Video Of The Week: My Talk On Bitcoin, Crowdfunding, and Charitable Giving
I gave this talk at NYU last week. It’s about three things I am spending a lot of time on and thinking a lot about these days.
The talk is about 30mins long and the Q&A goes on for about as long after the talk.
Comments (Archived):
Interesting talk and thoughts. I am headed to the North American Bitcoin Conf in Chicago today to learn more and more. What is the one thing you would concentrate on at a conference?On the velocity of the money, liquidity will help-but somehow there has to be a way to transfer risk of holding because Bitcoin can’t be in constant motion. I can’t help but think an app built on the blockchain will be developed to do that.There is a compelling case for charities. It seems to be a chicken and egg problem right now. Similar to email. “Hey, I have an email account”; but if only 100 people have email accounts it’s not worth too much. There are a few hurdles to get over before network effects take over.One contrarian thought I had-what if credit card companies and banks drop the cost of their fees in a competitive response to Bitcoin? How would the opportunity costs for charities/businesses/people change and affect adoption?Great talk outlining the basics, and thought provoking in the Q+A.
I agree, a good talk.I think of this from the charitable side first, bitcoin last.The hole that crowdsourcing could fix in charitable giving is the connection.I like to be connected to the result so doing things like buying a well in Africa, supporting a child, supporting a building for homeless blind cat rescue orgs appeal to me cause I personally cause results.I would like to be involved in larger changes but the avenues that let me give and feel that connection are hard to find.If crowdsourcing maybe with BC can address this community aspect, I’m a convert.
Does Kiva do it well enough? Toms?What orgs do you think do a particularly good job w/ the connection?
Besides Donors Choose, I do all my donations individually, which is silly of course and limiting to what I can impact.I will check out the ones you mention.
and.. Charitywater? Pencils of Promise?I read the book by Pencils of Promise founder recently. A great story. They seem to do a great job of making a connection w/ storytelling.
Good list.
Meet people…Anyone involved in Bitcoin is kind of friendly.
That would be a wonderful thing. But they have built up a cost structure that will make it hard for them to take the fees where they would need to go to compete with bitcoin[image: Disqus] <http: disqus.com=””/> Settings <http: disqus.com=”” dashboard=”” #notifications=””> <http: disqus.com=”” dashboard=””/>A new comment was posted on A VC: musings of a VC in NYC <http: redirect.disqus.com=”” url?impression=”b9cdd89a-0f47-11e4-a9e2-003048df93b0&forum=24&thread=2856104948&url=http%3A%2F%2Favc.com%2F2014%2F07%2Fvideo-of-the-week-my-talk-on-bitcoin-crowdfunding-and-charitable-giving%2F%23comment-1492846764%3AzGtekRCUhXRZXjdcLkohqXBVrZA&variant=control&experiment=default&behavior=click&post=1492846764&type=notification.post.moderator&event=email”> —————————— <http: redirect.disqus.com=”” url?impression=”b9cdd89a-0f47-11e4-a9e2-003048df93b0&forum=24&thread=2856104948&url=http%3A%2F%2Fdisqus.com%2Fpointsnfigures%2F%3A3BtIUq5uAXWdBvC6z_yd664W2v0&variant=control&experiment=default&behavior=click&post=1492846764&type=notification.post.moderator&event=email”> *pointsnfigures* <http: redirect.disqus.com=”” url?impression=”b9cdd89a-0f47-11e4-a9e2-003048df93b0&forum=24&thread=2856104948&url=http%3A%2F%2Fdisqus.com%2Fpointsnfigures%2F%3A3BtIUq5uAXWdBvC6z_yd664W2v0&variant=control&experiment=default&behavior=click&post=1492846764&type=notification.post.moderator&event=email”> Interesting talk and thoughts. I am headed to the North American Bitcoin Conf in Chicago today to learn more and more. What is the one thing you would concentrate on at a conference?On the velocity of the money, liquidity will help-but somehow there has to be a way to transfer risk of holding because Bitcoin can’t be in constant motion. I can’t help but think an app built on the blockchain will be developed to do that.There is a compelling case for charities. It seems to be a chicken and egg problem right now. Similar to email. “Hey, I have an email account”; but if only 100 people have email accounts it’s not worth too much. There are a few hurdles to get over before network effects take over.One contrarian thought I had-what if credit card companies and banks drop the cost of their fees in a competitive response to Bitcoin? How would the opportunity costs for charities/businesses/people change and affect adoption?Great talk outlining the basics, and thought provoking in the Q+A.9:22 a.m., Saturday July 19* Reply to pointsnfigures * <http: redirect.disqus.com=”” url?impression=”b9cdd89a-0f47-11e4-a9e2-003048df93b0&forum=24&thread=2856104948&url=http%3A%2F%2Favc.com%2F2014%2F07%2Fvideo-of-the-week-my-talk-on-bitcoin-crowdfunding-and-charitable-giving%2F%23comment-1492846764%3AzGtekRCUhXRZXjdcLkohqXBVrZA&variant=control&experiment=default&behavior=click&post=1492846764&type=notification.post.moderator&event=email”> Moderate this comment by emailEmail address: *[email protected]* <[email protected]> | IP address: 108.160.195.165Reply to this email with “Delete”, “Approve”, or “Spam”, or moderate from the *Disqus moderation panel* <https: avc.disqus.com=”” admin=”” moderate=””/>. ——————————You’re receiving this message because you’re signed up to receive notifications about activity on threads authored by fredwilson.You can unsubscribe <http: disqus.com=”” account=”” #notifications=””> from emails about activity on threads authored by fredwilson by replying to this email with “unsubscribe” or reduce the rate with which these emails are sent by adjusting your notification settings <http: disqus.com=”” dashboard=”” #notifications=””>.[image: Disqus] <http: disqus.com=”” dashboard=””/>
This is absolute truth. Living in Delaware land of the credit card, the reason their fees are so “high” is that it costs them that much. That is what I respect about Dwolla not using their infrastructure. There are other companies that use their infrastructure but then just use their VC’s money to make up the difference. That is not sustainable.
Otoh, (and keeping in mind my other comment about this) they could always come up with a completely new product that is separate from the main product to compete. Similar to how major manufacturers sometimes do private label products that are sold in, say, drugstores next to their own brands. They don’t lower the price of their brands. Or the way Whirlpool does (or used to I don’t know if they still do) make washing machines branded as “Kenmore” (Sears).
There are a few hurdles to get over before network effects take over.And has to be done quickly. If it doesn’t happen quickly [1] it will no longer be viewed as important. This is totally a strike while the iron is hot opportunity to get as many large profile places to accept bitcoin as possible. With as much media attention as possible. Along those lines NYC would have been amuch better place to hold a conference than Chicago… As well as major vendors, at all costs, who will publicize that they accept bitcoin. Free advertising.One contrarian thought I had-what if credit card companies and banks drop the cost of their fees in a competitive response to Bitcoin?Almost impossible to believe they will do that before it becomes a threat (or even after actually) there is to much revenue to lose from existing accounts. Amazon does this (with AWS) of course but they are in the business of loosing money.Otoh might they selectively do this if they are faced with a charity that says “we can lower our costs with bitcoin can we negotiate a lower rate with you?”. That’s possible but I don’t think that poses a major threat.I think bitcoin has a short window of opportunity to get some critical mass which ends up being self sustaining. Getting big players onboard is key. Walmart did much to get barcodes adopted by requiring all their vendors to use them (I ended up making a tiny amount of money off of this fact). QR codes of course never took off and are kind of niche at best. The cuecat is dead.[1] I don’t know that I can actually define “quickly” in terms of an actual time period. But I know it when I see it. (I remember when fax machines came out and they completely blew to pieces Fedex’s offering faxing.[2] I remember customers getting fax machines and cheering about it it solved a huge problem in terms of information transfer.)[2] http://en.wikipedia.org/wik…
.One of the big things with credit companies is they absorb enormous fraud costs. I have read as much as $190B and find that number to be staggering.The credit card companies absorb fraud costs even when all that is done is the otherwise rightful use of their credit card.Anyone who wants to compete with them is going to have to meet this capability head on. It is no small cost.JLM.
Compliance costs are considerable as well, the moneygrams et al spend 3% of revenue on this.
Already happening. Fraud is a huge part of Coinbase’s P&L
The credit card companies absorb fraud costs even when all that is done is the otherwise rightful use of their credit card.With fraud costs the buck actually stops at the merchant. The merchant absorbs the fraud cost.All a card holder has to do is sneeze and cardholder not only gets the money backed out but the merchant gets a mountain of paperwork to show the charge is legit and burden on merchant to prove everthing is kosher. Oh yeah you also get dinged ($20 to $35 approx depending) just because you got a charged backed out.I’m not saying that cc companies don’t eat fraud (people of course don’t pay their credit card bills). Or perhaps there are special classes of merchants. (Airlines, hotels what not that get cut more slack good to be them and all).But if you speak to any smb merchant that accepts cards you will find who is really paying.Here’s an example of how things could be gamedQuite some time ago I had an employee that had a company gas card. I didn’t recognize some of the charges on the card. So I asked for signed copies.Next thing I knew they backed all of the charges out.Why? Because Mr. Gas Station owner didn’t have any paper backups of the charges and without that it was presumed that they didn’t occur.In the end as a merchant you end up cutting corners. If a customer calls and authorizes over the phone “that will be $100, not $70 – ok says the customer” you take your chances. To much friction to get a signed receipt each time.Separately always getting cc that are obviously fraudulent. You can usually tell by how they capitalize names, where they are (IP address) email address (sounds hackerish) and so on.
I’m a BC neophyte; any suggestions on resources to get up to speed aside from Fred’s talk?
Truth be told – Bitcoin started like a Wild West, and it is still that way, to a large extent. But it’s getting better and slowly hedging towards more order. Maybe we’re 10% of the way to an organized status.
My only concern with that statement is how you might define “order.” If you’re using it in such a way that it’s synonymous with “controlled,” then you’re never going to be satisfied with Bitcoin.
Didn’t mean to imply control is needed.Maybe clarity is a better choice of words, including knowing who are the players, the services, what you can / can’t do, where to go, etc.
In that case, we are in agreement. Cheers!
Fred I believe you said that individual cross boarder money transfer is the #1 opportunity for bitcoin. If this is so, it’s not western union that you need to talk about, its low cost provides like RIA. Also, Living in LA,I can tell you where the early adopters of bitcoin for money transfer may be. (Though I think its going to be a long process, as you need to educate both the sender and receiver), Its members of LAs gym and fitness centers. These are hard working, tech competant young Mexicans and Central Americans who transfer $ on a regular basis.
Thanks for pointing that out
its low cost provides like RIAI never heard of them. How big of a footprint do they have in the US?They don’t appear to have any locations in New Jersey (I checked Newark, Camden and a few other places) and even in NYC it appears to be only at a few company stores and 7-11’s. A total of 29 locations (mostly 7-11’s and no independent places).Actually I’m now seeing it was started in NYC so it’s even stranger that there aren’t more locations.https://www.riamoneytransfe…
$9 billion through a network of more than 200,000 locations. This is cost competitive/ relationship driven / fragmented /regional/ fractional business that is really tough to scale regionally, nationally and globally.
That’s worldwide. Apparently they haven’t reached New Jersey yet and it’s not because there aren’t people in NJ who need to send money overseas.
RIA is also the backbone behind Walmart’s new Walmart to Walmart super low cost money transfer service.
Donation matching (for example Larry Ellison just matched a recent one night fundraiser for USCs Keck hospital cancer research, a whopping 4.5 million dollar match!). Bitcoin matching might be a useful tool for VCs making big and early investments into the bitcoin ecosystem.
good suggestion
This is one of the reasons you need to cooperate more with journalists (and for that matter) suck up to them. Donation matching is great but if it doesn’t get you valuable free PR you aren’t getting the benefits you deserve. You need all these guys in your back pocket (remember the godfather?)I know you’ve said at one point “I don’t want the focus to be on me – I want it to be on my companies” when turning down certain writers. Not a good move. [1]Because the truth is if the focus is on you, it will benefit your companies. Here’s an example. This morning I drive down my street and there are signs for “Berkshire Hathaway Home Services”. BH bought the local Pru Fox Roach home company.Don’t you think that the fact that Warren is so widely known helps BH? A homeowner (and a realtor) is much more likely to be sold as a result of the fact that they either know that Warren is BHHS or after it is point out that Warren (who they have heard of) is BH.You know, Trump used to call up reporters to get publicity. He would give them interesting stories to write about. And it’s done wonders to put money in his pocket. And help him close deals. And helped him create a brand which makes money without him having to risk (afaik) any money anymore.That said I don’t like attention either so I fully understand why you don’t like to do this type of non humble thing. But if it would put money in my pocket I would definitely get out of my comfort zone and dress up like a woman if I had to.[1] I also think you’ve moved away from this a bit recently.
Great job Monday night. Glad to be able to check out the talk again and take some time with it.Last night I came across the PDF published describing Filecoin, a “Cryptocurrency Operated File Storage Network”. Looks interesting. http://filecoin.io/filecoin…Abstract: “Filecoin is a distributed electronic currency similar to Bitcoin. Unlike Bitcoin’s computation-only proof-of-work, Filecoin’s proof-of-work function includes a proof-of-retrievability component, which requires nodes to prove they store a particular file. The Filecoin network forms an entirely distributed file storage system, whose nodes are incentivized to store as much of the entire network’s data as they can. The currency is awarded for storing files, and is transferred in transactions, as in Bitcoin. Files are added to the network by spending currency. This produces strong monetary incentives for individuals to join and work for the network. In the course of ordinary operation of the Filecoin network, nodes contribute useful work in the form of storage and distribution of valuable data.”
Filecoin is a distributed electronic currency similar to Bitcoin. Unlike Bitcoin’s computation-only proof-of-work, Filecoin’s proof-of-work function includes a proof-of-retrievability component, which requires nodes to prove they store a particular file.This reminds me of a new candidate coming into a political race. Ultimately it just ends up stealing and splitting votes and then the other party ends up winning (other party being the legacy financial establishment in this case).An example might be if Elizabeth Warren decides to run against Hillary Clinton.
Transfers of money around the world..you have already seen Regalii (https://www.regalii.com/en)? They are in NYC. Not sure if they plan to integrate bitcoin or not.The travel & expat crowd is indeed a big oppty for bitcoin expansion. Most use paypal to transfer money, and that’s far from optimal (and everyone hates paypal). Every time I take out money while abroad (as I did in Chile yesterday), I cringe at the fees I end up paying.
The day that merchants stop immediately converting BTC transactions into dollars will be the beginning of the end for the USD and other currencies. I can’t wait to see what it does to the price of BTC. I’m all in and it’s going to be a fun ride.
Please develop on why you believe the 21 hard cap is a problem that cannot be solved by its infinite divisibility attribute. This was truly disturbing to hear coming from someone who has been into Bitcoin for a long time.
Because its deflationary and incents people to buy and hold instead of spend.Infinite divisibility doesn’t change the fact that there is a fixed amount.
So, worst case, it becomes a store of wealth similar to precious metals? And perhaps a version 2.0 (or side chain) that isn’t capped becomes the norm for smaller transactions? I can actually live with that.There are trillions stored in metals… that’s with a ‘T’! 😉
It really depends on what you wish Bitcoin to be. Gold or a replacement for fiat currency
I personally hope that it continues to work as both, but I’d also be ok with it becoming just a store of wealth (if deflation ultimately prevents it from becoming a perfect currency).However, it’s quite possible that mass adoption and a trillion+ dollar market cap could reduce volatility to the point where it’s still a viable currency, as well.And that doesn’t even touch on the secondary and tertiary financial mechanisms that the protocol may provide.I don’t know how this grand experiment will ultimately turn out, but I’m definitely enjoying the ride! 🙂
While it would be a good thing if BTC lowers transaction costs for non-profits by ~2-3%, why do you believe 100% of donor money should go to the cause and not pay for operating costs? That would be akin to a for-profit company not having any SG&A costs. For-profit or non-profit, there are costs for providing goods and services.Also, as far as I’m aware, charity:water, one of the non-profits you cite as relying on low cost, web enabled small donations, does hold fancy gala fundraising events and does a lot to cultivate large donors. (One example: http://www.nytimes.com/2013…
Fred, I watched the video and the main benefit I heard for charities was that it might lower the processing fee of “3.5%” (at the 26 minute mark).Given that debit cards have now been regulated down to 0.05% plus 21 cents, wouldn’t it just be simpler for charities to only accept debit cards?That would achieve the main benefit you mention on bitcoin for charities, using cards everyone has today, without the cost of a massive new payments system rollout.