Posts from blockchain

Beyond The Bitcoin Bubble

My friend Steven Johnson has penned a long and wonderful piece exploring what lies beyond the speculative market in crypto tokens.

This essay, which will run in Sunday’s New York Times Magazine, but is online now, could not have come at a better time.

All most people know about Bitcoin, Ethereum, ICOs, and alt-coins, is that you can trade them and make (and lose) money on them.

But that is not what interests me about crypto tokens and blockchain technology and it is not what interests USV and the folks in this sector we work with.

What interests us is that “crypto” could well be the architectural breakthrough that we need to move beyond the current Internet market dominated by a few large tech companies.

And Steven, as is his gift, explains this beautifully and easily in roughly 9,000 words.

This is a piece that requires sitting down with a cup of coffee or tea and reading it.

I would suggest you find some time this week to do that.

Video Of The Week: Vitalik Buterin

In honor of Ethereum trading (briefly) at north of $1000USD this week, I thought we’d hear this weekend from Ethereum’s founder Vitalik Buterin.

This is an interview that he sat for in October at the ETH Waterloo event (where, among other things, CryptoKitties was born).

What Is Going To Happen In 2018

This is a post that I am struggling to write. I really have no idea what is going to happen in 2018.

  • Will the crypto markets continue in their bull cycle? I have no clue. I was showing my daughter’s friend an app that helps people save and invest and he said to me “I don’t need that, I just buy some ETH every week.” I said “that’s a good plan until it isn’t.” I just don’t know when buying crypto will stop being a good idea. It was a great idea in 2017.
  • Will the economy extend its eight year expansion? I have no clue. The longest post WWII economic expansion was 10 years from 1991 to 2001. Can this one beat that one? Maybe. Will this one also burst over the collapse of another tech bubble? Maybe. But again, I have no idea when that might come.
  • Will the corporate tax cuts that are coming from Trump’s tax bill lead to increased hiring and investments, or will companies simply hoard that cash or pay it out in dividends? Likely a bit of both. But I think Wall Street has largely priced in the increased earnings so I’m not sure the tax bill will be a boon for the stock market in 2018.
  • Will the current Internet oligopoly (Amazon, Apple, Facebook, Google) continue to take share from the rest of the sector, or will one or more start to falter? I’d like to see the latter, but I suspect it will be more of the former.
  • Will the rise of massive growth funds (SOFTBANK, Sequoia, etc) lead to the best and brightest tech companies delaying IPOs even longer? The logical answer is yes, but I think the answer may be no. We see an increasing desire of founders in our portfolio to take their companies public.
  • Will the tech backlash that I wrote about yesterday continue to escalate? Yes.
  • Will we see more gender and racial diversity in tech? Yes.
  • Will Trump be President at the end of 2018. Yes.
  • Will the GOP lose control of Congress in the midterm elections. Yes.
  • Will we avoid war with North Korea? I sure hope so.

So there you have it. Ten questions. A few predictions. A lot of unknowns. That is how I am going into 2018.

Happy New Year Everyone.

What Happened In 2017

As has become my practice, I celebrate the end of a year and the start of a new one here at AVC with back to back posts focusing on what happened and then thinking about what might happen.

Today, we focus on what happened in 2017.

Crypto:

I went back and looked at my predictions for 2017 and I completely whiffed on the breakout year for crypto. I did not even mention it in my post on New Year’s Day 2017.

Maybe I got tired of predicting a breakout year for crypto as I had mentioned it in my 2015 and 2016 predictions, but whatever the cause, I completely missed the biggest story of the year in tech.

If you look at the Carlota Perez technology surge cycle chart, which is a framework I like to use when thinking about new technologies, you will see that a frenzy develops when a new technology enters the material phase of the installation period. The frenzy funds the installation of the technology.

2017 is the year when crypto/blockchain entered the frenzy phase. Over $3.7bn was raised by various crypto teams/projects to build out the infrastructure of Internet 3.0 (the decentralized Internet). To put that number into context, that is about equal to the total seed/angel investment in the US in 2017. Clearly, not all of that money will be used well, maybe very little of it will be used well. But, like the late 90s frenzy in Internet 1.0 (the dialup Internet) provided the capital to build out the broadband infrastructure that was necessary for Internet 2.0 (the broadband/mobile Internet), the frenzy in the crypto/blockchain sector will provide the capital to build out the infrastructure for the decentralized Internet.

And we need that infrastructure badly. Transaction clearing times on public, open, scaled blockchains (BTC and ETH, for example) remind me of the 14.4 dialup period of the Internet. You can get a taste of what things will be like, but you can’t really use the technology yet. It just doesn’t work at scale. But it will and the money that is getting invested via the frenzy we are in is going to make that happen.

This is the biggest story in tech in 2017 because transitions from Internet 1.0 to Internet 2.0 to Internet 3.0 cause tremendous opportunity and tremendous disruption. Not all of the big companies of the dialup phase (Yahoo, AOL, Amazon, eBay) made a healthy transition into the mobile/broadband phase. And not all of the big companies of the broadband/mobile phase (Apple, Google, Facebook, Amazon) will make a healthy transition into the decentralized phase. Some will, some won’t.

In the venture business, you wait for these moments to come because they are where the big opportunities are. And the next big one is coming. That is incredibly exciting and is why we have these ridiculous valuations on technologies that barely/don’t work.

The Beginning Of The End Of White Male Dominance:

The big story of 2017 in the US was the beginning of the end of white male dominance. This is not a tech story, per se, but the tech sector was impacted by it. We saw numerous top VCs and tech CEOs leave their firms and companies over behavior that was finally outed and deemed unacceptable.

I think the trigger for this was the election of Donald Trump as President of the US in late 2016. He is the epitome of white male dominance. An unapologetic (actually braggart) groper in chief. I think it took something as horrible as the election of such an awful human being to shock the US into deciding that we could not allow this behavior any more. Courageous women such as Susan Fowler, Ellen Pao, and many others came forward and talked publicly about their struggles with behavior that we now deem unacceptable. I am not suggesting that Trump’s election caused Fowler, Pao, or any other woman to come forward, they did so out of their own courage and outrage. But I am suggesting that Trump’s election was the turning point on this issue from which there is no going back. It took Nixon to go to China and it took Trump to end white male dominance.

The big change in the US is that women now feel empowered, maybe even obligated, to come forward and tell their stories. And they are telling them. And bad behavior is being outed and long overdue changes are happening.

Women and minorities are also signing up in droves to do public service, to run for office, to start companies, to start VC firms, to lead our society. And they will.

Like the frenzy in crypto, this frenzy in outing bad behavior, is seeding fundamental changes in our society. I am certain that we will see more equity in positions of power for all women and minorities in the coming years.

The Tech Backlash:

Although I did not get much right in my 2017 predictions, I got this one right. It was easy. You could see it coming from miles away. Tech is the new Wall Street, full of ultra rich out of touch people who have too much power and not enough empathy. Erin Griffith nailed it in her Wired piece from a few weeks ago.

Add to that context the fact that the big tech platforms, Facebook, Google, and Twitter, were used to hack the 2016 election, and you get the backlash. I think we are seeing the start of something that has a lot of legs. Human beings don’t want to be controlled by machines. And we are increasingly being controlled by machines. We are addicted to our phones, fed information by algorithms we don’t understand, at risk of losing our jobs to robots. This is likely to be the narrative of the next thirty years.

How do we cope with this? My platform would be:

  1. Computer literacy for everyone. That means making sure that everyone is able to go into GitHub and read the code that increasingly controls our lives and understand what it does and how it works.
  2. Open source vs closed source software so we can see how the algorithms that control our lives work.
  3. Personal data sovereignty so that we control our data and provision it via API keys, etc to the digital services we use.
  4. A social safety net that includes health care for everyone that allows for a peaceful radical transformation of what work is in the 21st century.

2017 brought us many other interesting things, but these three stories dominated the macro environment in tech this year. And they are related to each other in the sense that each is a reaction to power structures that are increasingly unsustainable.

I will talk tomorrow about the future, a future that is equally fraught with fear and hope. We are in the midst of massive societal change and how we manage this change will determine how easily and safely we make this transition into an information driven existence.

Video Of The Week: Token 1.0 vs Token 2.0

AVC community member William Mougayar sent me a video of a talk he recently gave in Moscow.

I really like the framework he articulates about half way through the talk regarding token 1.0 (where we are now) and token 2.0 (where we need to be before we will see real sustainable disruptive value creation with blockchain technologies).

Here is that bit:

If you’d like to watch the entire talk, you can do so here.

A Fun Way To Learn To Create Dapps In Solidity

One of the reasons I am rooting for the Ethereum community to address many of its current issues (scalability being the big one) is that there is a clear developer platform opportunity for Ethereum. The Ethereum programming language Solidity is relatively easy to learn and Ethereum was designed from the ground up as an application platform. Ethereum applications, called Dapps (for decentralized apps), are starting to launch pretty regularly.

If you want to learn how to create a Dapp in Solidity, you might try out this interactive coding game called Cryptozombies:

CryptoZombies is an interactive code school that teaches you to write smart contracts in Solidity through building your own crypto-collectables game.

Thanks to AVC community member William who showed this to me yesterday.

There is a lot of naysaying out there suggesting that public blockchains and crypto aren’t good for anything other than speculating on token prices.

That is dead wrong, but it is true that the immature state of the technology has made building useful things on top of this technology very hard.

What we need to look for are efforts to make public blockchains more reliable, faster, and easier to build on. Those projects are out there and the fruits of all of that labor will come in due course.

In the meantime, it might be a fun and productive use of your time to learn to build a Dapp in Solidity and have some fun at the same time.

Video Of The Week: The Token Summit Conversation

As I start thinking about 2017 and what happened this year in the world of startups and tech, I am going back and watching and reading things that stayed with me this year.

This talk between William and me at Token Summit captures much of what I have been thinking about the blockchain/crypto sector this year (and beyond).

It was fun to watch it again six months later. It is about 30mins long.

Proceed With Caution

The CEO of Coinbase, a company that I am on the Board of, wrote a note to all of their customers on Friday. That note, which he also posted to his blog,  urged caution in the trading of crypto assets such as Bitcoin and Ethereum.

This is a quote from that note:

Over the course of this year we have invested significant resources to increase trading capacity on our platform and maintain availability of our service. We have increased the size of our support team by 640% and launched phone support in September. We have also invested heavily in our infrastructure and have increased the number of transactions we are processing during peak hours by over 40x.

There may be downtime which can impact your ability to trade

Despite the sizable and ongoing increases in our technical infrastructure and engineering staff, we wanted to remind customers that access to Coinbase services may become degraded or unavailable during times of significant volatility or volume. This could result in the inability to buy or sell for periods of time. Despite ongoing increases in our support capacity, our customer support response times may be delayed, especially for requests that do not involve immediate risks to customer account security. 

The reality is that much of the infrastructure that has been built up over the past seven years to support the trading of crypto assets is struggling to handle the load that the recent excitement over Bitcoin and crypto in general has put on their systems. It reminds me of the days in the mid 90s when all of a sudden everyone wanted to get online and AOL could not handle the massive increase in dial-up customers who wanted to log onto the Internet.

Of course eventually everything got sorted out and we have highly scaled systems that can support the roughly 3 billion people who “go online” every day. But that took some time to happen.

I think we are going through a similar phase of growing pains with crypto/blockchain. And things will be messy for a while. So proceed with caution, don’t get too far out over your skis, don’t invest more than you can afford to lose, and be prudent.

Un-Super-Vised

My partner Andy and I were playing with the latest crypto craze, cryptokitties, this weekend and he suggested we sire a USV kitty.

So he contributed a parent from his collection and I contributed a parent from my collection and with the addition of some Ethereum, which I paid from my Coinbase account, we made a new kitty.

Since it is a USV kitty, we asked the USV team to send in name suggestions and Jacqueline won that contest with the wonderful name of Un-Super-Vised.

That’s a handsome cat but the thing I like most is its “lucky stripe.” God knows we need that in the startup business.

In the wake of all that excitement, Jacqueline posted her thoughts on this craze. If you want to know what to make of all of this, I’d suggest giving that a read.

The End Of Net Neutrality As We Know It

I have written about net neutrality frequently here at AVC. I believe that for as long as we have local monopolies and duopolies for last mile broadband internet in most parts of the US, we need our federal government to actively reign in the broadband providers from doing things that are anti-innovation, anti-consumer, and pro-big business. For much of the last decade, the internet crowd has been a force to be reckoned with on this issue and we fought for and won good net neutrality rules that were put in place and defended in court. If you are a long time reader of AVC, you heard me advocating for and celebrating these wins.

The times have changed. We have a pro-big business team in the White House and at the FCC who are hell-bent to overturn those hard fought for net neutrality rules. We should fight them in these efforts, just like we have fought for these rules at every turn. Here are some things you can do:

But even as we fight for net neutrality, we also should be investing heavily in efforts to reduce our society’s reliance on the big cable and telcos for our broadband internet. That’s the core problem here.

So, in addition to fighting for net neutrality, here is what you should be doing:

  1. Don’t use an ISP who won’t commit to following basic net neutrality rules if you have a choice. Our portfolio company Tucows has a subsidiary called Ting that provides fiber broadband in some parts of the country and they are committed to following basic net neutrality rules no matter what the law says. Use an ISP like that if you can.
  2. Report abusive behavior and business practices by your ISP to the FCC. This will become even more important if the FCC overturns net neutrality.
  3. Join a mesh network or multiple mesh networks. Peer to peer wireless is our best long-term solution to the monopoly/duopoly issue.
  4. Look for blockchain projects that are seeking to solve the mesh networking issue and support them. The token-based incentive business model is a powerful way to bootstrap p2p mesh networks. This piece from 2015 explains that well.

I believe that technology is ultimately a better solution than regulation to market failures like the monopoly/duopoly issue in last mile broadband and I am confident that we will get the technology to solve it soon enough (certainly in my expected lifetime). But until that happens, regulation is a good tool to keep things moving in the right direction. That’s why I have supported net neutrality and will continue to support it until the technology arrives in the mass market to address the underlying problem.