Posts from June 2021

The Internet was developed by the US Defense Department to create a network that was capable of surviving a military attack. They accomplished that with a design where no part of the system was central to its operation. You can take out any part of the Internet and it will still operate.

When I read the Bitcoin White Paper for the first time, I was struck by the similarity of its design to the Internet.

And we are watching an “attack” on the Bitcoin system right now, in the form of a purge in China.

Over the last three months, the government in China has moved to rid the country of Bitcoin mining. You can see the effect of the purge on the chart of Bitcoin Hashrate:

This is a significant reduction in the processing power of the Bitcoin network and the result has been slower transaction clearing times:

It will take time for miners outside of China to pick up the slack and get the hashrate and transaction times back to where they were, but that will happen. There are economic incentives for that to happen. What would be even better, and could happen, is for this new mining capacity to get built on clean/renewable energy.

I believe the Chinese purge of Bitcoin mining is short term bearish but long term bullish for Bitcoin and crypto more broadly. It shows that a powerful government can take its best shot at a cryptonetwork and the only thing that will happen is capacity will move elsewhere.

Anti-fragility is a beautiful thing to behold.

This should be obvious to AVC readers but I am a fan of short and sweet. Why take two pages to say something you can say in one page? Why take two paragraphs to say something you can say in one paragraph?

This letter to potential investors from the CEO in the Duolingo S-1, which was flipped to the public yesterday, is a fantastic example of that.

Disclosure: USV is an investor in Duolingo and we stand to profit from their IPO. This is not in any way an endorsement of the offering. Investors should read the S-1 and make up their own mind about it.

A reader asked me if I had ever written about the infrastructure I use to run AVC. We both searched the archives and could not find a post on that topic.

So here it is:

1/ Content Management System – WordPress – I use the open source software version of WordPress to write these posts and manage them.

2/ Hosting Provider – Cloudways – I have used a number of hosting providers over the years. If you use WordPress, it is fairly easy to migrate from one to another. Cloudways is the current favorite.

3/ Comments – Twitter Comments Plugin – I have used various comment systems over the years. I am currently using a WordPress plugin to host the comments on Twitter.

4/ Email – Feedblitz – This allows me to send an email out to over 30,000 people whenever I post.

5/ Search – Algolia – Fast and simple site search.

It’s relatively easy to set all of this up and then you are not locked into a service provider. I strongly recommend this approach.

I understand that regulators and elected officials need to raise concerns about new technologies and their impact on society. It is their job or at least part of their job. But I am also dismayed regularly by how poorly many elected officials and regulators understand the technologies they are talking about.

In particular, I am deeply concerned with how poorly many elected officials and regulators understand blockchains, smart contracts, and decentralized applications and organizations. They assume that these things are run by companies and people and can be regulated with traditional corporate regulatory activities.

What people need to understand is that blockchains, smart contracts, and decentralized applications and organizations are not companies. They are software. And they can and do run without any company operating them.

Let’s look at Bitcoin. There is no Bitcoin Inc. There is no company to sue. The founder is unkown and may not exist. So she can’t be sued either. There is nobody to call before Congress. There is no entity to make regulatory filings.

AMMs are smart contracts. These smart contracts operate liquidity pools that allow for decentralized trading of assets without any company operating them, controlling them, or managing them. Once these software programs are published on a decentralized blockchain, they just keep running without any intervention by anyone.

I could go on and on, but I expect you get the point.

So when someone says that one or many of these decentralized software applications needs to be regulated or, god forbid, shut down, I wonder the heck they are talking about. I don’t even know what that means.

Of course, using this decentralized technology could be deemed illegal in places and I fully expect that we will see that happen. But we won’t see it happen everywhere. And the places that embrace these new technologies will benefit immensely from them. So, like the criminalization of alcohol and gold, those approaches will eventually fail and will harm those regions that try it relative to the regions that embrace it.

I believe the more productive path for regulators and elected officials is to take the time to understand how this stuff actually works and think about new ways that society can mitigate the risks while gaining the benefits. That’s a harder path but a better path.

It is officially summer now and with adult vaccination rates passing 70% in many parts of the US, people are out and about. I’ve heard the term “analog summer” used to describe this moment. If the past 15 months have been a digital lockdown, then the next three months are going to mark a return to analog activities; beaches, parks, concerts, bars, restaurants, nightlife, etc, etc.

We’ve already seen the effect of this change in behavior in our portfolio companies, many of which benefited significantly from the digital lockdown. Digital providers of education, entertainment, shopping, and so much more had banner months in 2020 and the first half of 2021.

I am looking forward to the analog summer. I can’t wait to do all of the things that we could not do in the last year and a half. I think it will be a much-needed return to normal for all of us.

As for our portfolio and the tech sector more broadly, I am not too concerned about the return to normal. These businesses all got a huge boost in business over the last year and they aren’t going to give it all back. But their growth rates will be more like what they were in 2019 than 2020. And they will be growing from a much larger base.

I think we all learned some new behaviors during the pandemic and while we are eager to shed some of them this summer, I think we will keep a lot of them going forward. The covid pandemic will mark an inflection point in the adoption of digital services and our analog summer, as great as it is going to be, will not change that.

My friend Kirk backed this project earlier this week and I got a notification and checked it out and backed it immediately.

I like everything about this project. Finding opportunities for people with special needs to work productively and happily is such a great thing to do.

Email readers can watch the video here.

For as long as I can remember, Pier 76 on the west side of Manhattan has been home to the west side tow pound. Some of my worst moments as a NYC resident have been there retrieving a car or a scooter, something I’ve done more than I want to remember. It was pure misery to have to go there and I think that was intentional.

So over the last four months on my morning bike rides up the west side bike path, I have been watching the city tear down the west side tow pound and replace it with an urban park.

I believe Pier 76 opened last week and is hosting one of the outdoor locations for the Tribeca Film Festival which is going on in NYC right now.

So today on my morning ride, I took a slight detour and visited the new Pier 76.

It is so great to see the city making itself nicer. The entire west side park along the Hudson in Manhattan has been a slow but steady version of that and it just got a little bit nicer. Well done NYC.

ENS stands for Ethereum Name Service and it is a decentralized domain name system built on the Ethereum blockchain. You can get domains with the .eth extension by going here, connecting a wallet, and searching and purchasing a domain.

I have purchased fredwilson.eth and avc.eth and a bunch of other .eth domains for my family. It does not cost a lot of ETH to register a domain, but you need to remember to go back and renew it as there is no company/registrar operating a business to do that for you.

An interesting angle on ENS is that the .xyz extensions are interoperable with ENS and that is explained here.

So if you own .xyz domains, you can participate in the ENS system. I also bought fredwilson.xyz and avc.xyz and a bunch of other .xyz domains for my family.

It is interesting to me to see blockchains and smart contracts being used to replicate many of the things we use to build applications on the Internet. Slowly but surely a decentralized infrastructure that mirrors the centralized infrastructure is getting built out.

While there aren’t a lot of things you can do with a ENS domain today, I expect that there will be a lot of things you can do with one in the future. And that is why I think it is a good idea to purchase ENS domains for the ones you own in the .com world.

NYC has a primary next week (June 22nd) in which parties will pick their nominees for Mayor, City Council races, Borough President races, and Manhattan will pick candidates for Attorney General. Because NYC is overwhelmingly Democratic, the primary is the main event. Most of the time, Democratic candidates prevail in the General Election in November.

So this is a big election for NYC and everyone who cares about the future of NYC should make it a point to vote in this primary.

Early voting started last Saturday and I made my way to my early voting location (which is different from the regular voting location) yesterday morning and was in and out in two minutes. It was the smoothest voting experience I have had in NYC since we moved here almost 40 years ago.

If you live in NYC want to do early voting this week, go here and enter in some address info and you will be shown your early voting location.

Early voting is such an awesome addition to the election process. It makes it way easier for many people to get out and vote. And I hope you all do.

And make sure to vote for five people, not just one, as NYC is doing rank choice voting this year. Pick a slate of your favorite candidates from one to five and fill in all of the columns. Hopefully one of your top five will win.