📌 +Token Summit recap, Coinbase, Stable Coins, Aragon Nest
Token Economy
📓 also published on Medium (but with a lag!)
🔥 🌏 Bitcoin and the planet
This week's most interesting debate has been around the environmental impact of bitcoin and to a larger extent obviously all proof-of-work cryptocurrencies.

We feel like this is going to continue to come up, but unfortunately there isn't any great solution to it. As there isn't any great solution to other absolutely insane carbon emissions in the world.

The Bitcoin-bashing side is arguing that Bitcoin is the most dumb thing because it just wastes energy and will end up destroying our world.

That's obviously a position that doesn't hold any merit, and I say so as someone who constantly thinks to devote the rest of his life to preserve the planet.

Securing a multi-hundred-billion (maybe trillion soon) money ecosystem in a decentralized fashion without digging up and making our planet explode to get a metal or destroying trees and killing animals to print banknotes is quite an accomplishment and it is only reasonable that some energy would get used for that.

My main problem is that, obviously, there is absolutely no mechanism for network self-control, being a decentralized network. Cheap energy will always win, and Bitcoin holds at the same time the potential to completely annihilate our planet as well as save it (by incentivizing cheap renewable energy and bringing down the cost for everyone).

We'll see which one it ends up being, but if for some reason Bitcoin was the tipping point to bring us towards a clean energy future (faster than any government could), then that would make it something even more remarkable, if even possible.

This piece originally written on Grist and reprinted a bit everywhere started the discussion (even thought this is a constant theme from Bitcoin haters).

What really impressed me where the two heavy hitters of this piece:

- By July 2019, the bitcoin network will require more electricity than the entire United States currently uses.
- By February 2020, it will use as much electricity as the entire world does today.

I wasn't really able to find the data to corroborate these claims, but that would indeed be quite astounding.
The Bloomberg piece does a great job comparing BTC's energy use, to its alternatives:

"A recent report suggests that at current prices, Bitcoin miners will consume an estimated 8.27 terawatt-hours per year. That might sound like a lot, but it’s actually less than an eighth of what U.S. data centers use, and only about 0.21 percent of total U.S. consumption. It also compares favorably to the currencies and commodities that bitcoin could help replace: Global production of cash and coins consumes an estimated 11 terawatt-hours per year, while gold mining burns the equivalent of 132 terawatt-hours. And that doesn’t include armored trucks, bank vaults, security systems and such. So in the right context, bitcoin is positively green."
The author does a lot of math to come up with an energy usage, and it is in line with the one above.

The main point of the piece is that today Bitcoin uses mostly renewable energy and will continue to do so in the future.

The author also shows how you could think of the amount of energy used depending on what you compared it to:

"If I had the intention to lobby for a ban of Bitcoin mining, I would use references like the one below:

- Bitcoin uses as much energy as 520,000 Canadians every day
- Bitcoin uses as much energy as the Democratic Republic of Congo
- Bitcoin uses more energy than 116 countries each
- Bitcoin uses enough energy to power 6 Nimitz-class aircraft carriers

It is also easy to make this number look very small:

- The energy that Bitcoin consumes in a year would only last the U.S. for 19 hours.
- Bitcoin uses only 20% of the energy from a single coal power plant in Taiwan
- The Three Gorges Damn in China produces three times as much electricity as Bitcoin consumes
- The U.S. produces more electricity from a single Geothermal plant than Bitcoin requires
- 17 NSA Data centers together consume more electricity than Bitcoin
- Google used about double as much electricity in 2015 than Bitcoin does today"
🙀 CryptoKitties
What a week in the digital feline industry.

In virtually every single group chat we are part of the topic came up multiple times, with feelings ranging from disgust to adulation.

A few themes emerged.

1. The 'fundamentals'
Why on earth are folks paying +$100k worth of ETH for digital images of cats? As we mentioned last week, this is an exploration of the concept of digital scarcity, and more specifically of non-fungible digital collectibles. While not being fully decentralized yet, this game would be significantly less interesting if ownership and supply were controlled by a central issuing authority, as Vitalik himself stated. People are clearly willing to attribute material value to things that are verifiably scarce and trustlessly transferable (and are happy to deal with partial centralization for the sake of better usability). We note there are other competitors already popping up, which raises the question of what scarcity actually means (presumably scarcity only has value in conjunction with strong network effects).

2. Applications of blockchain
While everyone seems religious about now not being prime time for the application layer, we may have just experienced the emergence of the first mainstream consumer Dapp. The fact that the first breakout Dapp is a game and is about cats shows that practical applications of the blockchain can extend well beyond ICOs.

3. Scalability
The interest it generated almost took the Ethereum network to a halt, its smart contract accounting at times for up to 25% of the entire network's transactions and for over 10k pending transactions. Some ICOs had to delay their token sale. The team responded by increasing the birthing fee by 7.5x. More than ever it's clear how scalability should be (and is) a top priority for the Ethereum development team.

4. Revenues!
This project will unfashionably (or fashionably, we are not sure what's contrarian anymore!) fund itself going forward through a sustainable revenue model, steering well clear of an ICO.

5. Return and ridicule

It's always very risky to discount something that looks ridiculous or a like a toy. Some of the most successful investors of all time have built investment thesis around this heuristic, and this was another example of it. We know of someone who purchased hundreds of Gen0 kittens in the very early days of it and, as it currently stands, is sitting on a mind-blowing return.

Other interesting links:

The Cryptokitty Whitepaper with a section of ERC-721 token standards (more on that further below!)

Cryptokittydex - an ecosystem is already forming up.

Surely enough, Cryptokitties experts landed on Twitch.

And surely enough, someone dissected the codebase to help any dev build her own Cryptokitties-like game on Ethereum.

Some mind-bending metrics from the first few days, and a newly coined term (Kittycap).

Phew, Cryptokitties are probably not securities. A lawyer actually Howey tested them.

👩‍🚀 Coinbase
No one here is new to Coinbase, but it has received quite the media attention this week.

From a massive NYT profile to being the #1 app on the US app store. 
The NYT profils its amazing growth but also its massive customer support issues.
As it got featured, it also became the #1 App on the US app-store, officially hitting the mainstream now I guess (always hard to gauge from our bubble).

"The irony of Coinbase hitting the mainstream is that, for many customers, the service was actually unavailable for large portions of the day. "
They are getting so many people on board (who probably have absolutely no clue whatsoever what BTC ETH and LTC are) that they had to issue a warning and cautionary message to please invest responsibly.
📌 Token Economy
💡 Featured on TokenEconomy.co

Our friend Pawel, partner at European VC fund Point Nine Capital, attended the 2nd edition of Token Summit and wrote up a handy summary of the key themes debated. 

Unlike the first version that seemed centered around ICOs, this one appeared to be focused on industry bottlenecks such as scalability, security, regulation and availability of talent.
This is what is powering your Kitties!

ERC721 tokens will probably be an even bigger thing than ERC20 tokens.

"Uses include tracking real-world non-fungible assets, like real-estate. It is critical in each of these cases that these items are not "lumped together" as numbers in a ledger, but instead each token must have its ownership individually and atomically tracked."

The proposal is to have a standard implementation for tokens that will describe different types of unique and unequivocal assets.

We had a call with a fund manager who was going to implement this for some activities, and are seeing massive interest everywhere.
Parker has been a vocal critic of Bitcoin and other crypto happenings, but he hasn't been ignoring them.

In this posts he categorizes different types of tokens and tries to think through how to value them.

The biggest takeaway for me, that I share entirely, is the absolute lack of understanding from the investor community about what a reasonable healthy price should be for different types of tokens. This is also on the entrepreneur side, often coming up with valuations as comparables to other raises. Doesn't feel safe at all.
Given the recent volatility in prices of crypto assets, Albert Wenger mulls over the concept of crypto stable coin (not the 1-1 asset backed, which he does not consider crypto currencies). His main questions are:

1/ What should it peg to?
2/ What's the implication for supply and demand?
3/ How is one created?

No one really knows. As always the comments below the post are the most interesting, with the founder of Basecoin chipping in generously.

2018 will see lots of experimentation in stable coins. 
This is something that early-adopters and BTC believers struggle with everyday.

BTC is now ALL about its price. Features and add-on products are all somewhat influenced by the price, and it is fairly clear it will stay like this for a long time.

To me, it kind of feels like random people send me LinkedIn or Facebook requests. That's not how it was supposed to be.
Tough luck for me I guess.

"Bitcoin was supposed to disintermediate the finance industry — the system of banks and middlemen and transaction fees in which a single entity can hold your money hostage. Instead, it replicated this system and made it worse. Ordinary users all trust third parties to verify transactions and hold their money."

“Bitcoin was supposed to demonstrate the power of a true free market,” the developer Adam Chalmers tweeted on Wednesday afternoon, when the average price of Bitcoin was around $13,000. “Instead it's full of scams, rent-seekers, theft, useless for real purchases and accelerates climate change. Mission accomplished.”
375+ companies in the blockchain space are hiring on Angel List. 

Those ICO funds are getting spent!
The ASX is ready to replace its current clearing system with blockchain technology developed in partnership with Digital Asset Holdings.
Another week, another $70M+ hack. No biggie.
As announced at Token Summit, VC-backed OpenBazaar are eventually going for a token sale, less than a year from publicly stating that they could do without. 

The main trigger for the change of heart seems to have been the slightly clearer regulatory landscape in the US, where they believe they would not qualify as a security token. Other than that, the token is portrayed as a nice-to-have feature rather than a crucial part of the protocol.

We are fans of the OpenBazaar vision, here's hope for a non-greedy token sale.
Aragon is launching a grant programme in partnership with crypto VC fund Placeholder. The aim is further kickstart the ecosystem by providing developers with the economic incentive to research and build Aragon's tooling layer. 

Incentivising open source development is a challenge for everyone and ICOs are not the final answer. We'll see more of these type of initiatives, particularly from projects that are sitting on highly appreciated ETH/BTC raised by ICO.
So Bitfinex is now potentially gearing up to sue the anonymous Twitter account Bitfinex'ed on the grounds of 'market manipulation' (which Bitfinex'ed is accusing them of).

If that wasn't enough fire for the week, Bitfinex experienced a flash crash on Wednesday in which lots of leveraged traders lost money on stop-losses getting triggered at the wrong prices.

What a story.

The famous author and evangelist Andreas M. Antonopoulos had quite the week. He first admitted that he wasn't a Bitcoin millionaire on Twitter and had to rely on Patreon to make ends meet, got shamed by Roger Ver, and then actually became a millionaire from the community's donations.

Donations continue to pour in, and we've spotted one that amounted to 42 BTC..
Centralized exchanges are probably the equivalent of telcos (or more ironically, banks).

They make a stupid amount of money, while being basically unusable and holding your money hostage.
a16z's Alex Rampell gave a talk at the November 2017 a16z Summit and we can now all watch it from wherever we are in the world 🎉
We've already profiled quite a few of these guides, but Linda has decided to double down on "beginner" posts for different cryptos and has collected all of them here.
Lightning is almost about to happen people.

These tests are the first multihop Lightning payments using real Bitcoin.
A well-done token sale. Congrats to the team.

"Of the funds acquired, only $10 million will be immediately available to the company, as the firm has agreed to a lock-up until milestones are hit. The next $20 million will be released when its board of advisors verifies it has delivered the next version of its product, a network that integrates the token.

The final $20 million will be secured when it achieves its final milestone, one million verified users."
One of the biggest problems with BTC today.

The piece focuses on the problem that centralization of holdings causes in the trading markets, but I think a much bigger issue is the currency survival aspect.

We are intro cryptos because they are decentralized.

If we end up with a more unequal structure than the current one (hint, it already is), then people might start questioning if it is all worth it or not.

It's ok to redistribute wealth and have a few early savvy investors / users be life changingly rich, but there might come a point where it will be too much.
👮 This week in regulation
Facing a free-falling national currency and US sanctions, the president of Venezuela announced intentions to launch a new crypto currency backed by oil, gas, gold and diamond reserves names the Petro. Not much of it will obviously be a 'crypto currency', being asset backed and government controlled.

Many Venezuelans in the meantime have already switched to Bitcoin to avoid exposure to a collapsing Bolivar.
The CNV, national regulator, made a pretty standard statement on ICOs, warning investors of the risks associated with them and warning issuers that, despite it not being a regulated activity, they are watching out for scams and cases of security fraud. 
The SEC is at it.

They targeted PlexCoin, a full-on scam that raised $15M (this is ridiculous).

"This first Cyber Unit case hits all of the characteristics of a full-fledged cyber scam and is exactly the kind of misconduct the unit will be pursuing," said Robert Cohen, Cyber Unit chief, in a statement. "We acted quickly to protect retail investors from this initial coin offering's false promises."

"It obtained an emergency asset freeze against Dominic Lacroix, whom it called a "recidivist Quebec securities law violator," his partner Sabrina Paradis-Royer and PlexCorps. It also filed charges against LaCroix and PlexCorps alleging that they sold securities claiming investments in PlexCoin would bring profits of 1,354% profit in less than 29 days."

My sad takeaway is that given the amount of scams, I believe it is unfortunately actually possible to do "light scams" and probably get away with it, especially if not in the US.
Crypto currencies may soon become available to qualified investors to trade on the Russian stock exchange.

The aim is very clear, capital control:

"We really need to be able to track deals and transactions in these currencies" said Russia's Deputy Minister of Finance.
In a last minute spin, the South Korean Financial Services Commission has issued a ban on bitcoin futures trading, just as bitcoin derivatives are going live in the US.
💰 New funds
Another entrepreneur joins a crypto fund.

After Augur's Joey who joined Pantera, Civic's founder and CEO joins Multicoin.

We have very mixed feelings about entrepreneurs in the infancy stage of their company joining funds (one of us also has experience with that..).

"This additional role will have the intended consequence of providing me with more time to focus on Civic, in that the team at Multicoin are very talented and I will be trusting them to manage the bulk of my cryptocurrency investments going forward."

We would also like to get a new job + more free time at the same time. Didn't know it was possible. Sign us up!
They are:
- Unikrn
- BlockFi
- Pryze, a giant marketing machine to push other ICOs.
- An unnamed security company
📚 Book of the week
Primavera De Filippi, prominent blockchain researcher, has announced her new book on the regulation of crypto currencies, smart contracts and ICOs. Available for pre-order.
ℹ️ About us
Token Economy is written and curated by Stefano Bernardi and Yannick Roux.

If you're building a new fundamental piece of technology for the future, please reach out 🤙
Feel free to send links to include in the next issue, or any comments you might have on this one!
Token Economy · The Dolomites · 38121 Trento TN · Italy
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