Posts from hacking finance

The Blockchain Market Map

Four hours ago I left my house for the airport and was planning to blog on the flight to SF this morning. But things got in the way of that. First the pilot didn’t show. Then when he did the computer systems went down at LAX grounding all Delta flights to SF. We called an audible, booked a ticket on an American Eagle flight, and hustled to another terminal, through security, onto a shuttle bus, and finally just in time onto our flight. There’s no wifi on this plane and all the delays mean my day in SF has been compressed and will be crazy as soon as I land. 

So no time for a blog post today. 

In lieu of that, here’s a graphic from William’s excellent work to create a “market map” of the blockchain ecosystem:

Click here to read his post which goes on to list all the companies active in all of these sectors.

Feature Friday: Accept Bitcoin With Stripe

Stripe has had this in beta for quite a while but yesterday they launched it and now any merchant who is using Stripe can accept Bitcoins in the regular Stripe checkout flow.

Here’s the details on how it works and there’s a nice interactive demo on this page.

If you are using Stripe to handle your checkouts, just add a few things to your Stripe code and you are good to go.

It’s things like this, making it drop dead simple for merchants to accept Bitcoin, that will help drive adoption of Bitcoin payments in the coming years.

And accepting payment with Bitcoin via Stripe costs a merchant 0.5% vs the customary 3%. For low margin products, this is real money. I expect merchants will start incenting customers to pay with Bitcoin in certain product sectors.

I’m going to go find some Stripe merchants that are accepting Bitcoin and try out the checkout flow. It looks really smooth and clean, like everything Stripe puts out.

Can Mobile Banking Improve The Lives Of The Poor?

It feels to me like mobile banking is arriving. Whether its M-PESA in Kenya, Venmo in the US, or Bitcoin around the world, more and more people are using mobile services connected to the cloud to store and exchange money with other people and businesses.

And one of the big potential impacts of this trend is on the unbanked, those people who traditional banks won’t service.

The Verge’s Ben Popper and Bill Gates wrote a piece in The Verge this past week about the potential of mobile money to improve the lives of the poor. It’s a good read.

Bill Gates wrote this in his annual letter:

By 2030, 2 billion people who don’t have a bank account today will be storing money and making payments with their phones. And by then, mobile money providers will be offering the full range of financial services, from interest-bearing savings accounts to credit to insurance.

That’s 15 years from now, a long time for sure, but the part of that prediction that is the most important is the “don’t have a bank account today” part. That’s a huge number of people who will have the basic infrastructure in place to allow them to consume other financial services. That feels like a massive market opportunity to me. And it feels like a massive life improvement opportunity to me too. Doing well by doing good. There isn’t much better than that.

Feature Friday: Digital Money Accounting

So this is a different kind of feature friday. It is about a feature I want but don’t have.

Digital money is coming and it is coming pretty fast now. In the developing world we see mpesa taking off in many countries. In some places, like Kenya, it has become the dominant way people conduct their financial lives.

In the US, among the young adult crowd, Venmo is hugely popular. My kids use it for much of their financial lives. The Gotham Gal and I rent a property we own to some young adults and they all pay us rent on Venmo. We, in turn, pay the super we use in the building on Venmo.

And then there is bitcoin. I’m running around with the Coinbase bitcoin wallet on my phone and sending money (dollars or bitcoins) around using the bitcoin protocol.

The problem is these digital money services are a “black hole” when it comes to accounting for all the transactions. I know that I put $500 into my Venmo account last month and I know its all gone. But where did it all go. How much came in and why? And how much went out and why?

I want for digital money services, starting with the Venmo and Coinbase mobile apps. That would be super helpful for me and, I suspect, for everyone using these digital money services.

I bet it exists or that it is being built. I just haven’t see it yet. And I want it. Badly.

The Tell Of The Proprietary First Movers

I spent some time today on the new We launched it on New Year’s Day and then pushed another rev of it last week. It’s pretty damn good, if I must say so myself.

Anyway, I read two posts back to back. Joi Ito’s post comparing the early days of the Internet to the early days of the Blockchain. And William and David Cohen’s post on The Trust Web.

Joi makes the point that interoperable email was the first killer app of the Internet and that Bitcoin is likely to the be the first killer app for the Blockchain. He talks about how we were able to send email on the proprietary online services like Compuserve, Prodigy, and AOL, but only to other users of those services. And then these services implemented connections to Internet email and all of a sudden we could talk to anyone. I remember that moment vividly. It was one of the many “aha moments” that I had in the mid 90s that led me to leave Euclid and start Flatiron with Jerry. I could see that something important was afoot and I needed to get in on it.

William and David talk in their post about SMS based banking and payment services in the developing world:

To peer into the future of decentralized banking for the masses, look no further than the success of easypaisa in Pakistan and M-Pesa in Kenya

It seems to me that easypaisa and M-Pesa are the equivalents to Compuserve, Prodigy, and AOL. They are the proprietary closed networks that deliver on much of the value of Bitcoin but are not open and interconnected to everything else. Their very existence, however, is the tell that we are on the cusp of something similar that is open, global, and interconnected. I know that people are working to connect easypaisa and M-Pesa to Bitcoin and the Blockchain. That’s an obvious but important step to get to “decentralized banking for the masses” as William and David call it.

As Mark Twain supposedly said, “history doesn’t repeat itself, but it does rhyme.” I’m banking on that to be true.

Feature Friday: US Dollar Wallet

My colleague Joel told me he doesn’t own any bitcoin right now. Instead he has a “USD Wallet” on Coinbase and when he needs to spend or send bitcoin, he just does that out of his USD wallet.

So I decided to set one up myself. I now have three accounts on Coinbase. A bitcoin denominated wallet, a USD denominated wallet, and the vault where I keep most of my bitcoin (I don’t own much, around 30 bitcoin in total).

The recent slump in price for Bitcoin revives the issue for many of the price volatility of owning bitcoin. Some want that. They are speculators who think the price of Bitcoin will increase substantially as the technology is broadly adopted. That may well happen. But others, like me, hold bitcoin so that I can use to it spend money and send money. For them, having their bitcoin denominated in dollars makes a lot of sense. Joel is one of those people. I could become one, but for now I’m happy to do it both ways.

Coinbase has had a USD wallet since October 2014, but it has not been available in many states as a result of regulatory issues. Coinbase recently added New York State customers to the USD wallet which is why I was able to add it to my account.

If you own a lot of bitcoin and are concerned about price volatility, you might consider putting it in a dollar denominated account on Coinbase. You can still do everything with your bitcoin you want to do, but you can now do it in dollars. If you have stayed away from bitcoin because of the price issues, you now have a way to “pay with bitcoin” without taking price risk.

If you want to try it you visit your account or set up an account at Coinbase.

The State Of Bitcoin – January 2015

This is a slideshare from Coindesk:

I think this slidedeck shows that 2014 was a tough year for bitcoin, something I mentioned in look back and look forward posts. This year has started off poorly with problems at Bitstamp and the price breaking below $300, probably in relation to the Bitstamp issues.

It’s tough times for the bitcoin sector but venture capitalists continue to make investments and transaction volumes continue to rise. I believe we are witnessing a transition from one phase (monetary and speculation driven) to another phase (new applications and bitcoin as a platform) and there will be a shakeout as the transition happens. I think we are well into that shakeout.

More On The Coin Center

Last September, I blogged about a new policy organization called the Coin Center that had been formed and that USV was supporting financially along with a number of other entrepreneurs and investors. At the time, the Coin Center had only one employee and there wasn’t much information about them on their website.

In the roughly three months since that blog post, the Coin Center has already established itself in Washington DC as a credible and trusted source of information and education on bitcoin and blockchain issues and has also built a real organization that can deliver on all of that.

Today, the Coin Center has launched a fully functioning website that explains in detail what they do, has educational resources on it, introduces the staff and board, and of course, allows anyone to support it.

If you are active in the bitcoin and blockchain space or care about how it evolves and how policy makers and elected officials think about it, you should be aware of the Coin Center and consider supporting it.

Broken Cap Tables

A “cap table” is a schedule of all the shares outstanding for a specific company. Here’s an MBA Mondays post I wrote back in 2011 on the subject of cap tables. If you want to know how much of a company you own, a cap table is the best way to figure that out.

Cap tables are almost always prepared and kept in spreadsheets, usually excel, but also increasingly google sheets. And, it turns out, they are often wrong.

Henry Ward is the founder and CEO of a company that is aiming to fix that called eShares. Last month USV led a Series A round in eShares and my partner John Buttrick wrote a bit about that investment today on the USV blog.

The reason I tell you this is that yesterday Henry wrote a great post about broken cap tables that everyone in the startup world should read. Here are the four big takeaway’s from Henry’s post:

  1. Most cap tables are wrong
  2. Most investors don’t track their shares
  3. Note holders are often forgotten
  4. Employees suffer most

How does Henry know this? Well part of eShares’ business is converting cap tables from spreadsheets into their cloud based application and reconciling everything to make sure it is correct. They onboard about 100 companies a month right now and they see a ton of cap tables.

Tracking everyone’s ownership in companies is a perfect application for a cloud-based network of owners and issuers. If every company used a platform like eShares, and if all these platforms talked to each other, if there was a common identity standard, then as you move from one company to another over your career, collecting equity along the way, you could access and manage all of your ownership interests in a single dashboard.

This is a service that is incredibly useful to startups and angel investors and VCs. But as Henry outlines at the end of his post, it will ultimately help employees the most. And, as we have discussed here before, employee equity is certainly more broken than cap tables are. Fixing that is a worthy mission for a startup and that is what Henry and his team intend to do.

Tipping Tuesday

One of the most promising use cases for Bitcoin is micropayments. And one of the most promising use cases for micropayments is funding content. There are two primary ideas for how to do this with micropayments.

1) A paywall that requires a tiny micropayment to read something (like a penny or less).

2) A tip mechanism. Think of a facebook like or a twitter star with money attached.

We are testing out the latter on AVC starting today. Our portfolio company Coinbase launched a tip button today.

You will notice a tip icon at the bottom of this post (and every post at AVC). If you click on that tip icon, you will see this dialog box:

coinbase popup

For those that don’t know, CSNYC is a non-profit I helped to start that is bringing computer science education to the NYC public school system. They will be the beneficiary of all tipping here at AVC.

300 “bits” is 0.0003 bitcoin, or roughy 10 cents. If you are logged into Coinbase on the web or on your phone, you will see the option to use Coinbase wallet to send the money. If you are not, you can type in a bitcoin wallet address and send the money. If you enable one click tip, you will send 300 bits every time you click on the tip button. You can also do this on William’s blog.

Since not all AVC readers have Coinbase wallets or own Bitcoin, we are doing a Bitcoin giveaway today on AVC to jumpstart the bitcoin tipping thing. We will give away $10 in bitcoin to the first 200 people to raise their hands, virtually, for this giveaway.

Here’s how the AVC Bitcoin Giveaway works:

2.) Receive an email back from Coinbase to “claim $10 worth of free bitcoin”
3.) Create a Coinbase account with that link
4.) Receive funds

Please don’t send that email if you don’t think you will go through this entire flow as you’ll be taking one of the 200 spots.

I think that’s all there is to say about this right now. Let’s see how this goes. Should be an interesting experiment. Here are some other blogs you can tip at today: