This by Dani and Nick at USV was probably the most discussed and shared post of the week, so we'd be very surprised if you haven't read it yet.
As always, USV are best in class at zooming out and looking at the big picture. In this post they argue that platforms (eg Web3.0) don't evolve in a linear fashion from infrastructure build-out to applications, as the common narrative goes, but they rather follow a more iterative path first led by a breakout app that inspires a wave of new development work on the infrastructure required to scale similar apps.
"How do you know that the infrastructure you are building solves a real problem until you have app teams that you are solving for? It will be a challenge to build crypto infrastructure now until there is a breakout crypto app that other developers want to emulate and need better dev tools and infrastructure to do so."
With the open source and interoperable nature of crypto networks, these cycles are bound to increasingly overlap and run at much faster pace than in the past.
Vlad Zamfir post “Blockchain Governance 101” from last week cause a bit of a stir in the community and triggered some lengthy responses.
In this follow up Vlad lays his cards on the table outlining what is it specifically that he will be fighting for on the governance of blockchains front.
"I am going to put political pressure on my political opponents. I am going to put pressure on them to give up their pursuit of blockchain governance outcomes that I want to avoid. I will start by trying to convince them with words (English) in person and online [...] And let me be more clear: I intend to avoid autonomous blockchains I intend to avoid capture of blockchain governance I intend to avoid internet censorship as blockchain governance"
Reminiscent of Nathaniel's post of a couple of weeks back, the lines between governance and politics in blockchain are starting to blur.
Harbor's CTO tries to make sense of the new emerging security token infrastructure.
It's all straightforward (and obviously biased towards their platform), but I think it clearly shows how modular all these new developments are in the blockchain space.
This means that potential businesses have many potential layers to choose as their "attacking point". And, probably, there will also be opportunities for businesses to put every single layer under one roof and remove the complexity for end users.
If you are into fundamental ratios, Murad Mahmudov and David Puell have come up with an intriguing one for bitcoin borrowing from some of the ideas recently shared by Nic Carter on "realized cap".
According to the realized cap, "the UTXOs are aggregated and assigned a price based on the BTCUSD market price at the time when said UTXOs last moved", which would give a lower weighting to lost coins and coins that are held by hardcore holders, effectively acting as proxy for cost base.
According to the ratio of market value to realized cap, a drop below 1 would suggest temporary undervaluation. And since we are still hovering above that level, according to the authors there could still be some downside ahead.
The article goes in a lot of details that aren't needed if you know how Bitcoin works, the gist of it is that "if a customer’s transaction happens to be stuck pending for at least 4 blocks, we’ll broadcast and pay for a child transaction at a sufficient fee rate in order to rescue the parent transaction".
If you don't understand this I'd highly suggest reading the post.
A good post explaining a bit more details around the Interledger protocol, which we're guilty of never really having dug into enough.
This post is from Ripple's ecosystem initiative, which has a vested interest in a few companies, but still shines some light on a class of very interesting protocols, those that connect different chains and networks. I think that with the current network proliferation, we'll see a lot more activity around this concept (which was one of the initial rationales around the 0x investment, even of that ended up moving a bit more towards just a pure token exchange).
"The gambling of crypto and the real need for easier securitization and fractionalization played the role of the Trojan horse, introducing much more important innovation."
As you probably know by now, we're big fans and huge proponents of Programmable Legal Entities. This post tries to explore the consequence of having that technology and infrastructure finally available.
The problem is the potential to be overloaded with an insane number of "junk" security tokens.
This introduces an idea I'm personally very interested in, which is the "curation" or at least valuation / sorting of security tokens on both first emissions and secondary markets.
The folks at Chorus One wrote a very nifty recap of different staking mechanics, comparing Ethereum's new staking infrastructure to others like Cosmos and Cardano.
PoS systems are undoubtedly growing in interest and development, so this is a welcome read for anyone trying to figure out the details of their own implementation.
- Coinbase. Rumours of a $500M round at $8B valuation led by Tiger Global, half of it in secondary from existing investors (and presumably employees). Apparently it took most of 2018 to close a deal, but the headline numbers are certainly not reflective of a bear market. - M&A. Circle has acquired crowdfunding company SeedInvest so it can turn it into a compliant token sale platform. - ICOs treasuries. Rumours of incoming dapp capitulation may be exaggerated, as Bitmex demonstrates most projects have already liquidated most of the ETH raised and are still sitting on paper gains.
- Custody. Gemini have secured insurance coverage for customers' digital assets custodied in hot wallets (like Coinbase offers).
- ErisX. TD Ameritrade and a bunch of other Wall St firms, plus DCG, are backing a startup building out a regulated crypto exchange and clearing house offering spot and futures markets.
- Tether pains. Tether is supposedly diversifying away from troubled Puerto Rican Noble Bank, who's desperately seeking for a buyer. It seems like its parent Bitfinex has just started banking with HSBC, and claims it's all good (showing BTC, ETH and EOS cold wallet balances).
- Mining. Dramatic turn of events at Sia as the community eventually decides in favour of hard-forking to brick Bitmain and Innosilicon's ASICs. Fascinating case study in governance of decentralized networks.
- Shapeshift. Erik published a strong rebuttal to the damning WSJ post from last week, shining light on many inaccuracies. WSJ does not come out in a good light.
- Releases. dYdX has released expo on mainnet, where you can live trade on margin. Prysmatic Labs has released v0.0.0 of their Ethereum 2.0 implementation, really futuristic stuff. And Bitcoin 0.17.0 is out as well.
Numerai continues to be one of the boldest, most fascinating yet somewhat esoteric projects out there, with a working product and a token that is actually used for its intended purposes.
The issue with the original model was its centralization: only Numerai (and its hedge fund) could buy the predictions and trade on them, setting the rewards and slashing stakes. With Erasure, they have added an extra dimension to it and a much larger addressable market, opening up a decentralized marketplace for prediction feeds where any hedge fund can be on the buy side and data scientists on the sell side can set the price of their feeds and terms of their stakes.
This is somewhat of a departure from the grandiose original vision for Numerai to be the last hedge fund, managing all the money (covered all the way back in issue #5). It's now all about NMR becoming the "cryptocurrency of the entire hedge fund industry." We continue to scratch our heads about how value should fundamentally accrue to NMR and whether it's actually necessary under this new model. But it will be fascinating to see the marketplace in action.
In a clear sign that traditional institutional money is starting to dip toes in crypto (albeit indirectly), the $30B Yale Endowment fund has reportedly written two checks into A16Z Crypto and Paradigm (Matt Huang and Fred Ehrsam's shiny new $400M crypto fund).
This move, while undoubtedly representing a relatively tiny allocation of their AUM, is of particular significance as David Swensen, who manages the endowment, is regarded as one of the world's top money managers, and the endowment itself is the second largest in the world only after Harvard's. As for the legitimacy of the asset class, hard to think of a better early signal.
For folks in the big money circles though this may not come as a surprise, as it was probably known to, or at least assumed by, most that A16Z Crypto had raised its $300M fund mainly from the A16Z existing LP base, which counts many endowments including Yale itself. And same goes for Paradigm, being a fund incubated by Sequoia, which counts Yale as one of its long standing LPs.
“To be able to use a crypto wallet you either need a good dose of Xanax or a master’s degree in computer science or both, unless you want to depend on a central entity"
This was the inspiration that led Ouriel to start and bootstrap KZen, a mobile-first non-custodial crypto custody product than aims not to compromise between security and convenience.
Until this week, when they announced a $4M seed round led by Benson Oak Ventures, with aprticipation from Elron, Samsung NEXT, FJ Labs, Collider VC, and BlockNation, plus some high profile angel investors.
Skale Labs has closed a $10M SAFT led by Multicoin Capital and followed by the usual party round (Galaxy Digital, Aspect Ventures, Blockchange Ventures, Boost.VC, Canaan Venture Partners, Floodgate Fund, Hack.VC, Neo Global Capital and Signia Venture Partners).
Skale is an Ethereum layer 2 scaling solution that will allow dapp developer to run the EVM on a plasma chain, with the ultimate vision of providing L2 scalability solutions as a service across other blockchains.
Here is Multicoin investment thesis (in Kyle's words Skale is "Ethereum's best shot at fending off competition from other smart contract platforms.").
Great to see more funding flowing into the lightning network ecosystem.
The Paris-based team of 3 devs has released the most popular lightning wallet to date (Eclair Wallet) as well as one of the three implementations of the lightning software.
The seed round was led by French VC Serena Capital.
🤡 ICO madness
September 2018 ICO numbers (via Token Data) Another low, with 'only' $180M raised by 16 projects via public and private token sales where amounts could be accurately verified. The aggregate numbers are bound to be conservative, but the trendline is clear.
Top 5: 1/ Alchemy ($46M): Lending and Collateralized Debt Obligation platform 2/ NEX ($21M): DEX for Neo tokens 3/ Ankr Network ($19M): Distributed Cloud Computing 4/ Verasity ($19M): Mobile application platform 5/ Opiria ($16M): Data marketplace
Members of the European Parliament have finally gathered to discuss 'blockchain' and what emerged is that we're probably nowhere near having harmonious regulation across the continent. Not that we were holding our breath.
The views are still pretty widely divided on how emerging tech like blockchain and crypto should be regulated, from fear of losing control, to 'let it bloom before intervening' to regulation is pointless...so for the time being its going to be more status quo by the sound of it.
Get the 🍿🍿out as next Thursday October 11th Nouriel Roubini and Peter Van Valkenburgh and witnessing at the United States Committee on Banking, Housing, and Urban Affairs on “Exploring the Cryptocurrency and Blockchain Ecosystem.”