Posts from hacking finance

Video Of The Week: The NYS DFS Bitcoin Hearings

I don’t know who is going to watch all of these panels. There were five in total. I am not sure who is going to watch this video of our panel in its entirety. However, there are a number of fascinating issues raised in this discussion. From the role of regulation in the innovation economy, to the (I think false) choice between stopping bad actors and freedom to innovate, to the way a new technology comes to market. If you have two hours this weekend, you might want to put this on your TV and let it roll.

We were panel number one. I have watched parts of all five panels. I have included links to all of them below.

Here is the second panel (alternative virtual currencies, including the developer of Litecoin).

Here is the third panel (law enforcement)

Here is the fourth panel (entrepreneurs)

Here is the fifth panel (academics)

Reactions to these hearings have been all over the map. William sent me this video reaction from Andreas Antonopoulos which is worth watching if you still have time after (or instead of) watching eight hours of testimony.

Bitcoin Tuesday

There are at least three Bitcoin events that I know of in NYC today. I do not think any of them are public events but the fact that there are three in a single day is interesting to me.

This morning, NYC’s Economic Development Corporation is hosting a Bitcoin breakfast with some of the leading banks and financial services companies in NYC to discuss Bitcoin. My partner Albert will be attending that.

Also in lower manhattan, Ben Lawsky, New York State’s Superintendant of Financial Services, will be holding hearings about Bitcoin.  I have been asked to testify and will do so, at 11:30 along with Barry SilbertJeremy Liew, and maybe a couple others, in a panel of investors.

Then at 6pm this evening, in the USV event space, Wells Fargo is hosting a discussion about Bitcoin. My partner Albert will be part of the expert panel. I plan to attend the first part and then duck out to see the Knicks play the Celtics in the battle for the cellar in the east. This is a public event, but it has been sold out for weeks and if you are not already attending, unfortunately you can’t.

It certainly feels like there is a whirlwind of attention and discussion and debate about Bitcoin in the air in New York City. Last week Marc Andreessen penned a piece in the New York Times titled “Why Bitcoin Matters.” Later in the week, JP Morgan’s CEOdismissed Bitcoin on CNBC. And over the weekend, well known NYC Bitcoin entrepreneur Charlie Shrem, shown in this AVC post from this summer, was arrested for knowingly transacting in Bitcoin with drug dealers (or something close to that, the complaint is here).

So there is a lot going on at the intersection of the Bitcoin world and the world of finance and money and regulators right now. I am happy that USV is engaged and involved in these discussions. They are important and necessary.

Bitcoin – Getting Past Store Of Value and Currency

Lightspeed India has a post with ten predictions for Bitcoin in 2014. It’s a good read and I agree with many of them. But prediction number 7 is the one I am most interested in right now:

7. The use of Bitcoin will evolve beyond ‘store of value’ or ‘transactions’

The underlying Bitcoin protocol makes itself applicable beyond the use cases of ‘store of value’ and ‘payments’. The Bitcoin foundation took a huge step in allowing meta data to be included in the blockchain. This will unlock a lot of innovation and maybe even prompt regulators to acknowledge the potential of Bitcoin, making it all the more difficult for them to shut it down or suppress it. As one can see from the current Bitcoin ecosystem map (http://bit.ly/1krEd0Z) that there are almost no start-ups, which solely use the protocol without using the ‘coin’ or the ‘currency’ as a function. 2014 will be the first year to see some of these.

I think there have been three phases to Bitcoin so far

1) Bitcoin emerges, community develops, mining, wallets

2) Bitcoin vice, silk road, etc

3) Speculation, trading, collecting, price spike

I think the next two phases will be/need to be

4) Commerce – real people buying real stuff with Bitcoin

5) Bitcoin as infrastructure – this is what prediction number 7 is all about. When will we see entrepreneurs coming to USV to talk about the marketplace for XYZ that they build on top of the Bitcoin architecture?

Soon I hope. I would like it to happen today actually.

A Web Service For Qualified and Accredited Investors

I just finished filling out a sixteen page questionnaire for an investment the Gotham Gal and I are making. I fill out this identical form about once or twice a month for various investments we make. Each time I get the form, I find a version I filled out previously in my archived email and copy the answers line by line. It’s complicated and I want to make sure I answer the questions correctly.

This form is created by lawyers to make sure that we are qualified and/or accredited investors. They also use this form to verify our tax and regulatory and compliance status. If you make an investment in a venture fund, a hedge fund, a private equity fund or a private placement, you will probably fill out a similar or indentical form.

Here’s the thing. I am literally answering the exact same questions again and again. I take great pains to make sure I answer them the same way each time. And it is a chore. I hate doing it.

Though the size of the accredited/qualified investor market may be small, I really don’t understand why there isn’t a web service where I can go, fill this form out once, and then certify that the answers are correct, and then simply auth with this service each time we make an additional investment.

If such a service exists, please point me to it and I will recommend it to the lawyers who handle these sorts of transactions.

USV requires our investors to fill out these same forms. When we close our next fund, we are going to hack together a web based system in partnership with our portfolio company CircleUp. But this isn’t really CircleUp’s business and they are doing this as a favor to us and our investors.

What we really need is a third party to offer this service to all accredited and qualified investors and we need the market to adopt it. It would make me and many others very happy to stop filling out these forms.

The Smartphone As A Wallet

Last night the Gotham Gal and I went out with a bunch of friends. We met at a restaurant on the upper east side that had recently opened. It was snowing pretty heavily all day yesterday and we were worried about getting a cab on the street. So as we were getting ready to leave, I hailed a cab on my smartphone so that it would pull up in front of our apartment building. The car came more quickly than I thought it would and we scrambled out of the apartment and got in the car and headed uptown.

When we arrived at the restaurant, I realized that I had left my wallet in the apartment. Because the cab was paid for on my phone, the driver had been paid and tipped. But I was concerned about paying for dinner. So I told the Gotham Gal that she would have to pay for dinner. And then she told me that she too had walked out without her wallet.

Fortunately we were having dinner with friends and I asked one of them to pay for our share of the dinner, which he was happy to do. When the check came, I asked him how much our share was, he told me, and I pulled out my phone, opened my Coinbase app, and sent him a fraction of a Bitcoin to cover our part.

I then hailed a cab to get us back home and when we walked out of the restaurant the car was out front waiting for us. We got in, went home, and walked the dog and went to bed.

We paid for every part of the evening on my smartphone. Had we been going out solo last night the Bitcoin bit would not likely have been possible. But my gut says that will change pretty quickly. We are not the only people getting used to paying for things on our phone and doing it frequently. The experience we had last night seems likely to be normal and customary in a few years time. And I can say that it is a convenient and pleasant and I am excited to see it coming.

A Note About Bitcoin

Yesterday I received an email from a reader who wanted to know why I was hyping my position in Bitcoin. It's a fair question and one that I feel like responding to publicly as well as privately.

USV does not own any Bitcoin. I don't know for sure, but I suspect my partners own very little, if any Bitcoin. I own a total of 7.39 Bitcoin spread between several hosts.

I own these Bitcoin to be able to use them when I want to try new things. I have purchased approximatly 175 Bitcoin over the years and have spent or given away almost all of it.

I don't have a view on what the ultimate value of a Bitcoin will be nor do I care. I am interested in Bitcoin plain and simply because I believe it can be and possibly will be the financial and transactional protocol for the global Internet. That's where my interest lies and that is where my positions will lie. We have one so far, which is Coinbase, and I hope and expect we will make other Bitcoin related investments.

My partner Albert's post on Bitcoin lays out where we are looking to make investments in this sector. Buying and speculating on Bitcoin is not one of them.

Buying Your Holiday Gifts With Bitcoin

Everyone focuses on the price of Bitcoin these days and it is no wonder why. But for Bitcoin to be anything more than a store of value, we need to see a transactional ecosystem develop. When the citizens of the world will be able to buy and sell from each other and from retailers of all shapes and sizes via Bitcoin, then we will have truly realized the potential of a global digital currency.

Furthermore, transactions can help stabilize what is a very volatile currency today. There is an imbalance of supply and demand right now. If there was as much transactional activity as there is speculative activity, there would be more supply of Bitcoins in the market (as retailers who recieve them turn them into their local currencies).

So everyone who wants to see Bitcoin succeed should want to see transactional activity rise and the sooner the better. This holiday season is a great time to make that happen. We have been involved in a campaign called Bitcoin Black Friday to encourage buyers and sellers to transact in Bitcoin this holiday season.

If you have products to sell and you accept Bitcoin go here and sign up.

If you want to buy your holiday gifts this year with Bitcoin, go here and sign up.

The idea is very simple. Sellers list their products and buyers get alerted when the deals go live and big retailers sign up. I plan to do my holiday shopping with Bitcoin. I hope you all will join me.

Fintech Innovation Lab 2014

I have written about the Fintech Innovation Lab here before. It's one of the first vertical accelerator programs that have cropped up in NYC and its one of the best. They take a handful of promising fintech companies each year and give them introductions to the top execs at the leading financial services companies in NYC.

If you are running a fintech startup and feel like you could use some mentoring, visibility with investors, and above all, some intros to potential customers, you should think about applying.

The application deadline is in three weeks, December 6th. Details and the application page are here.

Video Of The Week: Ben Milne on TWIST

I found this video in my YouTube suggested video feed. It's a Jason Calacanis interview of Ben Milne, the founder of our portfolio company Dwolla. It's a good discussion of why the credit card system is very expensive and why we need something better. Dwolla is trying to create something better.

Video Of The Week: Bitcoin Under The Hood

Bitcoin was in the news this week and once again the association wasn’t all that positive. As I have said publicly, privately, and on this blog numerous times, I think so much of the discussion of Bitcoin misses the big point, which is that at its core, Bitcoin is a technology, protocol, and platform for entrepreneurial innovation.

Bitcoin is simply a transactional commerce layer for the global Internet. And once you wrap your head around that, the opportunities for innovation on top of Bitcoin turns out to be enormous.

But how does it work? Well, its not simple to understand. I think this video does a good job of explaining it.