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🚣The calm before the storm?
This week, aside from the Facebook news (more on that below), felt unusually quiet. We guess that most folks are already OOO for Blockchain Week in NYC, or holding back on their big posts and announcements until Consensus and Token Summit kick off.
This is Multicoin's response to Spencer's response to Multicoin's missive on EOS from a few weeks back, phew! We are all lucky that this debate is conducted in public forums. 🙏
The philosophical contention is around the path to achieve sovereign grade censorship resistance, and Multicoin makes the case for how EOS pragmatic approach, making certain hotly-debated trade-offs, will ultimately get them there.
Team Multicoin didn't get the memo on slow week, they just keep churning out content like there is no tomorrow (oh, and last week it was Multicoin Summit, here's a take on in from someone who was there).
This one is on debunking Metcalfe's law n-squared-shaped network effects and how SoV networks like Bitcoin are unlikely to exhibit it (from the demand side). This is a thought provoking exercise as crypto is still at <1% penetration of global population, so by definition it's still very unclear how each network effect curve will unfold from here.
This post from sama has been underrated in my view.
In it, YC's president acknowledges his skepticism of crypto, and suggests a USDC, US Digital Currency.
Most responses have bashed it mentioning other stablecoin projects, or the fact that the dollar is already digital, or the fact that it would still be fiat, etc.
But I think the main point has completely been missed.
Sama writes: "Ideally the initial coins would be evenly distributed to US citizens and taxpayers—something like everyone with a social security number gets two coins, one that is immediately sellable and one that you have to keep for 10 years."
This is a completely revolutionary thought, one that would enable countries to "start from scratch" and the only possible solution to the widening disastrous income inequality facing most of the world.
I wish there was a bit more thinking around this. (We had Auroracoin back in the day, but the only way something like this could work is if it was backed by a big government, as sama says).
Xapo seems to attract this sort of coverage every once in a while.
The TL;DR is that Xapo stores $10B worth of Bitcoin (or 7% of its total supply) for large customers like Reid Hoffman and Mike Novogratz, through a network of underground vaults on five continents. It takes about 2 days to move the bitcoins out and there's top-notch security:
"...vault’s fingerprint scanners were equipped with a pulse reader to prevent amputated hands from being used".
An enlightening, long deep dive on the current crypto mining landscape by a Sia lead dev, sharing learnings from taking the Obelisk ASIC miner to market.
"At the end of the day, cryptocurrency miner manufacturers are selling money printing machines. A well-funded profit maximizing entity is only going to sell a money printing machine for more money than they expect they could get it to print themselves".
Inevitably the post contains a lot of interesting insights into Bitmain, whom the author thinks most are still under-estimating.
A must read post if you have an interest in EOS, ahead of the imminent mainnet launch. And a refresher on hard spoons.
Key points: - Mapped wallets could end up having a significant upside from non-registrations; - Exchanges are keeping their cards close to their chest for now, hard to predict how they will play; - Some exchanges may end up being block producers, creating agency issues; - Grab your popcorns!
The narrative around the inflow of institutional capital in the digital asset class is that it will be ultimately driven by the tokenization of existing assets through regulatory compliant security tokens.
This is now expected to account for several trillion $ of market cap, potentially eclipsing crypto currencies. The difference being it's just value shifting from analog to digital, with some upside from enhanced liquidity, less intermediaries and a more global investor base. Not as exciting as going from 0 to 1, but no doubt plenty of upside for the "service companies", some covered in the post, that will facilitate this shift.
In the first issue of the year we spent a few words on Zuckerberg's 2018 challenge to learn about decentralised technologies. We closed the brief commentary with the following line:
"The fact that David Marcus, Messenger’s lead, has recently joined Coinbase Board of Directors could indeed suggest that Facebook have serious intentions to get into this space [...], or at the very least to get to know their enemy better…"
Fast-forward four months, Facebook just announced that David Marcus, who ran Messenger for 4 years, will be leading an internal team of a dozen people dedicated to exploring possible applications of the blockchain for Facebook. The timing is interesting, just a few weeks after a visibly uncomfortable Zuck, in his tie, had to explain the Cambridge Analytica debacle to a panel of old congressmen. For what we know though, this was in the workings for a while, apparently since Morgan Beller from Facebook's Corp Dev team began looking into emerging tech over a year ago. Making it official suggests they may already know the way forward.
The big question now is what will come out of it. There are already rumours of Facebook own cryptocurrency, obviously, and that does not seem that far fetched if you connect the dots:
- David Marcus has deep experience in mobile payments, having exited Zong to Ebay/Paypal in 2011 to then act as Paypal's President before joining Facebook. His more recent tenure as Coinbase director will have exposed him to the ins and outs of this industry, what's possible and what's legal; - The team counts two notable members from Instagram, who have built and scaled mass consumer-facing properties (Kevin Weil, ex SVP of Product at Twitter, and Everingham, VP of engineering); - Telegram is gearing up (once it's finished counting its moneys) to arm +200M users with a crypto wallet.
Here are some other ideas about what they could be up to.
Facebook also has a history of copying products/features from other companies and of being very good at M&A, so we wouldn't be surprised if the strategy involved some of that too.
Nice to see Aragon's Nest program come to life with the first 5 grants. There's cool stuff in there, but the best thing is to see cool open source software being financed, without the need for crazy ICOs.
In other news:
- Ethereum. The Ethereum network is processing $4B a day, with more than half of that to smart contracts (up from 40% 6 months ago). The #BUIDL is real, but we are still thinking about Pfeffer's paper...
- Mining. Nvidia made $289M from selling crypto currency mining chips in its most recent quarter, accounting for over 9% of total revenues. Management expects that to drop by 2/3 in this quarter, markets didn't like the guidance.
- Exchanges. UPbit, South-Korea's largest crypto exchange (>$2B/24hrs), has been raided by prosecutors on the suspect of fraud for selling cryptocurrency to customers that it does not hold. Markets took a dive on the news.
- Celebs. Watch Chamath Palihapitiya's response to the Buffet-Munger-Gates trio on their Bitcoin bashing from last week.
- Corporates. After IBM and Amazon, and ahead of Salesforce in the fall, Oracle is unveiling its blockchain enterprise offering over the next couple of months. Is anyone tracking mentions of "blockchain" in earnings calls?
- NFTs. A cryptokitty was sold for $140K at Ethereal.
Interesting idea put out there by Aleksandr of Coinfund: Initial Witness Offering.
It's supposed to work like this: 1/ a company creates and sells non-transferable digital badges 2/ the capital is used to build a decentralized network 3/ the protocol on which the network runs requires witnesses to hold badges in order to join the network 4/ the only way to benefit from owning the badge is to become a witness (ie contribute work) 5/ the company airdrops an amount of their transferable transaction currency commensurate with current usage to both early users and witnesses 6/ after a while, the badges expire and anyone holding the transaction currency can become a PoS witness.
This is thought of as a way for early stage projects to finance themselves without having to sell securities (it is not possible to extract value from badges without contributing work, making them akin to an asset) and to build a clear path to full decentralization. The recently announced Adapt toolkit will help in spinning out and experimenting with this and other economic models.
Tech keeps moving faster than the regulator. Looking forward to seeing how this one gets adopted.
Peter Van Valkenburgh praised the comments SEC Commissioner Hester Peirce made last week on the ideal approach to crypto regulation.
"In general, it’s best that regulators only get involved in emergencies, when there are grave risks to consumers or investors that can only be addressed through the law. Regulators should avoid making legally binding pronouncements that dictate specifics about how consumer or financial technologies should be built. "
Hester also got a high-five for her remarks from crypto-dad Chris Giancarlo, Chairman of the CFTC.
Not much else of note in this department this week. Nothing emerged yet from the highly anticipated working group meeting of May 7th between senior officials of the SEC and the CFTC.
BlockTower Capital is devoting $20-25M to a new venture-style fund, and has brought on board Eric Friedman to lead the initiative. Eric was previously at Expa and has been looking at crypto for a while.
Launch a crypto offering, wait 3-4 months, raise 9 figures. The playbook worked for Revolut, eToro and now Robinhood, who just closed a monster Series D round at $5.6B valuation from existing investor DST Global and participation from the likes of Sequoia. Note that DST have also just led the $250M Series C in Revolut.
Not all capital stays in though. According to Axios, Robinhood's co-founders and some early employees cashed out to the tune of of $100M.
Placeholder have published their investment thesis for Decred, their first "public" investment.
This is interesting as Placeholder is structured as a traditional venture capital fund and yet it's investing in an asset that is already liquid. Technically they have purchased tokens from other investors, rather than having provided primary capital to the project, which is typically the role of a VC. At the same time we see many hedge funds investing at the illiquid phase, where you'd expect VCs to play.
This is to show how the lines between venture and hedge funds are blurring in this space.
StarkWare has raised a $6M seed round from the whos-who: Pantera, Naval Ravikant, MetaStable, Floodgate, Polychain, Vitalik, Zcash Co., Tezos' Arthur Breitman, NEO's Da Hongfei, Bitmain, Elad Gil, Fred Ehrsam, Linda Xie, and others.
The notable investor is Zcash's parent company, and two of the founding scientists there are now co-founders here.
There isn't much available about what the company does, and if it will develop a new currency or not. We just know they will be working on STARKs.
"StarkWare will develop a full proof stack: software and hardware to support fast and reliable generation and verification of computational integrity proofs for general computations."
Capital is starting to flow into NFT infrastructure.
After Rarebits $6M round in April, OpenSea, another marketplace for crypto goods, has raised $2M in funding from Founders Fund, 1confirmation, Foundation Capital, Blockchain Capital, Coinbase Ventures, Chernin Group, Stable Fund and Blockstack.