Posts from blockchain

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:

The Cloudflare Ethereum Gateway

Last year, during its annual “crypto week”, our portfolio company Cloudflare shipped an IPFS gateway. I wrote about that then.

This year, they have shipped an Ethereum gateway.

It is great to see a very large Internet infrastrcuture provider build and ship crypto gateways.

If you are a small developer looking to create decentralized applications, having a web-scale provider offering IPFS and Ethereum gateways is really helpful.

I expect to see Cloudflare continue to extend the number of crypto protocols they support with their gateways.

And that will be part of what needs to happen to get to a world of truly decentalized applications.

If you are interested in developing on the Ethereum protocol and want to understand how the Cloudflare gateway works, this blog post explains it well.

Why USV is Joining the Libra Association

A new blockchain & cryptocurrency project, Libra, was announced today. Libra has been incubated by Facebook. USV will be one of the founding members of the governing body, the Libra Association. Libra is a stable, fiat-backed cryptocurrency that will launch inside some of the world’s largest consumer-facing applications. We believe Libra has the potential to be the catalyst that brings the entire cryptocurrency and cryptoasset market into the mainstream.

When USV invested in Coinbase in early 2013, our rationale was that digital currencies and digital assets (like Bitcoin and beyond) were a breakthrough technology, similar to TCP/IP, HTTP and SMTP. But we also knew that it would take significant investment in the surrounding infrastructure to make them useful for businesses and consumers, just like it did with the Web back in the 80s and 90s. At the time of that investment, we wrote:

“There is much that must be built on top of of these digital currencies to make them work well enough to support real business at scale”

This has proven to be true. If we look back at the past 10 years since the invention of Bitcoin, we have seen a lot of infrastructure built to support an increasing variety of use cases. But there is still a long way to go.

We think about the crypto sector as the intersection of Finance 2.0 (“Money Crypto”) and Web 3.0 (“Tech Crypto”), and what we have seen is that the “Money Crypto” use cases have been the earlier to materialize, especially “slow money” use cases (those that don’t require high throughput):

For consumer use cases (including both Finance 2.0 and Web 3.0 use cases), the biggest barrier to date, beyond technical scalability, has been the rollout of crypto wallets to mainstream consumers. As of today, there is still no mainstream web browser with crypto built-in, no mainstream phone with crypto built-in, and relatively few mainstream applications with crypto built-in. As that changes, crypto assets have the potential to move from being curiosities for enthusiasts to being default internet and financial infrastructure.

Once we have crypto-compatibility built-in to applications, browsers, and phones, many new behaviors and use cases will emerge. The financial system, in general, will become more accessible (smartphone adoption is outpacing bank account adoption globally). Payments can become faster, more reliable and less expensive. Magical new user experiences will be possible due to interoperability and reduced friction, the same way that the Web’s native interoperability unlocked countless new use cases and experiences. And, perhaps most importantly, we will open the door to self-sovereign digital identities (private keys) that are the underpinnings of user-controlled privacy and control of data.

So as we think about the potential drivers for mainstream crypto adoption, a simple, fully-collateralized, cryptocurrency used inside the world’s largest applications, touching hundreds of millions or billions of consumers, is perhaps the most promising one. It is our hope that Libra will serve as a major on-ramp to cryptocurrencies and cryptoassets, to the benefit of the entire ecosystem.

USV will be joining as a founding member of the Libra Association, the governing body that will manage both the Libra technology and the Libra Reserve. As one of the initial 20 members of the Association, we will have the opportunity to participate in design and policy choices that will shape the network. It is worth noting that Facebook will be just one equal member of the Association, which was an important factor in our decision to join.

This will be a large and complex undertaking, as there are many unresolved and challenging questions, involving the technology itself (security, privacy, path to decentralization), the regulatory environment, and the nature of the ongoing governance. In some ways, the initial Association resembles a constitutional convention, where the main goal is to draft the long-term governance mechanisms themselves.

To be clear, we view this as both an ecosystem investment and a financial investment. In addition to participating in the governance process at the Libra Association, USV plans to invest in the Libra Reserve, which will provide the stability for the currency. This is an unusual type of investment for us, but we have learned that investing in the crypto sector requires us to explore a variety of new investment structures.

We appreciate that Facebook invited USV to be an initial founding member of the Libra Association and we take our role in that seriously. We will advocate for those things that USV values most: openness, transparency, decentralization, and permissionless innovation. We think that those features will help accelerate adoption within the entire crypto ecosystem — including our many existing investments in the space — and also help Libra succeed in its goals.

This has also been posted on usv.com.

Audio Of The Week: How About Howey?

This Unchained Podcast with Patrick Gibbs of the law firm Cooley and Ted Livingston founder of the Kin cryptocurrency project is a great discussion of the Howey Test that the SEC has put forward as the framework through which to evaluate whether a crypto token is a security.

Here are links to some interesting parts of the discussion:

1/ Ted Livingston explains who Howey was and the details of that case.

2/ Patrick explains why Kin (and most crypto tokens as well) is not a security.

This is the kind of stuff that mostly interests law nerds, but it is very relevant to all developers who are building crypto tokens and putting them out into the market. So it is worth getting knowledgeable about this stuff.

And if you want to support this Kin case as it works its way through the court system and ends up creating a new precedent that could supersede Howey, you can do that here.