Posts from blockchain

Digital Dollars

I have written about stablecoins a bunch here at AVC. I believe cryptocurrencies that are not highly volatile are important for use cases like e-commerce. I explained why here.

So we need crypto assets that are price stabilized and one of the best ways to do that is to peg a crypto asset to a fiat currency like the dollar. You do that by fully reserving the asset with dollars.

The two most popular digital dollars are USDT (Tether) and USDC. There is almost $20bn of circulating supply of USDT and just over $3bn of USDC.

There has always been some concern that USDT is not fully reserved. I share that concern. I am more confident that USDC is fully reserved and it is the digital dollar that I hold and use.

We got some big news yesterday about USDC which is that the VISA card network is going to “help select Visa credit card issuers start integrating the USDC software into their platforms and send and receive USDC payments.”

I think this is going to give more payment networks and financial services platforms the confidence to also integrate USDC. I could imagine USDC having a circulating supply of the current size of Tether by this time next year. We will see.

There are concerns for those, like me, who are big fans of digital dollars. A few members of Congress yesterday proposed a bill requiring stablecoin issuers to be banks. I appreciate that our elected officials want to provide for consumer safety and confidence. But forcing all of this innovation into the banking system is the surest way to kill it that I have ever heard of. Maybe that is what they want to do. We cannot allow that. The crypto sector and innovative financial services companies like VISA will need to spend time on the Hill educating our elected officials on what good regulation looks like and what bad regulation looks like. All we seem to be getting out of DC right now is on the bad side.

Finally, I should mention that while we are debating the role of digital dollars here in the US, China is rolling out its own digital Yuan. Goldman Sachs estimates that over a billion people will be using the Digital Yuan within a decade. I think that is way too pessimistic.

I think everyone who uses fiat currency right now will be using digital/crypto versions of these fiat currencies within a decade. The only question is which ones we will use the most. If we want the Digital Dollar to be in the top two or three, we had better get behind the ones that are out there and support the issuances of new ones too.

#blockchain#crypto#policy#Politics

Crypto Wallets Are Not Bank Accounts

We learned last week that the US Treasury wants to regulate crypto wallets like bank accounts. On the surface, one can understand that temptation. If people store, send, receive, and sell crypto assets in crypto wallets, then surely they should be regulated like bank accounts.

Except that is only one use case for a crypto wallet. It happens to be the primary use of crypto wallets right now but it is not likely to be the primary use of crypto wallets in a decade.

Regulators need to think of crypto wallets like web browsers. They are software applications that open up access to the decentralized internet and over time they will reduce our reliance on applications like Facebook, Google, Amazon, etc. But only if they are allowed to exist without crushing regulation, like we treated the web broswer when it came out in the mid 90s.

Brian Armstrong, the founder and CEO of Coinbase, pointed this out in a series of tweets last week and these two are particularly good examples of ways that crypto wallets are used that are not like bank accounts:

These are just early use cases for crypto wallets that don’t resemble bank accounts. There will be many many more soon if we don’t strangle crypto wallets with suffocating regulation.

Crypto will eventually lead to a decentralized internet but the first industry it is decentralizing is finance. It reminds me of the web browser that started in media. The issue with decentralizing finance first is that regulators are tempted to regulate crypto like it is just finance and that could not be more wrong. And it will take everything the industry has to push back on this temptation.

#blockchain#crypto#policy

Bitcoin - The Gateway Drug

The first crypto asset most people purchase is Bitcoin. It has the highest market capitalization. It has way more search interest.

But Bitcoin is not all there is to the crypto sector. There is about $160bn of market value in the crypto sector outside of Bitcoin.

The “non-Bitcoin” portion of the crypto sector has risen over $100bn in 2020 and is up 2.7x this year.

Bitcoin is up about 2.2x in 2020.

What seems to happen is that individuals, and increasingly institutions, purchase Bitcoin to start their crypto portfolios and journeys, but over time they move some of their gains into other assets.

According to Coinbase, there are now 24 crypto assets with a market capitalization of greater than $1bn. I expect that list to expand greatly over this crypto bull run we are in that started this past spring.

We are starting to see sectors of the economy decentralize using blockchain technology, starting with the finance sector, naturally. This is a ten to twenty year trend that is just getting started. And owning crypto assets is the way to play that trend. Starting, but not ending, with Bitcoin.

#blockchain#crypto

Educating Electeds

A number of members of Congress sent a letter to the Office of Comptroller of the Currency (OCC) on Tuesday. I have embedded it below but readers via email may need to click here to read it.

Letter to the OCC on Fintec… by CoinDesk

These elected officials are correct that way too many people in the US are unbanked or underbanked. They are also correct that community banks and minority owned banks are closing at a rapid rate, which is contributing to these alarming unbanked and underbanked numbers.

However, I think that the OCC and, more importantly, the crypto industry, owe these elected officials an education on how crypto can address these important issues and why it is not a distraction from them.

In the letter, the members of congress mention “the immediate needs of millions of at-risk individuals who have not yet received an economic stimulus check and/or cannot deposit their funds in a bank.”

If the United States was developing (as is China), a digital currency stablecoin (a digital dollar), then those millions of at-risk individuals would have been able to receive their economic stimulus funds via any one of the popular mobile apps that support or will soon support digital assets, like Coinbase, Square, PayPal, Robinhood, and many more.

It would have been less expensive (by an order of magnitude or more) and much simpler to get funds to these at-risk individuals with blockchain based assets vs outdated technologies like paper checks.

I am not taking a swipe at these well-meaning elected officials. I am saying that the crypto sector needs to sit down with them and their staffs, pull out their phones, have them do the same, and send them some money. And then talk about regulations that will accelerate the adoption of these new technologies among the at-risk communities instead of what we have now which are regulations that are holding all of this progress back.

#blockchain#crypto#policy#Politics

Rosetta

Our portfolio company Coinbase released an open source framework for crypto asssets to make it easier to list them on crypto exchanges. It is called Rosetta. Coinbase is encouraging blockchain projects to integrate Rosetta so that they can more easily list new assets on the Coinbase Exchange.

But as this Coindesk post outlines, any crypto exchange can adopt Rosetta so this could be something that levels the field for everyone.

Coinbase is putting Rosetta out to the broader community under an Apache license in the hopes that other exchanges will kick the tires on it. “All the code is available, it can be forked, it can be edited, so if there’s another exchange or another project that wants to put their code on it they can do that and also suggest their own changes,” Dalal said. “In a perfect world there are people building on top.”

https://www.coindesk.com/coinbase-open-sources-technical-standard-to-streamline-token-listings

Because different blockchains work differently, each crypto exchange needs to build their own interfaces to the blockchains in order to list them. That takes time and slows down listing new assets.

An open source middleware framework like Rosetta should make it much easier for exchanges to list new assets and allow them to support new assets more quickly. This would be great for innovation in the blockchain sector.

#blockchain#crypto

Flow Playground

Our portfolio company Dapper (creator of Cryptokitties among other crypto games) has been developing a new blockchain designed for high throughput consumer experiences (like crypto games). That blockchain is called Flow.

Today, Dapper is opening up the Flow Playground so that developers can start building things on Flow.

The Flow Playground is the first taste of what building on Flow feels like: it is an interactive web environment where developers can write Cadence smart contracts and run them against the Flow Emulator being hosted by Dapper.

Cadence is the smart contract programming language for Flow and it uses resource-oriented programming concepts to deliver a faster, safer, and better user experiences when it comes to writing smart contracts.

Here are some screenshots of what it is like to develop in Cadence in the Flow Playground:

If you are a developer who likes to create fun consumer experiences and wants to build something on a blockchain, you should check out Flow and the Flow Playground. You can get started here.

#blockchain#crypto

The Digital Marshallese Sovereign

I’ve learned over the years that many of the most important things start out looking like little things or even laughable things. So if you want to laugh at this news, that will make me very bullish on it.

The Marshall Islands announced today that they will be issuing a digital version of their national currency, The Marshallese Sovereign, built on top of our portfolio company Algorand‘s blockchain.

The Marshall Islands claims that theirs will be “the world’s first national digital currency.” I suspect it won’t be the last.

#blockchain#crypto

USDC

I just bought some US Dollars today. I do that many days. But the dollars I bought today are crypto assets, like Bitcoin and Ethereum. These US Dollar assets are called USDC and they are issued by an industry consortium called Centre, led by Circle and our portfolio company Coinbase. I expect many other companies will join the Centre consortium in the coming months and years.

I have been waiting to buy USDC for quite a while. As a NY State resident, I was prohibited from buying them on Coinbase, where I like to buy and hold my crypto assets. I read this morning that the NYS DFS had finally greenlit the sale of USDC to NYS residents and I went to Coinbase and made my purchase.

USDC is a stablecoin, like Tether or Libra. It is designed such that it has a stable value. I bought my USDC tokens for a dollar each this morning. The idea is that I will be able to sell them for a dollar each in an hour, a day, a week, a month, a year, or a decade.

They way Centre does this is they have a reserve. Everybody that spends dollars to buy USDC invests those dollars in the USDC reserve. And so when I want to sell USDC, the reserve is there to supply real dollars to me. The USDC reserve is audited and you can see the audit reports here.

So why would I want crypto dollars vs paper dollars or dollars in a bank account? Well for one, crypto dollars, like other crypto assets, ride on crypto rails. I can send my crypto dollars from my Coinbase wallet to your Coinbase wallet, your Ledger wallet, or many other crypto wallets.

USDC is built on Ethereum and is an ERC-20 token. So it uses crypto standards to ride on these crypto rails.

But more than all of that, USDC are programmable dollars. This is a big deal. Kind of like the difference between an MP3 file and song on a cassette tape. Once an asset is natively digital, without any strings attached, and can be programmed and routed digitally, interesting things happen.

If you have cash balances in your Coinbase account, consider using at least some of them to buy USDC. Then send them around to friends and family. It will feel like using Venmo today. But that is just the start of a lot more to come once programmers start building apps that accept USDC and other crypto assets.

We are emerging from a two year crypto winter right now. Lot’s of interesting things are starting to happen. It’s exciting to see.

#blockchain#crypto

A SEC Safe Harbor For Crypto

SEC Commissioner Hester Pierce proposed a “safe harbor” for crypto projects that raise money before they are sufficiently decentralized.

I am a big fan of “safe harbors”and wrote a bit a few years ago about why I like them so much and why a crypto safe harbor is such a needed and good idea.

There is a chicken and egg problem in financing crypto projects. These projects need investment capital and community involvement/buy-in to get to market and begin the process of decentralization. But the SEC views crypto-tokens as securities until the crypto-networks are sufficiently decentralized. And so crypto projects get stuck in this never never land and have to craft crazy frankenstein financings or risk getting sued by the SEC (and/or both) in order to raise money and get their tokens in the hands of community members.

I encourage the SEC to take Commissioner Pierce’s proposal seriously and adopt a workable safe harbor for crypto projects here in the US. We have seen the crypto capital markets and so much of the innovation in the sector move offshore and a safe harbor would be incredibly helpful in getting it back onshore (I couldn’t help the nautical metaphor).

#blockchain#crypto#policy

The Filecoin Testnet Is Live

Our portfolio company Protocol Labs is the creator of the IPFS protocol and the Filecoin protocol. The idea behind both of these open source projects is to decentralize the storage of information on the web.

The Filecoin project is very ambitious. The idea is to create a decentralized storage network by allowing anyone to mine Filecoin by hosting files on the Filecoin network.

Yesterday the Filecoin project announced that the Filecoin Testnet is live. This means that an “alpha” version of the Filecoin network is up and running and anyone can connect to it and use it.

Filecoin has been 2 1/2 years in development since the project was funded in the summer of 2017. The launch of the testnet signals that the research and design phase is over and the protocol is now making it way towards going live next year.

This is a story that is playing out all across crypto. Many high profile projects were funded in 2017 and 2018 and have been heads down designing and building their protocols and networks since then.

Getting these projects out of development and into the market is a big step for the crypto sector and I believe that will be a big theme for crypto in 2020.

#blockchain#crypto