As a newsletter covering decentralized technologies and their massively disruptive potential, we feel obliged and mostly excited to eat our own dog food. So when we came across Niel’s Staketree we just went for it. It’s a simple smart contract that allows a creator to raise funds from supporters via ETH staking and then drip-feeds funds to a beneficiary address to the tune of 10% of the balance each week. Importantly it also gives the funders the choice of initiating a refund of whatever is left of their initial stake, at any time. It’s still a pilot project in its early days of development, but its functional and does the job for us (thanks Niel for setting us up on a Saturday!).
Some asked us why we don't charge for the newsletter, some asked us to accept sponsorships, many are begging us to feature their scammy ICOs. Staketree feels like the most natural, fair and non-intrusive way of monetizing: anyone is totally free to chose what it is worth to them, no intermediary taking a fee in the middle.
We do have some running costs of course, nothing gargantuan that we could not afford. But we do also have many opportunities to make the product better which we'd like to explore instead of parking them.
What a fascinating story to read. It gives you all of the feelings.
The #1 takeaway is that hyperbitcoinization is happening in Venezuela.
As the state currency breaks down, the only way to maintain spending power and earn an income is through Bitcoin. The more fortunate are able to afford S9 miners and can live in more than decent conditions.
With hidden mining activities happening all over the country, it is clear that Bitcoin's censorship-resistant technology has found its first major real-life use case.
We don't think it's the last. This is exactly what fascinated me about Bitcoin early on, and seeing it happen in real-life just 5 years or so after having first touched the coin is insane.
Must-read (with a grain of salt because the story-writer didn't really do much fact checking).
What's happening with the monster Telegram ICO is extremely fascinating.
The article states that the big VCs who have dabbled in crypto the most are sitting this one out (USV, A16Z, Bessemer), while some that still haven't placed their bets are going all in (Sequoia (we hear they're leading..), Kleiner, Benchmark, etc.).
We're seeing this behavior even at a much smaller scale. We've seen SPVs being formed and investors putting in insane amounts of money usually as one of their first ICO investments.
For some reason, this ICO just makes people more comfortable. Seeing a product live with so much hype and traction makes everyone not care that much about the fact that they are investing in something completely new that has absolutely nothing to do with the product currently live (and which doesn't exist yet).
In any case, it will be interesting to see who wins this hodlers-vs-n00bs little bet.
A great post by Jill Carlson highlighting how the innovation pendulum in blockchain continues to swing from new decentralized assets (first Ether, Litecoin, Zcash and the altcoins, more recently Filecoin, Tezos, EOS etc) to decentralized infrastructure (permissioned blockchains first, now Ledger, 0x, Lightning Network).
The emergence of new assets drives innovation in the way these assets get secured, traded and transacted. Jill thinks 2018 is the year infrastructure projects deliver.
$534 million worth of NEM have just been stolen from one of Japan's largest exchange. Despite the fact that this is largest than the MtGox theft and the largest ever theft of digital assets, it just seems to go mostly unnoticed. Markets are up, the discourse has already move on.
Perhaps it is no longer news that exchanges are the least safe place one can keep coins. Coincheck (ironically named) was holding NEM in a hot wallet!
The funds stolen are marked and it's highly unlikely the thief will be able to cash out unnoticed. In the meantime Coincheck have announced that they will make good their affected customers out of their own balance sheet (yes, exchanges are not safe but they are insanely profitable).
Stripe had a small feature that enabled Bitcoin support. It wasn't very widely available and wasn't that pushed by the company.
Now the experiment is veering to an early end, citing fees, confirmation times and price volatility as the main culprits.
They apparently are not done with crypto just yet, saying that "We’re interested in what’s happening with Lightning and other proposals to enable faster payments. OmiseGO is an ambitious and clever proposal; more broadly, Ethereum continues to spawn many high-potential projects. We may add support for Stellar (to which we provided seed funding) if substantive use continues to grow. It’s possible that Bitcoin Cash, Litecoin, or another Bitcoin variant, will find a way to achieve significant popularity while keeping settlement times and transaction fees very low. Bitcoin itself may become viable for payments again in the future. And, of course, there’ll be more ideas and technologies in the years ahead."
For me, thinking of anything other than Bitcoin for payments is fairly utopian (especially things like Stellar), so I expect that Lightning would be the only possible choice here.
A very long awaited piece, Taleb finally writes something about Bitcoin.
The most shared and highlighted piece has certainly been the following:
"But its mere existence is an insurance policy that will remind governments that the last object establishment could control, namely, the currency, is no longer their monopoly. This gives us, the crowd, an insurance policy against an Orwellian future."
BitGo is going to go hard against Coinbase in the custodianship market.
To do that they've just acquired a $12B AUM custodian called Kingdom Trust.
"The custodial services offered by the trust company, alongside BitGo’s market-leading digital currency security protection software, will make the combined companies the only full-stack, at scale provider of onsite and online protection for digital currency investments held by institutional investors"
Interesting view about why South Korea is so influential in the crypto trading world.
The TL'DR is: "To sum it all up, a tech savvy nation that highly valued digital goods and also had a penchant for gambling without a viable outlet was naturally drawn to cryptocurrencies. The densely packed and hyper-connected composition of Seoul allowed for word of the massive gains being made from cryptocurrency investments to spread rapidly throughout the population, creating a mania. The rise of cryptocurrency's popularity coincided with political turmoil that distracted the government from a situation that under normal circumstances, it would have tried to control."
Coinbase did a whooping $1B in *revenues* last year, and every VC now wants to get in. Aside from the fact that getting in *after* a company hits $1B in rev is not really what VCs are paid for, there isn't anyone selling to being with.
This is a weird one. The owners of ETHNews.com have gotten so rich off the price of Ether that they have purchased 67,000 acres (270 km2) of land in Nevada close to Tesla's Gigafactory (they also bought blockchains.com).
The speculation on the use that they will make for it is rampant in the community, and on their website they just say they will build a campus.
Using cheap electric spillover power from Tesla to mine crypto could be one of the potential activities, but we really have no idea what is going on here.
TrustToken, a real-world asset tokenization protocol, have launched a collateralized ERC20 stable coin, endorsed by no less than Ari Paul of BlockTower (investor in TrustToken).
With all the noise and FUD about Tether, we badly need some fully transparent, compliant and regularly audited alternative so this is timely. As for the approach, it seems to mitigate known flaws of the existing examples of stable coins, both the algorithmic ones (actual stability) and the collateralized ones (counterparty risk and transparency).
TrueUSD is backed by fiat held by a network of licensed trust companies and banks (their way of reducing counterparty risk), and as a KYC'ed holder of TrueUSD one is the beneficial owner of the custodial account funds were sent into. That means that the token represents a legally recognizable claim on the underlying fiat and therefore fully redeemable (price stabilization is therefore left to arbitrageurs). They promise regular audits and transparency on bank account holdings, though they have yet to disclose who the auditors are.
ACINQ is a small French startup developing deep Bitcoin tech.
They are the makers of Eclair (French for Lightning), which is a Scala-based implementation of Lightning.
This week, they released Strike, a Stripe-like API for Lightning.
Strike is basically exactly like Stripe. They will receive payments on your behalf (they are running the node, opening and managing the channels and so on) and you then get a payout in BTC onchain once you reach a threshold amount (that you choose, so you can minimize the amount of trust you place in them or decide to pay less tx fees).
This is very different from what Blockstream released last week, which was a tool for anyone to easily implement Lightning (but where you essentially are running the full thing in a completely trustless manner).
The DFINITY White Paper on their Consensus System is out.
It is very interesting (even for a permissioned committee-based model). For me it goes to show that some tech-heavy projects are really bringing massive innovations to all aspects of decentralized computing (in this case, the Proof of Stake mechanism).
We've already understood that Venezuela is pushing hard, and this week they released a document stating that "Petro is indipendence". It's a national decree that creates the "Superintendencia de los Criptoactivos", the agency that will handle the creation and management of the Petro.
Regardless of how much we think the coin is useless, I feel we're living in incredible times and this will be a fascinating story to watch develop.
Two very strong statements by the SEC Chairman this week, one as part of his opening remarks at the Securities Regulation Institute and a joint-one with the CFCT Chairman on the WSJ two days later (see below).
The first one seems like an unprecedented blow at industry gatekeepers, particularly lawyers, hinting that many may not be acting "responsibly" by being excessively lenient in counselling ICO promoters. Is the SAFT being questioned subtly?
"I have instructed the SEC staff to be on high alert for approaches to ICOs that may be contrary to the spirit of our securities laws and the professional obligations of the U.S. securities bar."
Clayton also brings up the recent surge in listed companies of all sorts "moving" into the blockchain space.
"The SEC is looking closely at the disclosures of public companies that shift their business models to capitalize on the perceived promise of distributed ledger technology and whether the disclosures comply with the securities laws, particularly in the case of an offering."
(behind WSJ paywall, click here for readable version)
In a joint statement with the Chair of the CFCT, SEC's Jay Clayton continues with the same tone of his opening remarks.
While regulatory efforts should operate in the spirit of embracing innovation, they are very concerned by the current state of affairs in crypto land which shows "little or no regard to our proven regulatory approach".
They hint at revisiting regulatory frameworks for exchanges to bring them under the scrutiny of the SEC or CFCT (currently operating under states regulations).
They hint at vigorous enforcement against "those who seek to evade the registration, disclosure and antifraud requirements of our securities laws."
With respect to ICOs, and directly addressing lawyers, advisors and exchanges, the are 'disturbed' by "many examples of form being elevated over substance, with form-based arguments depriving investors of mandatory protections". Again this feels like an attack at the instrument of the SAFT.
On a positive note, they do appreciate the underlying technology has potential for "productivity-enhancing economic development" and they hint at taking a forward-looking approach to this new market.
Overall, we should continue to expect more enforcement coming from the SEC, which is likely to result in less public ICOs and more private rounds, certainly on US ground. We are definitely seeing more and more projects deliberately avoiding a public token sale all-together. Utility tokens are clearly hard to deal with in context of the existing regulatory framework, the SAFT was a start to self-regulation but clearly not the final answer. To that end, it's great to see new initiatives like Consensys Brooklyn project taking off (their Telegram group is buzzing with activity!).
With rumours that by now EOS has raised about $1 billion from its continuous ICO, it was a matter of time before they announced an ecosystem fund. Two in fact, as we missed the first one last week, a $50 million fund in partnership with TomorrowBC, a sub-fund of Eric Schmidt's Tomorrow Ventures, seeded by Block.one (developer of the EOS software).
This one with Novogratz's Galaxy is bigger at $325 million.
We talked about ecosystem funds and their rationale last summer, when Blockstack and Tezos announced theirs. Many projects that raised capital in 2016/7 are now sitting on more liquid assets that they can sensibly deploy, so we expect to see more of these type of funds pop up this year.
Ex Credit-Suisse and Morgan Stanley bankers are raising $125 million crypto fund of fund, of which $50 million has been secured.
They will be investing in a portfolio of crypto funds as well has hedging their bets with short positions in Bitcoin and Ether futures, charging 1 & 15 for the service.
Big ups for targeting managers with humility, a rare quality in a bull market:
"Anyone who really claims to know exactly what is going to happen in the crypto space is probably misguided at best, so I think it's important to come at this space with a strong amount of humility, because I think it will inform your investment strategy and ultimately your trading."
In Q2 Grayscale will launch four new single-currency crypto funds plus and index fund a la Hold 10 based on a basket of digital currencies. Would not be surprised if Grayscale got to $10 billion AUM by the end of 2018.
One side effect of the emergence of index funds is the increasing correlation between crypto assets returns, as inflows and outflows of capital from such funds will move assets together.
This is quite an interesting development and a sign we are likely to see an increasing number of security tokens emerge.
A fund is raising $35 million via a pre-sale and subsequent ICO for a security token that will give token holders exposure to a portfolio 30 companies in the 22nd 500 Startups batch. The fund will hold between 2.5% and 10% of each company and will distribute proceeds to token holders as and when distributions occur, with the added benefit of being liquid (though hard to find exchanges willing to list security tokens, perhaps the DEXs?).
You'll remember we covered Spice.vc a while back, a tokenized venture fund raising capital via ICO. As part of setting it up, the Spice team have also productized and spun-out the regulatory and compliance process into securitize.io, a platform to issue security tokens along the lines of what Templum and Polymath are working on.
Something we will see A LOT more of very soon: venture capital (and hedge fund) firms snatching up core developer talent either as partners or venture partners.
This time it's Blockchain Capital, which has announced that Jimmy Song, a bitcoin core developer, has joined the firm as a venture partner.
Comes at an interesting time given we just reported on Vitalik leaving his VC role last week, but there will not be a slowdown here for us. We'll be seeing specifically a lot more Joey / Pantera type deals.