Posts from crypto

The Demand Side Of A Crypto-Network

I was purchasing some domains with Ethereum yesterday and ran out of funds in my wallet and went to Coinbase to buy some more ETH. The price was approaching $3000 and I thought to myself, “the demand side of this network is exploding.”

The way crypto-networks work is that the supply side gets built first with incentives to mine, validate, stake, etc. This has been going on for over a decade now. People started mining Bitcoin twelve years ago.

The demand side of most crypto-networks has been dominated by buying, holding, and speculating for those twelve years. There is nothing wrong with that. Buying, holding, and speculating has provided the funding to pay for building out the supply side of these networks.

But I think that is changing now, certainly with Ethereum and a number of other crypto-networks. You need ETH to do things on the Ethereum network. And people are doing things on it; buying domains, peer-to-peer lending, buying art, racing horses, etc.

The more people use ETH, the more the demand side grows, and the value of Ethereum goes up.

Of course, we could be witnessing another speculative wave, but it feels different to me this time. I think the demand side is taking off now.

Disclosure: Long ETH personally and professionally

#crypto

Sending Crypto To India

I saw this tweet in my feed yesterday and I sent some ETH to India this morning.

Sandeep followed with a bunch more wallet addresses to use if you want to send other crypto assets:

With the pandemic easing in the US, thanks to vaccines, we cannot turn a blind eye to what is happening elsewhere, particularly India.

I appreciate the crypto community, which is global, stepping up to do this and I encourage anyone with some crypto to participate.

And we finally found something useful to do with DOGE coins.

#crowdfunding#crypto#Current Affairs#hacking philanthropy

Funding Friday: Burn Alpha

Emily Segal is writing her next novel called Burn Alpha and she is crowdfunding it on her Mirror blog.

I contributed 0.1 ETH to the effort yesterday evening and she is now approaching her 25 ETH goal.

If you have an Ethereum wallet, like Coinbase Wallet or Metamask, you can participate in her crowdfunding project here. The rewards are pretty cool as is the premise of the novel. You can see all of that on her blog.

If you read this post on my Mirror blog, you will see the crowdfunding project embedded in this post. That’s pretty cool too.

#Books#crowdfunding#crypto

Dapper Labs, Flow, and NBA Top Shot

I have written about all of these things here at AVC before. But I am writing again as there is likely to be a bunch of chatter about Dapper, Flow, and NBA Top Shot as the news of a financing round comes out today.

Financings don’t really interest me but companies do. And this is a fascinating company.

Dapper Labs came out of an incubator called Axiom Zen back in 2017. The Axiom Zen team was looking at interesting things they could build using Ethereum. They contributed to the ERC 721 standard for non-fungible tokens and started building an NFT collectible game that became Cryptokitties. That got our attention and led to a financing that spun out the team and Cryptokitties into Dapper Labs. I wrote a short post on the USV blog announcing that we had invested in Cryptokitties, but in truth, we invested in much more. We are only seeing the entire vision now.

After building a few more collectible experiences on Ethereum, the Dapper Labs team concluded that the NFT experiences they wanted to create needed a different blockchain and they started building Flow. Flow is a proof of stake blockchain that was designed from the ground up for consumer experiences that require scale and performance and more.

And then they started building NBA Top Shot on Flow. That required a deal with the NBA which they made happen a few years ago. And it required Flow to launch. And it required a crypto wallet experience that was tightly integrated into the game that allowed new users to fund their wallets with credit cards in addition to crypto assets. Building all of that was quite a task but they got it all done by the middle of last year and launched NBA Top Shot into beta last summer.

Slowly but surely Dapper let more users into NBA Top Shot and iterated on the experience and by the end of the year, they had a hit on their hands. Hundreds of millions of dollars of transactions a month happen between collectors on NBA Top Shot. Pack drops sell out more or less instantly.

The success of NBA Top Shot has led many developers to Flow seeking to build additional collectible experiences and I expect that we will see many more great games and experiences on Flow in the coming months and years.

It is rare in the crypto sector to find a team that has successfully launched a blockchain, a wallet, and a number of popular applications. The Dapper team has done all of that and I am excited to watch what they do next.

#blockchain#crypto#digital collectibles#Games

Digital Art Frames

I have a Samsung Frame in my home office. I think I posted a photo of it here at AVC once before. But for those who did not see that post, here it is:

I’ve had it for something like three years and I change the digital art on it from time to time.

Digital Art has been tricky to purchase and own and the business models around it are a bit challenging.

I think NFTs might change that. If artists can get paid for the “original” or a “limited edition” and then make copies free or near free, then I think the digital art market could explode.

My partner Albert posted about NFTs a week or so ago and made an important point that I think is a bit lost in all of the hype/mania about NFTs right now:

This is what NFTs do for digital content. They let someone assert “I am the Louvre” (for that piece of content).

This is not a fad. It is a fundamental and profound innovation.

https://continuations.com/post/645017712412786688/a-word-on-nfts

Go here and read the entire thing because “the Louvre” is a bit out of context in that quote. His point is that crypto/blockchains allow for someone (or a group) to own the original(s) and everyone else to own copies that are as good as the original.

And that is the kind of thing that could make owning digital frames really awesome.

#art#crypto#non fungible tokens

Crypto and Climate Continued

I wrote about crypto and climate earlier this month and suggested that the narrative that crypto is bad for the climate is not as straightforward as many make it out to be.

Over last weekend (a beautiful one in the northeast), two of my partners wrote on this topic.

My partner Albert took a similar approach as I did in my post and outlined many reasons that crypto and climate are not at odds with each other. He went further than I did in my post and it is worth reading his, even though they are similar.

My partner Nick went out on a limb and compared Bitcoin to a battery. He used that analogy to be provocative. He took some heat for doing it, but I think it was worth it because you sometimes have to stake out a provocative position to get people’s heads to turn a bit on something.

This is the key part of Nick’s post:

Which brings us back to crypto mining. Crypto mining converts electricity into value, in the form of crypto assets (BTC, ETH, etc). Those assets, like the aluminum produced in Iceland, can then be moved, transferred and transformed. But unlike aluminum, which must be physically shipped to its final destination, crypto assets are programmable, and can move there instantly via an internet connection.

So, if we think of Bitcoin as a battery, what can we do with it?  The key properties of Bitcoin’s battery are: 1) always on and permissionless (no need to find customers, just plug and go) and 2) naturally seeking low-cost electricity: it will always buy when the price is right.

https://www.nickgrossman.xyz/2021/bitcoin-as-battery/

We have been addressing this topic (crypto and climate) for multiple reasons. First, because we believe the narrative in the mainstream media is too simplistic and we would like to see it evolve. And second because we know that there are many entrepreneurs out there that are working with crypto to help address the climate crisis and we would like to meet them.

Nick and Albert’s posts last weekend opened the floodgates on the latter point and we are now talking to a number of very interesting projects as a result.

#climate crisis#crypto

News Moments

There are these news moments that we remember vividly forever. The plane flying into the World Trade Center. The mob breaking into the Capitol. Reagan at the Berlin Wall. Just writing the words, I can see the images in my head.

Our portfolio company Recount Media is all about these moments. Recount captures them quickly and concisely and shares them on social media and other digital platforms so that the world can see what is going on around them.

Today, they are trying an experiment that I am quite interested in. They have taken one of their most-viewed news moments, one they published exactly one year ago today, and they have minted it into a one-of-a-kind digital news moment and are offering anyone the opportunity to own it.

The auction is going on here and I just placed a bid. My goal is not to win this auction, although it is possible that I could. If I do, I will contribute it to a DAO that would allow group ownership.

Recount explains why they are experimenting with NFTs here. I particularly like this line:

So as we approached the one-year anniversary of the Calendar, our first runaway viral video, we thought it would be fun to celebrate that breakthrough in a manner that itself is an expression of our relentless aspiration to rethink how journalism works — its form, function, and economics — in this moment of intense fluidity and flux in digital media.

One of the challenges with digital media is the limited business models available to news organizations. You either sell ads or subscriptions, or both.

Who knows whether minting news moments can help stimulate new business models, but it sure can’t hurt to try. Sticking to the old ways of sharing the news and making a business out of it is not interesting to me. Coming up with new ways of sharing the news and making a business out of it very much is.

#crypto#Current Affairs#digital collectibles#entrepreneurship

Crypto and Climate

I keep reading that Bitcoin, Ethereum, NFTs, etc are a climate issue.

It is true that proof of work mining which secures the Bitcoin and Ethereum blockchains uses electricity to do that work. And certainly there are carbon emissions associated with that electricity consumption.

However, it is not as simple as that for the following reasons:

1/ Proof of work miners are constantly seeking the lowest cost of electricity to mine with. That leads them to electricity sources like geo, hydro, solar, and wind. There is a meaningful financial incentive to mine on clean energy in many cases.

2/ The Ethereum blockchain is moving to proof of stake and moving away from proof of work. Many other popular blockchains, like the Flow blockchain that powers NBA Top Shot and other NFT experiences, already use proof of stake. Proof of stake consensus uses vastly less electricity to secure the network.

3/ There is a narrative that much of China’s Bitcoin mining happens on coal powered electricity, but I have read that most of it happens on China’s overbuilt hydro capacity.

4/ Proof of work mining can stimulate the buildout of clean energy capacity because it can produce immediate monetization of that capacity.

It is time for the crypto industry to study this issue carefully and provide real data. I would like to see carbon emissions from proof of work mining measured over time and projected into the future.

#climate crisis#crypto

Digital Art

My friend Seth is an entrepreneur and an artist. I have two of his paintings hanging in my office in NYC. His latest work is taking photographs of the sunset every day at Venice Beach and then training an AI model to turn it into a 30 second video. The work is published in a MP4 video. Therein lies the challenge. Anyone can copy an MP4 video so how does he make this work unique?

He turns it into a “non fungible token” or NFT.

I have written about NFTs a lot here at AVC over the years, most recently on how our portfolio company Dapper has used them to invent a new kind of basketball trading card.

But NFTs are also a very powerful tool for digital artists to bring scarcity/uniqueness to their work. And we are seeing a fair bit of activity starting to happen in and around digital art and NFTs.

Seth minted an NFT of his work and listed it for sale yesterday and then tweeted this out:

I saw that tweet and placed a bid on it this morning. If you would like to do the same, you can do that here (you will need a Metamask wallet holding Ethereum).

There is still some geekiness/wonkiness about digital art NFTs (like needing a Metamask wallet and Ethereum) and I expect that will go away in short order and the experience of buying NFT art will be more like the experience of buying a rare Luka Doncic Holo MMMX card on Top Shot which requires none of that.

Crypto technology has many uses and is absolutely not limited to speculating on meme coins. In fact, the emergence of real utility (vs speculation) is the single most important thing that needs to happen for crypto to live up to its potential (and current market values). I think NFTs and digital art is likely to be an early example of that utility emerging.

#art#crypto

The Revenge Of Retail

A number of people have been asking me what I think of the Game Stop situation. This is not really my world. I don’t trade stocks, we hold them. I don’t use Robinhood, though I have an account thanks to my friend Howard. I don’t hang out on Reddit, though I visit it from time to time.

So I have not paid enough attention to this one, but it certainly is fascinating. The generational aspect of this is important. Boomer hedgies getting crushed by young folks self-organizing in social media. It feels like a moment where you realize that the power structure has shifted and things won’t be the same.

The financial system in the US, and in other developed countries, is a rigged system and has been for a very long time. Only big institutions can get into hot IPOs. Only rich people can invest in startups. Many of these rules are designed to protect “widows and orphans” but all they really do is make the rich richer and keep those without money out of the game.

Not anymore. Whether it is crypto (Coinbase) or day trading (Robinhood), the retail investor now has the tools to get into the game and win the game.

The new startup investing is buying into the Ethereum crowdsale. Had you done that in the summer of 2014, you would be looking at roughly 1,000 times your money right now. And that crowdsale was launched by a team led by a 20 year old. Though the SEC and others would like to impose the same rules on crypto that protect the rich and keep out everyone else, that has not happened and I pray that it won’t.

The new hedge fund is the Robinhood army self organizing on Reddit. They can move a stock more easily than the largest hedge fund.

There will be calls to regulate this “madness.” But it is the same madness we have always had. It is just a different crowd in charge.

I do worry that this Game Stop short squeeze will end badly and not only the hedge funds will get hurt. Markets can be brutal. But regulating markets to protect the small investor is not the answer. As we can see, the small investor is often a lot smarter than the large investor.

What we need to do is stop printing money to stabilize the economy. And start addressing the real economic issues that exist on main street, not wall street. Monetary policy is not the answer. Fiscal policy is. That won’t stop more Game Stops from happening. They are a by-product of markets. But it will get the money to where it is needed versus where it is just gameplay.

#crypto#Current Affairs#economics#stocks