Data is the new oil.
Energy output is destiny.
Data centers are the new factories.
We are rapidly moving into a new age, one where exponential is the norm. This is causes a great deal of confusion, upset, and angst among the population. In short, we are not mentally wired for this type of situation.
Humans are naturally linear thinkers. We can conceptualize going from A to B. If we want to head to C, that is another layer. To us, it is the same process.
This is the opposite of exponential. The difference between the two is what some are calling the exponential gap. It is going to change everything, including economics. For this reason, crypto-assets are at the center of everything.
In this article we are going to dive into how the exponential gap forms and how this causes an underestimation in crypto.
We hear of returns of 5%. 10%. Sometimes even 20.
It is rare to hear or a return on investment of greater than 20%, long-term, that is not some type of scam or does not involved fraud. It happens occasionally but it is not the norm.
That is because we still are in a linear world economically. While the percentage of the economy that is driven by IT (or software) is growing, it is still a minor factor compared to the total.
This is changing. Estimates have the global economy at about 7% software. What happens when this number is 25%? or 50%?
If you are like the average person, the idea is incomprehensible. We simply cannot fathom this type of move. The numbers get overwhelming very quickly.
This is the reality of our situation.
Jensen Huang, CEO of Nvidia, reaffirmed that his company is operating on a multiplier in cost per performance of 1Mx per decade. That means, for the same money as 10 years earlier, one gets 1 million times the compute.
If you want to see how this plays out in the real world, look at mobile phones. The early Motorola phones produced in the early 1980s cost more than $3,500. Today, you can get a low-end smartphone, which is basically a computer, for $30 in many countries.
This is about 1% of the original purchase price.
The output capability, on a cost basis, exploded. This is how the numbers can get very big over time.
Key to this discussion is the fact that we are seeing things moving at a faster pace than ever before.
I prefer the term "crypto-assets" to cryptocurrency since the only currency, one suited for medium of exchange, are stablecoins. The other coins and tokens serve difference purposes.
The number 1 utility of crypto-assets is as value capture. This is true for the Bitcoin, Ethereum, Cardano, or any other coin tied to a blockchain. It can also apply to applications, communities, or whatever else tokens are tied to.
What this means is the exponential value creation due to the underlying foundation I am highlighting is captured via crypto-assets. It is why some of the price forecasts for something like Ethereum, Solana, or other networks is not absurd.
If they keep scaling, the potential for economic output tied to these blockchains is enormous. This is likely going to explode once we move deeper into the agentic internet.
Look at the above image. The one line shows an exponential curve and the other is a normal, linear progressing with a consistent uptrend. Basically, the dotted line is 3% annual return.
The exponential more in line with a crypto-asset. It is not going to operate similar to traditional assets. Consider a stock like Home Depot or IBM. They are established, providing steady growth (hopefully) to their investors. They will not, however, go parabolic.
Then we have some companies that follow the exponential curve. This is what everyone is looking for. It is the homerun in the markets. In the last few years, Nvidia pulled this off. Suddenly, everyone woke up to what was going on.
The time will come when people look at crypto in this manner.
It is easy to conclude I am talking about market activity. That is only a representative of what is taking place.
To illustrate, let's first look closer at Nvidia.
This is a company that dominated gaming with its chips. That is what the GPU first was used for (on a large scale). Then, when crypto mining because a thing, Nvidia was right there. Of course, now that we are in the AI age, and billions are being dumped into data center, Nvidia is selling everything it can build.
My point is the company was pulling an exponential long before the market latched onto it.
Now we contrast that with crypto. We will use Ethereum as an example. This is simply for illustration purposes and not a condonation of the financial opportunity.
Ethereum has the potential to follow Nvidia. It is a network that has run for 10 years. The key to the future is scaling. There are billions in TVL already tied to the network. Many major institutions are starting to put tokens on that chain. Fees are still high, at least for the average transaction. If they want to target that market, improvement is required.
That said, the market cap is around $300 billion. Visa, which is simply a payment network, is more than double that. Ethereum, along with all EVMs, offer a lot more than simply payments.
The same case could be made about any network.
Of course, the difference maker is what is actually build. Wishing for something to grow is not going to make it so. Development is required, providing scalable infrastructure that can meet the growing needs in the exponential age. Fortunately, the foundation, compute, keeps growing at a rapid pace.
By now, most should see how this ties into economic productivity. Here is where crypto-assets excel. The ability to capture and transfer value is unprecedented. Unlike the traditional financial system, which misses many components, such as the social layer, crypto can easily capture this.
Once that is tokenized, financial services can be utilized to put this value to work.
Those who understand this will end up in a strong position. Unfortunately, for most, they are stuck in the exponential gap.
