Posts from blockchain

The End Of Net Neutrality As We Know It

I have written about net neutrality frequently here at AVC. I believe that for as long as we have local monopolies and duopolies for last mile broadband internet in most parts of the US, we need our federal government to actively reign in the broadband providers from doing things that are anti-innovation, anti-consumer, and pro-big business. For much of the last decade, the internet crowd has been a force to be reckoned with on this issue and we fought for and won good net neutrality rules that were put in place and defended in court. If you are a long time reader of AVC, you heard me advocating for and celebrating these wins.

The times have changed. We have a pro-big business team in the White House and at the FCC who are hell-bent to overturn those hard fought for net neutrality rules. We should fight them in these efforts, just like we have fought for these rules at every turn. Here are some things you can do:

But even as we fight for net neutrality, we also should be investing heavily in efforts to reduce our society’s reliance on the big cable and telcos for our broadband internet. That’s the core problem here.

So, in addition to fighting for net neutrality, here is what you should be doing:

  1. Don’t use an ISP who won’t commit to following basic net neutrality rules if you have a choice. Our portfolio company Tucows has a subsidiary called Ting that provides fiber broadband in some parts of the country and they are committed to following basic net neutrality rules no matter what the law says. Use an ISP like that if you can.
  2. Report abusive behavior and business practices by your ISP to the FCC. This will become even more important if the FCC overturns net neutrality.
  3. Join a mesh network or multiple mesh networks. Peer to peer wireless is our best long-term solution to the monopoly/duopoly issue.
  4. Look for blockchain projects that are seeking to solve the mesh networking issue and support them. The token-based incentive business model is a powerful way to bootstrap p2p mesh networks. This piece from 2015 explains that well.

I believe that technology is ultimately a better solution than regulation to market failures like the monopoly/duopoly issue in last mile broadband and I am confident that we will get the technology to solve it soon enough (certainly in my expected lifetime). But until that happens, regulation is a good tool to keep things moving in the right direction. That’s why I have supported net neutrality and will continue to support it until the technology arrives in the mass market to address the underlying problem.

Onename to Blockstack

Our portfolio company Blockstack, which was the subject of a video I posted here last week, started out as Onename.

Onename is a distributed identity system, kind of like Facebook Auth, built on the blockchain.

I wrote about Onename a few times here on AVC back in 2014 and I suspect some of you registered onenames.

If you have a Onename that you like to use on the Internet, you have to import it to Blockstack before November 11th, or you will lose it.

To do that, you have to download and install Blockstack on your computer and then log into the Blockstack browser and import your Onename.

Instructions how to do all of that are here.

I like to use the same userid everywhere. So this sort of thing is important to me.

If it is important to you too, then I suggest you take the time to do all of that in the next week.

Token Summits in SF and NYC

The Token Summit, run by AVC regulars William Mouyagar and Nick Tomaino, announced two more events in the coming months, Dec 5th 2017 in San Francisco and May 17 2018 in New York.

The first Token Summit was held in NYC at NYU last May, and sold out. Here’s a highlight reel from it.

Today, William and Nick have published the agenda for the San Francisco conference, and you can find it here. It is being held at the Mission Bay Conference Center at UCSF, in a hall that will fit 600 people.

Some of USV’s portfolio companies will be presenting, and I am sure William and Nick will have yet another successful event. If you want to learn about where the token economy is going, and network with the entrepreneurs and companies who are leading it, the Token Summit is a great place to do that.

Ledger Nano S

I got my hands on a Ledger Nano S last week and set it up over the weekend.

The Ledger Nano is a “Cryptocurrency Hardware Wallet” which means it is a device you can store your Bitcoin, Ethereum, and other crypto assets on. It costs $95 on Amazon.

It looks like this:

It is about the size of your average thumb drive/USB Stick.

The screen you see in that photo is quite small and the UI that runs on it is pretty bare bones as a result.

There are Chrome Apps that run in your browser and connect to the Ledger and provide the basic wallet functionality that you have gotten used to on Coinbase or some other hosted or software wallet (balance, send, receive, etc).

I was able to set up the Ledger Nano and get it working without too much hassle. The instructions are pretty good. But the security precautions (which are absolutely necessary) are a bit of a pain to deal with and it is not the simplest experience. It doesn’t take a long time to set up, it’s just a process you have to go through.

There is a USB cable that you use to connect to your computer and put the device online. You can then send and receive crypto assets and use the wallet apps to see the activity on the device.

When the device is disconnected and saved somewhere safely, it is offline.

Many crypto purists believe that you must own a hardware wallet and that your assets are not really yours unless you control the keys and the device on which you store your assets. For those who feel that way, the Ledger is a great solution.

I personally am happy to store my crypto assets with our portfolio company Coinbase in the cloud, particularly in their vault offering which provides delayed withdrawal and multi-sig on the account.

But I do understand those who feel that storing your assets on your own device is the right answer.

Where I find value in the Ledger is as a solution to store crypto assets that aren’t supported by Coinbase and/or some other trusted hosted storage provider.

What many people do is store their “alt-coins” on the exchanges that support those coins. That has turned out to be a dicey option as many exchanges have been hacked over the years.

What I advise, and do, is to store these “alt-coins” on a hardware wallet, like the Ledger, and then move them onto an exchange to trade them, and then back off after the trade clears.

The idea is to limit your assets in “hot storage” as much as possible and maximize your assets in “cold storage” as much as possible.

And for that, the Ledger Nano is a great solution.

I Scam Yous

I read a Nathaniel Popper piece in the NY Times today about celebrities endorsing ICOs. It made me want to throw up.

Readers know that I have been and continue to be excited about the emerging blockchain/crypto/token opportunity and I believe it represents the next big wave of innovation in the tech sector, upon which many important companies, products, and technologies will be built. I’ve been saying that since I started blogging about Bitcoin here on AVC in 2011.

I have also written a lot about our portfolio companies that are working in this sector and have even mentioned the tokens that they are issuing. But I have never and will never promote a token offering here at AVC. I believe that these are very risky investments that require a lot of diligence and patience. These are very similar to the kind of seed investments we make at USV. We know that that vast majority of them will not work out and we build a portfolio based on that understanding.

I have also written a lot about the need for diversification and that I expect this sector will come unglued at some point, like the Internet sector did in 2000/2001. If you read Carlota Perez, you will understand that most important technological revolutions have been fueled by rampant speculation that almost always comes undone right as the sector is moving from the installation phase to the deployment phase. That framework is almost certainly playing out again in crypto.

So this ugly speculative phase comes with the territory and always has. But that doesn’t mean I have to like it. I hate it. Most ICOs, like the ones mentioned in Nathaniel’s piece, are scams. And the celebrities and others who promote them on their social media channels in an effort to enrich themselves are behaving badly and possibly violating securities laws.

The worst of it, as Peter VanValkenburgh, the director of research at Coin Center, told Nathaniel is:

It’s undeniable that a celebrity endorsement brings a new audience into the world of crypto currencies. But I’m not certain that celebrity endorsements are doing a good job of bringing attention to the legitimate projects.

I am certain that celebrities are not doing a good job of bringing attention to the legitimate projects. A legitimate project has these characteristics:

  1. A relationship between the amount of money being raised and the complexity of the project.
  2. A very clear use case that requires the decentralization approach brought by blockchain technology.
  3. A reasonable valuation based on the size of the opportunity being pursued.
  4. A credible team.
  5. The technology has been built, at least to a point where it is demonstrable.

We have looked at hundreds of token offerings at USV and have only participated in one token offering to date. We do have five portfolio companies that either have done or will do token offerings so you can add them to the list of tokens we have exposure to. And USV is an investor in a number of token funds like Polychain which I blogged about yesterday. But the point I am trying to make is we have passed on most everything that is going on in this sector. We will keep looking for legitimate projects and we will certainly buy into token offerings. But we are being very careful and I would hope and expect that all of you are too.

When it comes to ICOs, understand that most are scams and that you must be careful to avoid them. As I said in that post I linked to above, the operative term when it comes to ICOs is “Buyer Beware.”

Video Of The Week: Polychain

Late last year, USV funded a new hedge fund called Polychain Capital, which invests only in crypto-assets.

I talked about the reasons for that investment in this blog post.

In the video of the week, Polychain founder Olaf Carlson-Wee talks about his belief in crypto assets and how he developed it.

Blockstack – A New Decentralized Internet

Our portfolio company Blockstack is building a development platform for decentralized applications built on top of the blockchain.

This video explains what they are doing and they just published a whitepaper outlining how their token works to support this application ecosystem.

I think that most people would agree that a more secure Internet with identity that users control built-in from the start is a better approach. But how one bootstraps that kind of Internet has been a challenge. Tokens as incentive systems are likely a solution to the bootstrap problem and it is exciting to me to see how this works.

Crypto Asset Allocation

Coindesk did me a disservice with this blog post:

It made it seem like I was predicting an imminent crash which I was not.

But just as bad, it has led to a lot of tweets like this one suggesting that I also said that people should have 10-20% of their net worth in crypto:

What I did say is that “true believers” in crypto might want to have 10-20% of their net worth in crypto assets. For many of these true believers that would be down from 80-100%.

So, what do I think is a reasonable asset allocation to crypto for the average investor?

Well to start, as I mentioned in that blog post, The Gotham Gal and I have about 5% of our net worth in crypto assets, across a number of vehicles; direct holdings, USV funds, token funds, etc. We have a fairly diversified crypto portfolio, likely much more diversified than most folks could do on their own.

I think that’s likely at the high end of what the average person should have, but I also think its not a ridiculous number for the average person to have.

Many endowments, pension funds, etc allocate 3-5% of their portfolio to venture capital. They know its a risky asset but it has the potential for outsized returns. The largest allocation I have seen to venture capital from a big endowment or pension fund is 10%. So that gives you a sense of what sophisticated investors do with risky asset classes.

If you had to pin me down on a number, here is where I would end up:

  • young, aggressive risk taker – 10% of net worth in crypto
  • sophisticated investor seeking a high performing portfolio – 5% of net worth in crypto
  • average investor, slightly conservative, but with some appetite for risk – 3% of net worth in crypto
  • retiree seeking to preserve portfolio value and generate income – 0% of net worth in crypto

Hopefully this will set the record straight. It makes me very nervous when I see folks tweeting out “advice” that I did not give.