Q&A with Larry Cermak
Larry Cermak — Head Analyst at The Block
1. For those who don’t know you, who is Larry Cermak?
Some wonderful members of the community would probably describe me as a nocoiner and a statist shill. I would describe myself as a crypto skeptic with a passion in financial privacy and rational disintermediation.
2. What is your background?
I was always weirdly fascinated about Bitcoin. My first interaction was sometimes in 2012 when I was doing research about the deep web and dark markets. Not because I wanted to buy drugs but because I wanted to see how it works. And I was curious what was being sold there. When I saw that bitcoin was being used for payments, I started doing some research.
I never invested much though. I bought some bitcoin and sold it a little bit later to take some profits. But I had virtually no money so it wasn’t much. For the next four or five years, I followed the crypto space very passively. I read CoinDesk and Bitcoin Magazine sometimes.
But then when I was a senior college and I had to decide what to write my Economics thesis about, Bitcoin seemed like the obvious choice. It was economically unexplored but mainly I wanted to research something that I would be passionate about. This was in late 2016 and I fell down the rabbit hole. I felt that virtually all the research in the space was biased in some way. The most critical papers didn’t understand how anything worked and the most positive papers seemed too biased in overlooking the drawbacks.
I started my crypto career in Diar, which is a weekly institutional research publication. The founder, Fadi Aboualfa, found me through SSRN where I posted my thesis. I worked at Diar as the Head Analyst for a year while also getting my Master’s degree in International Finance in Austria. I loved every minute of it. But as Diar’s readership spread, I started receiving some very tempting offers. And it felt like just the right time to make a change.
I decided to join a startup, The Block, where I was hired as the fourth employee. The Block is a little different from Diar since we also cover the news and we are not a periodical publication. We have a much larger team and more resources. We are also more community-driven.
3. What are you currently working on and what are your plans for 2019 onwards?
I am currently the Head Analyst at The Block. I coordinate the research that we put out every day. We just launched the premium subscription product in February, which we think gives the best value for the buck in the space. My plan for 2019 is to sign up at least 1,000 paying members; and so far we are on pace to do that.
4. Why you remain as a “no-coiner”?
I am a nocoiner because I think that if I wasn’t, it would affect the research that I do. That’s the main reason. Also, I’m not totally convinced in the overall narrative of ‘store of value’. I’m also not convinced in the, often irrational and condescending, community. Bitcoin isn’t going to eradicate central banks; at best it could become a good alternative go-to — an inflation hedge. The community seems like a cult at times; full of unrealistic expectations.
5. What are Bitcoin biggest challenges on survivability? If it’s to outlast all other cryptocurrencies.
Very long term, I am convinced that Bitcoin won’t be able to function indefinitely from a shrinking miner’s reward. The fees itself won’t be enough and I think Bitcoin will have to implement a significant protocol change. And I’m not sure how easy that will be to pass the change through the conservative community. It will be challenging. Other than that, Bitcoin is extremely resilient and it won’t go anywhere anytime soon.
6. Some studies suggest that Bitcoin mining is highly concentrated in a few players, long term is this a threat?
No. But it’s worth paying attention to.
7. What the future of consensus mechanism for Bitcoin and top cryptocurrencies will look like in the future?
I don’t think it will change.
8. What the future of exchanges looks like in your opinion? Beyond DEX.
I think the future is in non-custodial exchanges. I am still not convinced that DEX is the right way — it’s too slow and there will always be trade-offs if it’s not. I think a non-custodial centralized exchange (like Arwen) is probably the best we will have because it combines speed with access to liquidity. But there is still a lot of work to be done. I am curious how much traction Binance DEX will be able to get.
9. To understand Bitcoin and cryptocurrencies, is the fiat concept indispensable to understand previously?
Yes. And it’s really important to understand economics as a whole. Keynesian economics is misunderstood by a lot of crypto supporters.
10. Biggest threats for the rest of cryptocurrencies?
Consensus and inability to change
11. What is the future of Privacy cryptocurrencies
I’m not sure what the future is but privacy is one of the main reasons why I’m in this space. Financial privacy is impossible the way the financial system is set up and evolving. Cash is going away faster than we think. I am really positive about the developments in Zk-Snarks, MimbleWimble and Layer 2 private transactions.
12. What is your take on ICOs? Are they needed or a flawed model to raise capital?
I think ICOs are one of the worst things to have happened in the crypto space. It drove the price of all the other cryptocurrencies in 2017 by supporting hype and marketing techniques instead of technology. Founders of ICO-driven projects also have very misaligned incentives as there is no contractual obligation to deliver a product. It was an extremely flawed model and I’m glad it’s now over.
13. Why 2017 was fertile ground to raise capital through ICO’s?
Because people are vulnerable when they think they can make money fast. When people that I haven’t talked to in 10 years started calling me to get advice about ICOs, I knew there was a huge problem. Everyone smelled money and stopped being reasonable. Some people knew it was nonsense but capitalized on the irrationality.
14. What is best about CT?
Memes and speed of information.
15. What is worse about CT?
Condescending and cultish behavior towards outsiders and skeptics. It turns so many people off.
16. Who are you fan #1 in crypto? Why?
I like some people but I wouldn’t say I’m a #1 fan of anyone. In no particular order and not including anyone on The Block’s team, I like Udi Wertheimer, Andreas Antonopoulos, Neeraj Agrawal, Vitalik Buterin, Tim Swanson, Peter McCormack, Stephen Palley, David Morris and probably some others I’m forgetting.
As a cryptocurrency cultist I can appreciate the value Larry brings to this realm, sometimes we are so lost in our echo-chamber we forget how everything is perceived from the outside; also not been invested in this market gives Larry an edge few analyst have, unbiased perception.
If you are invested in cryptocurrencies, you must follow Larry to keep you on check, he is the nocoiner analyst/journalist that we love to hate, but under-appreciate.
Thankful to Larry for his time and insights, an honor for me to share a Q&A with him.
