This weekend I am going with a slideshow instead of a video or audio embed.
Some of my colleagues at USV have been spending a lot of time with regulators, elected officials, and lawyers helping all of these people understand cryptonetworks and why they are super important and need to be regulated with extra care.
One of the issues that many folks get wrong is the role of tokens in these cryptonetworks. For many reasons, not the least of which being the speculative frenzy surrounding cryptotokens, regulators and others simply see tokens as financial instruments and want to regulate them as such.
First a disclosure for all the disclosure enthusiasts who hound me here and on Twitter to disclose things that are well known to most readers in hopes of turning this blog into a legal document: USV is a large investor in Coinbase and I am on the Board of Coinbase.
Ok, now that we have done that part, here’s the news that came out yesterday and I want to talk about today.
To start, the Coinbase Index Fund will only be available to US-resident, accredited investors. Coinbase is actively working on launching more funds which will be available to all investors and cover a broader range of digital assets.
To me, this is all about broadening the appeal of crypto tokens to a wider range of investors than are currently in the market. Making it simple for the average investor to get exposure to this emerging sector is a good thing and I am pleased that Coinbase is broadening its offerings to reach people it is currently not serving.
Crypto tokens seem like an ideal technology/sector for safe harbors. Clearly this sector needs some rules and regulations. But subjecting projects and technologies to these rules too early in their life or subjecting projects and technologies to inappropriate rules and regulations would be devastating.
This is a portion of the post that I like very much.
Decentralization is a commonly misunderstood concept. For example, it is sometimes said that the reason cryptonetwork advocates favor decentralization is to resist government censorship, or because of libertarian political views. These are not the main reasons decentralization is important.
Let’s look at the problems with centralized platforms. Centralized platforms follow a predictable life cycle. When they start out, they do everything they can to recruit users and 3rd-party complements like developers, businesses, and media organizations. They do this to make their services more valuable, as platforms (by definition) are systems with multi-sided network effects. As platforms move up the adoption S-curve, their power over users and 3rd parties steadily grows.
When they hit the top of the S-curve, their relationships with network participants change from positive-sum to zero-sum. The easiest way to continue growing lies in extracting data from users and competing with complements over audiences and profits. Historical examples of this are Microsoft vs Netscape, Google vs Yelp, Facebook vs Zynga, and Twitter vs its 3rd-party clients. Operating systems like iOS and Android have behaved better, although still take a healthy 30% tax, reject apps for seemingly arbitrary reasons, and subsume the functionality of 3rd-party apps at will.
For 3rd parties, this transition from cooperation to competition feels like a bait-and-switch. Over time, the best entrepreneurs, developers, and investors have become wary of building on top of centralized platforms. We now have decades of evidence that doing so will end in disappointment. In addition, users give up privacy, control of their data, and become vulnerable to security breaches. These problems with centralized platforms will likely become even more pronounced in the future.