Posts from blockchain

Open Finance First, Open Data Second

My partner Nick put together a deck outlining USV’s approach to crypto investing earlier this year and we have been using it with founders and investors since then.

One slide I particularly like from that deck is this one which describes how we think the crypto market will develop over time.

We have already seen an explosion of assets issued on blockchains and a number of very large and profitable custody/brokerage/exchange businesses built. We expect we will see continued innovation in the open finance (finance 2.0) sector in the next few years while the open data (web 3.0) sector will take longer to develop.

We also think that open finance will inevitably lead to open data as users (both consumers and businesses) will start to understand and appreciate the benefits of increased user control, lower transaction (and other) costs, and other benefits of decentralization.

The Kik Answer

I have mentioned the legal case between USV portfolio company Kik and the SEC several times here on AVC, most recently here.

Last night Kik filed a 130 page Answer to the SEC and made this press release.

The story was picked up by Coindesk and other news outlets.

I am not going to get into the details of this matter here on AVC, but this is not an open and shut case by any means.

NBA Top Shot

I’ve written on this blog about extensible blockchain games, the ability to own the virtual goods you earn or buy in your games, and the idea that these virtual goods can move from game to game. I think this is a big deal and possibly the thing that brings blockchains and crypto tokens to the mainstream user.

So, here’s an awesome example of that. Our portfolio company Dapper announced today that it is building a blockchain game with the NBA called Top Shot.

Here is the idea behind the game:

NBA Top Shot will feature a social experience built around digital collectibles as well as a complementary head-to-head game designed to create a fun, authentic and accessible fan engagement on blockchain. Like other sports games or fantasy brackets, fans who play the game are tasked with creating their ideal squad, but in this game, their rosters are built by acquiring live in-game moments from the NBA season. These moments, such as a Kevin Durant 3-point shot, or Joel Embiid dunk, which are acquired as digital collectibles or tokens, can then be either owned forever or used to compete against other players in online tournaments and leagues.

NBA Top Shot will start offering crypto-collectibles in the fall, with the game to follow in early 2020. You can get early access by leaving your email address here nbatopshot.com

Video Of The Week: CEO AMA

AMA stands for “Ask Me Anything.” I have noticed a trend of CEOs doing these AMAs for their customers and broader stakeholder communities.

A good example of a CEO who is doing this is Brian Armstrong, CEO of our portfolio company Coinbase.

Brian has been doing this for several months. You can see all of them on their YouTube channel.

Here is the one he did with LJ Brock, Coinbase’s Chief People Officer, yesterday.

Video Of The Week: Fireside Chat With Brian Armstrong

Back in May, during Blockchain Week in NYC, I had the pleasure of interviewing the CEO of our portfolio company Coinbase, Brian Armstrong.

We started off talking about their rapidly growing institutional business, but quickly got to talking about everything Coinbase.

Brian also gets a question in for me about 17mins into the talk.

It’s about 10 minutes of me asking Brian questions and then another 20 minutes of Q&A from the audience.

Business Model Innovation

I’ve shared my views on this before here at AVC. I believe business model innovation is more disruptive than technical innovation.

A good example of this was moving from web apps to mobile apps, which was largely a technical innovation. While the move to mobile certainly created some new companies, it largely strengthened the market position of the big Internet companies because there was little to no business model innovation.

Compare that to the move from desktop computing to the web. We saw massive disruption as we went from a licensed software business model to an advertising supported business model, which has evolved into an advertising/subscription freemium business model.

I am excited about the move to crypto based business models supporting decentralized apps for this very reason. I think it opens up the possibility that some very large new companies will be created that innovate largely on entirely new business models.

An area that is particularly ripe for this kind of innovation is user generated content or, more broadly user generated products and services.

If you think about something like Instagram, the software is great but could fairly easily be replicated. But the network of users and the content they create is impossible to replicate. That is where the value is created. Or think about Reddit where the community creates the content. Or think about Waze where the users generate the data about which way has the least traffic.

In these sorts of businesses, the ideal model would remunerate the users for creating the content and allow them to take their content elsewhere if a better deal were to emerge.

That is precisely what a decentralized application built on an open data protocol would do from a technology perspective. And the remuneration of the user is what a token incentive model would offer in terms of a new business model.

So why have we not seen this emerge yet? Bitcoin has been around for over ten years. People have been mining Bitcoin and earning tokens for doing so for more than a decade. This new business model is sitting there in plain sight.

Well first of all, quite a few entrepreneurs have tried. Steem is a decentralized Reddit with a token incentive model and it has been around for a while now. There are over 150 decentralized apps in the Blockstack app store (Blockstack is a USV portfolio company).

So it is not for lack of trying.

I believe the primary inhibitor to this business model innovation is that it requires users to own crypto-assets and store them in a wallet somewhere and be comfortable using them to access decentralized apps. That has not gone mainstream and we need a killer app to make that happen. That is why USV has gotten behind Libra. We think it could be the thing to get mainstream users there.

But if not Libra, I am confident it will be something that gets billions of users holding and using tokens on our phones. And when that happens, a wave of business model innovation will be upon us. I’m super excited for that.

Price Stability

One of the use cases that has eluded cryptocurrencies to date is “means of exchange” (something you would spend).

I wrote about this a couple years ago and showed this transaction in that blog post:

That was a payment I made to a caddie named Kris after he carried my bags one morning six years ago.

We played today and he was carrying a friend’s bag and I asked him if he still had that Bitcoin and he smiled and said “absolutely.”.

That made me feel good but the truth is nobody should be paying for anything, including caddying services, with something that can appreciate 123x. That’s just not rationale behavior.

Which is why stablecoins, cryptocurrencies which have price stability built in to them, are one of the important sectors in crypto right now.

There is the “dollar pegged” approach, like Tether (which may not actually be dollar pegged) and USDC (which is actually dollar pegged). One of the issuers of USDC is Coinbase, a USV portfolio company.

There is the Libra cryptocurrency, which USV is involved with as a Founding Member of the Libra Association. Libra will not be pegged to a specific fiat currency, but will have a reserve made up of many fiat currencies so it will have price stability.

And then there are stablecoins that are asset backed but not fiat backed like Dai.

Finally there are stablecoins that attempt to deliver price stability programmatically. I am not confident that approach will work.

I am confident that one way or another consumers will adopt cryptocurrencies that are price stabilized and when they do they will start transacting in them. And that will unlock a lot of utility that has so far been elusive.

Video Of The Week: What Is Web3?

Juan Benet, founder and CEO of our portfolio company Protocol Labs, developer of the IPFS and Filecoin protocols, gave this talk last fall.

I like Juan’s statement, about 10mins into this talk, that “what Bitcoin did to money, Web3 does to everything.” That is obviously a very big statement/ambition, but I agree with it.

Here is Juan’s talk: