Posts from blockchain

Video Of The Week: A Crypto Economy

AVC community member William Mougayar traveled to Amsterdam a couple weeks ago, along with some USV folks, to attend SteemFest. He delivered this talk in which he sketches out a vision of an economy powered by blockchain technology. It’s a fairly concise but expansive vision of what is possible to build with open public blockchains.

Proof Of Stake

There is a lot of cutting edge computer science being used in blockchain technology and, because there are multiple blockchains and protocols being proposed and tested, there are various experiments going on at the same time. This is all very good in my view. We will eventually figure out which technologies are best for which applications and standards will emerge. I think we are three to five years away from that level of market stability, and possibly farther away than that.

One of the most interesting questions to me is whether we can figure out how to implement a proof of stake consensus mechanism in a large decentralized trustless public blockchain (ie Bitcoin, Ethereum, etc). The current consensus mechanism of choice is called proof of work and the specific proof of work implementation that is being used by most public blockchains is mining. Mining has a number of issues, most notably the massive amount of electricity consumed by miners to run these mining data centers. Other concerns with mining are centralization (a few large miners control most of the Bitcoin mining infrastructure) and exposure to 51% attacks (if one miner controls 51% of the network, they control the entire network).

Proof of stake is an alternative to proof of work and there is a lot of work being done to see if it can be implemented in a large public blockchain. The leaders of the Ethereum project have publicly stated a willingness to try to implement proof of stake on Ethereum and they are working toward that goal.

In a proof of stake system, you use the very coins/tokens that are at the heart of these systems as the “proof” that you can validate a transaction. Instead of using your capital to buy computers and electricity to run them, you just use your capital to acquire the coins/tokens and they allow you to validate transactions. This is all very simplistic, of course, but that is the heart of the idea.

I read the Proof of Stake FAQ on the Ethereum Wiki this morning. It’s an interesting (and dense) discussion of the various issues that crop up in a proof of stake approach and the algorithms and techniques that are being put forward to resolve these issues. If you are interested in blockchain technology and want to understand how all of this stuff works under the hood, you might do the same and give it a read.

I am hopeful that we will see a large public project, like Ethereum, attempt to implement a proof of stake consensus algorithm in the next year or two. Mining works. It has validated blockchain technology and allowed it to be commercialized. But my gut tells me that mining is not the best consensus system out there and that we can do better. And so we should see if we can. That’s what forward progress is all about.

Voting On The Blockchain

Blockchains are good at many things that require security, accountability, and rules.

Voting is one of those things.

I don’t expect that we will see Presidential Elections on the blockchain any time soon. Though it could happen in my lifetime.

I do expect that we will see voting happening on blockchains for organizations and efforts that are getting started now and want to do their governance in a modern way.

There is even a project called Tezos which is a blockchain with governance (ie voting) built right into the core protocol.

Imagine if every voter was issued a token/coin and every candidate/issue to be voted on was issued a wallet. Voters send their coins to whatever wallet they want to vote for. And there you have it, a secure, accountable system for voting on a blockchain.

I haven’t placed a vote on a blockchain yet, but it’s so simple to do that I expect I will be doing it frequently soon enough.

What Are App Coins?

Last week Coin Center published a primer on app coins. It is very good.

I particularly like this part:

Open platforms have proved difficult to create because it has been historically difficult to monetize them even if they become successful—by nature they are public goods. Now, however, the developers of a cloud storage service can incorporate a scarce access-token, an appcoin, into the design, distribute that token to users, retain some amount of the token for themselves, and if the platform proves popular, the token (alongside the holdings of the developers) will grow in value and remunerate the developers for providing a public good. This new model challenges the concept of equity as traditionally understood, and carries entirely different risks and rewards.

The idea that we now have a monetization model for creating and maintaining a public good (ie Twitter) is something that makes me incredibly happy and poses all sorts of interesting questions about the future of venture capital.

A New UI For Coinbase

For those of you who buy and sell and hold Bitcoin and Ethereum at our portfolio company Coinbase, there is an entirely new redesigned UI for you at beta.coinbase.com. It will be rolled out to all of the users in the next couple weeks.

Here’s screenshot of what the new dashboard looks like:

The redesign was driven by the move from a Bitcoin only service to one that supports multiple digital assets. Today that means Bitcoin and Ethereum but over time it will likely mean many more digital assets. Literally a coin base.

Fortune did a nice writeup on the new UI (which is where I got that screenshot) and also talked about the evolution and growth at Coinbase in the past year.

It is nice to see an awakening in the media to the changes afoot in the blockchain sector. Coinbase has been riding those changes and has seen strong revenue and customer growth over the last year as a result. As more and more people buy and hold digital assets, they are going to need a trusted, safe, and compliant place to buy them, sell them, and hold them. Coinbase continues to be the best place to do all three of those things.

Video Of The Week: Private vs Public Blockchains

This is episode 6 of Trust Disrupted, which I blogged about earlier this week. It features many of my arguments in favor of public blockchains and also plenty of the counter arguments.

I have no idea why I am holding my head at such a crazy angle in much of this. It hurts just to watch it 🙂

Trading R&D

I read this post this morning on why this fintech analyst and investor is “short ethereum”.

The pro-bitcoin and anti-ethereum arguments are interesting and worth digesting if you are into the blockchain sector as I am.

But more interesting to me is that we are talking about some fairly cutting edge computer science here. Ethereum is still very much a work in progress. A computer science experiment. And a very ambitious one too.

And yet they are tradeable, like stocks, bonds, currencies, etc. You can short them or put on a hedged trade (long BTC/short ETH).

Biotech has long been like this. There are publicly traded biotech companies that are doing cutting edge science and you can place bets on wether these experimental projects will succeed in developing some new medical miracle, or not.

But “tech” has not really been like that. You had to be an angel or early stage investor to make these sorts of bets in the software sector.

Not any more. You can buy and sell alt-coins, token, ICOs, or whatever else you want to call these digital assets.

It is fascinating to see this happening and think about where it might go.

Trust Disrupted

Techcrunch has created a six part mini series about bitcoin and the blockchain called Trust Disrupted. They will release one episode each day this week.

Here is the first episode:

Blockchain Nation States

I went on a walk through the Chelsea Art Gallery district yesterday afternoon. One of the galleries I visited was the Petzel Gallery and they have a show up by the New Zealand artist Simon Denny. The show is called Blockchain Future States and it compares Blockchain efforts like Ethereum and Digital Asset Holdings to the board game Risk.

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Given the comparison to Risk, I thought the name Blockchain Nation States would be more appropriate for the show.

As I was walking out of the gallery, I saw a tweetstorm come through on my phone from Naval Ravikant. It’s a good one, talking about how open protocols are going to change a lot of things.

But given the context of what I had just seen, this one particularly got my attention and I replied to it.

I agree with Naval that open protocols and the blockchains that underly them will be the driver of the next big wave of technology and that they will force big changes that will ultimately impact the global economy. That’s a big statement and I don’t make it casually. I do believe this.

The questions in my mind about this are when it will happen, which blockchains and protocols will emerge as the most important and valuable, and which nation states will embrace this and which nation states will not.

Sitting here in the US, I think the US is not likely to be one of the winners in this next big technological wave because our government and institutions are captured by the incumbent economic system and companies that define it. So many of the blockchain companies we invest in are forced to seriously consider leaving the US or get bypassed by companies and technologies that are being developed more freely outside of the US.

So what nation states are playing this game (of Risk?) better? That was the question I asked in my tweet reply and I got a lot of replies. Here are some of the top suggestions:

  • China (2)
  • Hong Kong (2)
  • Canada (2)
  • UK
  • Japan (2)
  • Estonia
  • Georgia
  • Singapore
  • Switzerland
  • Rwanda
  • Zimbabwe
  • Barbados

It is revealing that the big conferences where entrepreneurs, developers, and computer scientists gather to discuss the latest in blockchain technology are not often in the US. Last week, many in the blockchain world, including two people on our team, were in Shanghai to discuss the latest developments around the Ethereum blockchain. It does seem like China and its environs are emerging as an important center of gravity for blockchain technology.

It is not too late for the regulators in the US to change their tune and become more open to these new technologies and the capabilities of them. But, like the game of Risk, large pools of talent are being built on other continents and countries now and eventually they will be unbeatable.