That's the term that Fred Ehrsam, founder of Bitcoin startup Coinbase, used to describe the current state of play in the Bitcoin ecosystem.
It's an interesting term, one that a) makes me uncomfortable as an investor and b) I'm not sure totally applies to a marketplace that is all about decentralization and openness. First of all, it's a real estate term, obviously. It applies to a finite, physical resource. As the saying goes, "They're not making more land."
When and where do land grabs happen? Shifts in population, transportation, and economic opportunity produce land grabs. Settlers in the Western United States in the 1800's participated in land grabs. The more real estate you could secure, the better off you were--sort of. Technically, there's only a finite amount of land in Wyoming, but there are so few people there, it's priced as if it was pretty abundant. You could claim a whole bunch of land. However, the land itself had more value in terms of what it enabled you to do rather than having some inherent transactional value in a marketplace--because it was so abundant. Even today, land in the middle of the country is still pretty much dirt cheap--but if you decided to be a rancher on your land, you could probably scratch out a living. Contrast that with Williamsburg in Brooklyn eight or ten years ago. Anything you bought could be flipped now for multiples of what you paid for it--regardless of whether or not you developed it. That's because there's a finite supply of land within a certain amount of subway minutes from Manhattan. There's only N number of plots that are walking distance to the Bedford stop on the L. Increased demand, finite supply, price goes up.
Is there a North Brooklyn real estate bubble? It's entirely possible. We've certainly witnessed recent real estate bubbles before--but they tend to be more pronounced in places like Nevada and Florida where there seems to be tons of land AND tons of excitement about that land. Excitement is overestimated, and development outstrips demand. Lot's of people build, but there's lots—too much—land to build on. Poof, bubble.
My biggest issue with Bitcoin is that the decentralized nature of the system, while potentially promising lots of opportunity to create value for people, may look more like the Midwest than Brooklyn. The actual supply of Bitcoin is somewhat capped, but that may mean that you'd rather be a currency investor than a service business around Bitcoin--because access is going to be open, distributed, and trend towards as free as possible. It's the kind of market where the second you start making a lot of money by being a provider of services, someone's going to come along, copy it, and give it away for free. Why wouldn't all of the Bitcoin supporters make currency conversion, fraud protection, and trasaction processing of various types free for all, to encourage use of the system?
In a Bitcoin world, you'll never be the only provider of something, because that only tends to happen in centralized, regulated environments. Take the internet domain registries. If anyone could sell any names, there wouldn't be as much of a profit to be made in the business as there is now. To me, the magic and promise of Bitcoin is that the friction in the financial transaction system (and hence the profits to be extracted--taken out of the system), will move to zero using technology.
E-mail might be a good example to think about. It's an open, distributed architecture that anyone can jump onto. It's about as democratized as you get. If you add up the sum total of all of the enterprise value created by e-mail related companies, the bulk of it didn't happen until almost 20 years after the first e-mails were sent. Companies like Lotus, or the spam blockers, virus checkers, bulk senders, authentication providers, marketers etc made their money quite a long time after the medium was invented.
On the other hand, are there benefits to being the first investors in Bitcoin related companies? I think there are, if you're a bigger, established fund, with long term minded LPs whose coin you can educate yourself on. By being early to a space, you start building the earliest network of thought leaders in that space. You gain a reputation and, most importantly, you learn. There have been studies done on venture capital returns that state that being first to market for an investor isn't necessarily a good bet with those early companies, but that it provides you with the opportunity to invest in better companies in that market later on. Your first investments in an industry tank, but your performance in that space overall is better over time.
I think the key is understanding which of these markets are worth being early to. There was a time when we thought virtual worlds were going to be that kind of game changing space--where everyone would have an avatar and we'd stop traveling around by plane. That didn't quite happen.
Nanotechnology was another space that investors piled into that was supposed to change the world, but didn't live up to it's promise.
You might even say the same thing for social. What's the sum total of all of the enterprise value that has been created around social, compared to the money that went into it from investors? How much of that value is concentrated in Facebook and LinkedIn? Social changed everything, but few companies actually made money off it and exited by being solely about social.
I like the idea of having a currency that doesn't get manipulated by big banks and political types, but I think I'll always wrap a $20 bill around my Metro Card and my credit card if I go out for a run, just in case. As a consumer, I like knowing that the FDIC insures the cash in my bank and that I'm protected against identify theft with my credit card. Call me old fashioned.
Does that mean I'll likely miss out on the next few years of Bitcoin related investing? Perhaps, but Google wasn't the first search engine and Facebook wasn't the first social network. History has shown that it's ok to wait until the next card gets turned over until you have a more stable environment to root in.