soon as possible to expedite the development of Bitcoin for the world. 

Are BSV’s proponents doing a good job “selling” its benefits? What would you like to see more/less of in that regard?

ZR: Many are, and if they were not, we wouldn’t be here as a BSV ecosystem fund. So, thank you to everyone who is putting effort towards selling BSV. That being said, in our view focusing on Twitter is the wrong way to go. For many in the space, just staying focused on building one’s own business and finding customers is almost certainly best. For others who want to take a more active role, try to find opportunities to leverage your knowledge in a consulting position or something similar. Content is great, but getting more businesses exploring BSV adoption is what’s needed. That’s a goal that needs to be taken head on. There is a massive opportunity for anyone who is willing to take the initiative.

BSV’s market value (and all digital assets) seem to move together in a pattern. When will BSV “decouple” from the rest and stand out there?

ZR: One should be very skeptical of someone claiming to know with certainty when this will happen. To date, crypto markets have been driven by emotion and speculation much more so than any other market we’ve ever observed. We don’t necessarily see that changing anytime soon, even for BSV.

Potential catalysts for a decoupling include:

– Small number of enterprise apps rapidly increase transactions on BSV and market responds

– Introduction and enforcement of pending regulations could shutter normal operations for all non- compliant cryptoassets (pretty much all of them besides BSV)

– BTC halving difficulties leading to a BTC price drop and making space for a conversation about BSV. We hope our book can play a part in such an outcome.

– Events related to Satoshi’s court cases or Bitcoins.

In what area/s of the BSV industry are you looking most eagerly to make investments? (if any)

ZR: We are eager to fund any company building something amazing using BSV.

How, where (and in what format) will you be distributing your book?

ZR: We will be releasing the book on our website in pdf, epub, and mobi formats for the cost of one’s contact information. We are in the process of adding a BSV payment option as well.

Checkout the the book here.