Posts from July 2018

Web 3 is the next generation of the web in which decentralized apps (dApps) operate on top of a shared data layer and users have control of their data and the ability to move between dApps with little to no switching costs.

Think about the way domains and email addresses work. We (individuals and/or companies) own these identifying data elements and we can provision them in any app we want (I provision my email addresses in gmail and my domains in wordpress but I could choose many other options). In Web 3, this is how all of our data will work.

But we have a long way to go to get there. The infrastructure for Web 3 is immature and at least a few years away from being mature and stable enough to build mission-critical dApps on. We can see glimpses of Web 3 in games and collectibles, where the stakes are not that high, and we can see glimpses of it in financial services that have built up around Bitcoin and other leading crypto assets. But it will be a while before we are keeping our resumes on DinkedIn and our documents on DDocs, our friends and family networks on Dacebook, our photos and videos on Dinstagram, and our President’s tweets on Dwitter. But that time will come. I am more sure about that than anything else right now. The last few years of Web 2 have shown us what is wrong with the current architecture of the web and what we need to do to fix it. When this all happens is another thing.

Our friend and colleague Kyle Samani posted a long and thorough description of the current state of the Web 3 stack yesterday. My colleagues Albert and Nick provided some feedback on it before he published it so it reflects some of our thinking too.

As investors, we are spending much of our time wrapping our heads around these infrastructure layers, trying to understand which approaches will win out, where value will accrue, and when dApps can be successfully built, scaled, and delivered to market.

We think this is where the action is right now and we are heads down in this mess trying to understand it and invest in it.

My son told me he wanted to learn Japanese. I told him to check out our portfolio company Duolingo‘s awesome language learning product of the same name.

He told me that he has used Duolingo and likes it, particularly the ability to generate streaks. He told me that once you have a streak going, you really want to keep it going and that keeps you at the language learning exercises that are the heart of Duolingo.

Yesterday, I kicked off my weekly game of Swarm (from our portfolio company Foursquare) with some big point generating check-ins. My daughter, who I play the game each week with (among others) also had a quick start.

I texted her and she texted me back:

Streaks are a terrific game mechanic and can be used to motivate user behavior.

But streaks are also powerful in real life.

This blog is a good example. When you have posted every day for fifteen years (that anniversary is coming up this fall), you have quite an incentive to keep it going.

And the same is true in the VC business.

When you have had a big win every year for the last eight years, you want to keep that going.

When you have had four highly successful VC funds, you want to make the fifth work.

Keeping something going is a powerful motivator.

So when you have that day or week you really don’t want to get up for, think about your streak, get up for it, and do it.

I am excited by the potential of cryptocurrencies and cryptogoods to change, and hopefully improve, the way we raise funds for charity.

Cryptogoods are particularly interesting as they are scarce and unique digital goods.

AVC community member Arnold Waldstein tipped me off to a really good example of this:

Little Honu (Hawaiian for turtle) is part kitten, part sea turtle. Honu is the first of a lineage of CryptoKittens ‘hatched’ to both raise funds and be ambassadors for their causes and to be bought, sold, and bred within the game itself.

Honu will be auctioned to raise funds for charity. The auction starts today, on Monday the 9^th, ends Sunday the 15^th.

Auction proceeds go directly to two sea turtle conservation projects in the Caribbean: Operation Jairo and Unite BVI.

Previous CryptoKitty charity auctions have raised in excess of $140K.  Donations are tax exempt for the winner if a US citizen.

This is part of a pilot for CryptoKitties, tied to their KittyVerse partner program and their Kitties-for-Good initiative.

CryptoKitties teamed up with Bill Tai and his ACTAI community of activists, athletes and investors, and Ocean Elders, a conservation group headed up by Sir Richard Branson, Jane Goodall and others to make this happen.

And Arnold is the quarterback of this initiative, creating and orchestrating a mashup of traditional, web, crypto and event-based grassroots marketing and partnerships.  It’s a first step in a broader project he is developing with Bill Tai to bring together incentivized communities through unique cryptoassets into a larger framework for non-profit projects everywhere.

I just bid on Honu and am currently the leading bidder, which I expect won’t last for long.

Software systems have largely been governed by the companies that operate them.

The Washington Post reports that Twitter has been suspending more than a million accounts a day recently.

That certainly is necessary given all of the fake accounts, bots, spammers, and worse plaguing Twitter.

Twitter, the company, is making those determinations.

Twitter the company governs Twitter the software.

But that doesn’t have to be the case.

Back in 2007, a few years too early :), my partner Brad argued on usv.com that governance was the next big thing in software.

I suspect Brad was right, but maybe a decade and a half or possibly two decades too early in making that call.

One of the many interesting ideas that have emerged from the crypto sector is the idea of decentralized governance.

Decentralized governance can be implemented in many ways but the basic idea is that the token holders will control the operation of the software system.

The 0X decentralized exchange protocol is an interesting case in point.

They way 0X works is that companies build “relays” on top of the 0X protocol and operate decentralized exchanges on it.

Our portfolio company Coinbase operates a relay on top of 0x called Paradex.

Now imagine you are Paradex and 0X wants to make a change to the protocol that you don’t like.

If you hold a significant amount of 0X tokens, you can vote against that change.

Think about the Bitcoin miners. They would probably like to have the ability to weigh in on the roadmap for Bitcoin, but they do not.

Many crypto projects have either implemented a form of decentralized governance or have committed to doing so in their white papers.

And I am certain that we will start to see the benefits, and challenges, of a community governing a software system instead of a company.

And I believe we will see that start to play out in the coming years.

And then what? Well the basis of competition may shift from functionality to values as Brad predicted at the end of that post:

Is there a basis for competition beyond the governance systems underlying these services? If pressed, I would guess it will be values. It might be possible for two equally effective governance systems to compete by internalizing different values. One could perhaps embrace openness and diversity at the cost of some efficiency and the other could be optimized for efficiency for a more homogeneous set of users and interests.

In this video, AVC regular William Mougayar describes the fundamental properties of a blockchain native application.

The key section starts at 4mins and goes for about two minutes.

If you want to see the slides, which are not visible in the video, they are here.

I backed this project earlier this week. Atlantic City is a cautionary tale about our President and how he operates.  I hope you will join me in bringing this project to life.

Comments are closed for this post.

Like many of you, I had an incredibly frustrating experience with a credit agency today. It was TransUnion but I’ve had equally frustrating experiences with Equifax and others since locking down our credit information in the wake of the Equifax data breach last fall.

What is particularly galling about this place we all find ourselves in is that none of us chose to be customers of these credit bureaus. They simply collected the info on us from third parties, built up credit info on us, which they sell to banks and other lenders, and now, because they are unable to protect our data, we need to be customers of their lock and lift services.

TransUnion charged me $5 today to put a temporary lift on my credit report lock. It’s not really the money that bugs me, it’s the entire absurdity of how we got here that galls me.

And, of course, the UI on the online service was so poor that I ended up talking to a customer service agent who struggled to communicate with me in my native language.

Why was I even dealing with this nonsense? Because I want to lease a car instead of purchase one and, even though I’m willing to pay the entire lease upfront, someone still needs to check my credit.

And I’ve got it good. Good credit. The means to avoid this nonsense most of the time. Etc. Etc.

But think about so many of us that need access to these basic financial services and are hostage to these terrible companies! It is a mess.

And an opportunity for entrepreneurs. I’m rooting for all of you.

I’m sitting here on a park bench outside my favorite coffee shop, where I’ve been writing my daily posts for the last week and a half on my phone, and I’m staring at our flag.

Normally, a scene like this on the Fourth Of July fills me with pride. I love America, all that it has stood for, and what it has represented for me and for many others.

But today, I’m not feeling that pride. I am not proud of what America has been showing to the rest of the world and I’m not proud of the decisions we have made and the direction we have taken.

I am saddened. Deeply saddened.

Because this post is about my feelings and not meant to be about anything more, I have closed the comments.

I do care about how all of you are feeling today but I would prefer that you post those feelings on your own social media accounts and leave mine for me today.

Last night I picked up my phone after a long and fun dinner party and saw that the Golden State Warriors had signed Boogie Cousins (one of the most talented big men in the NBA) to a one year mid level contract of $5.3mm, an incredibly low number for a perennial all-star. Granted Boogie is coming off an achilles injury and won’t be available until mid season, but it just felt like the best getting better at the expense of every other team in the league. It annoys me.

Kind of like seeing a company renting electric scooters by the minute raising $400mm in a month when you can’t get anyone to put a dime into your company.

I’m not suggesting that the electric scooter companies should be dismissed. I don’t have a point of view on them other than as a user and I posted that here this past winter.

I am suggesting that the news cycle can make you depressed and jealous. My Knicks continue to struggle to put a decent team on the floor and the Warriors are assembling an all-star team that plays for them every fucking night.

It doesn’t feel fair. And it isn’t. Life isn’t fair. That’s how it is.

At times like this, I like to remind myself to keep my blinders on, ignore the news cycle, and focus on what I can control.

Most of us are not going to raise $400mm for our companies in a month. But we can all ship products, sell them, hire some good people, and find a few dimes to keep the lights on.

And that’s is what we must do. Lusting over what someone else has does us no good. Even it if is the best basketball team ever assembled.