Although the implosion of one of the largest cryptocurrency exchanges in the world has shaken many investors, billionaire Mark Cuban still believes in crypto.
Cuban stayed invested in crypto because he believes in smart contractsone of the main underlying technologies for carrying out crypto transactions, he explained on Twitter on November 13.
Essentially, a smart contract is a computer program that is embedded in a blockchain network. They operate on “if/then” commands; if X, then run Y.
For a simple example of how a smart contract works, consider a vending machine. Typically, you make your selection, insert the required amount of money, and receive the item. The “smart contract” in the machine is coded to dispense the selected item once payment is made.
Cuban believes smart contracts will have a significant impact on creating valuable applications that have useful for everyone.
In Cuban’s view, the value of a token derives from the applications for which it can be used and the usefulness of these applications for users, he said on Twitter.
But what’s still needed is an app that’s useful to people both inside and outside the crypto world, one that’s useful enough for people to be willing to learn how to use crypto. -currency in order to use the application.
Despite Cuba’s bullish outlook on crypto, it has a scathing criticism from former FTX CEO Sam Bankman-Fried.
“With FTX now, it’s somebody running a business that’s just dumb as greedy,” Cuban said during a speech at a Sports Business Journal Conference the 11th of November.
The collapse of FTX is expected to have a ripple effect on the entire crypto industry. Multicoin Capital, one of the leading crypto venture capital firms that has FTX-related assets, has told investors expects many trading companies to be wiped out and closed in the coming weeks amid the fallout.
However, Cuban does not consider the recent events that rocked the crypto market as “crypto explosions”, but rather as “banking explosions”. he recently tweeted. This includes lending funds to the wrong entity.
Cuban is a long-time cryptocurrency investor. Over the years it is invested in Ethereum and other various digital coins, NFTs and many blockchain companies.
In fact, “80% of the investments I make that aren’t on ‘Shark Tank’ are in or around cryptocurrencies,” he said during an episode of “The Trouble with Jon Stewart” podcast on January 12.
However, some financial experts advise against investing too much in crypto. “Cryptocurrencies are a quintessential game of trust,” James Royal, senior reporter at Bankrate, told CNBC Make It.
“With the exception of so-called stablecoins, crypto prices are entirely supported by belief in their future, not by any fundamental foundation, such as assets or cash flow,” Royal says.
It is important to note that cryptocurrency is a highly volatile asset that is subject to erratic fluctuations in value. Since there is no guarantee that you will make a profit on your investment, financial experts generally advise not to invest more than you are willing to potentially lose.
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Disclosure: CNBC has exclusive off-network cable rights to “Shark Tank.”