Posts from crypto

Staying Plugged In

I wrote in my 60th birthday post that my late career mantra is less hustle more conviction. It has been working for me and has kept me in the game.

But there are times, usually after an opening emerges, when a market moves so fast it is hard to stay on top of it all.

I don’t worry about missing out. That’s part of the venture capital business. Fear of missing out is a counterproductive emotion and I refuse to engage in it.

But I do worry about not understanding what is going on. When you stop understanding things, you are done. There is no way to be a great investor if you have no clue.

It is possible to surround yourself with others who can help you understand what is going on. I do that and I have terrific colleagues who keep me engaged in what’s happening. These colleagues are inside USV and also spread around many other firms too.

But at some level, you have to understand things yourself. Osmosis only works to a point. I find that you have to get your hands on the technology, use it, and feel it to understand it.

And that is the hard part when things go bananas as a market opens up. Less hustle works against you. And you have to find a way to engage in it all. That’s where I am right now.

#crypto#VC & Technology

Bright Moments DAO

Occasionally, I will write at USV.com and today is one of those days. I wrote about an investment in a DAO called Bright Moments that we made this week. DAOs are interesting and we plan to do a bunch of DAO investing going forward. You can read the post here.

#crypto

Splitting Ownership and Display/Consumption

I wrote about NFTs last week and said this in that post:

But when a party emerges online that anyone is invited to attend and the 500 person group picks up a punk with a party hat and they all change their social network avatar to this, well that got my attention.

https://avc.com/2021/08/the-opening/

Fractional/collective ownership is something we have been interested in at USV for a while. It fits well with our thesis about expanding access. We have an investment in Otis that is providing fractional ownership for collectibles and NFTs.

But there is an important difference between fractional/collective ownership of physical and digital goods.

When you purchase a share of a 1985 Air Jordan collection, as I did, you can’t showcase it in your home or office. It is shared ownership with many others. So it goes to a gallery or somewhere it can be shown publicly. That’s fine but somehow less satisfying than having it in your home or office for everyone who comes to visit you to see.

Contrast that to what happened with the punk. Everyone who bought it put it on their Twitter avatar. They collectively displayed it on their own digital property.

That is because of an important point my partner Albert made in this post a few months ago.

The underlying misconception here is to think that in the digital world copies are indistinguishable from originals. In a trivial sense this is true. Let’s say you copy a digital artwork, you will now have exactly the same bit sequence as the original. But in a much more profound sense it is not.

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

What NFTs do for digital art (images/Punks, videos/Top Shots, music, animations, etc, etc) is they separate the concept of ownership and the display and consumption of them. The ownership is on a public secure ledger. The display and consumption of them is out in the open for everyone to see and hear and more.

That’s not something that is easy to wrap your head around but it is profound.

#art#crypto#Film#Games#Music

Dune.xyz

Dune.xyz is a community of crypto enthusiasts, analysts, and investors who use the open data available to all via public blockchains to create charts and other analyses to understand what is going on in these systems.

One of the most important differences between blockchain-based systems and traditional web-based systems is that the blockchain has an open data layer. That means that we all control our data when we use a blockchain-based system. But it also means that this shared data layer is available to all to observe, measure, and analyze.

Here are some examples of community-built charts:

The P&L of the Maker lending system:

A time-based comparison of trading volume on the leading AMMs:

What is interesting and different about Dune vs traditional analytics services is that everything is built on open data. There is no proprietary data involved. And this is as much a community (like Reddit or Wikipedia) as an analytics service.

USV recently participated in a financing for Dune.xyz and we plan to start using it to observe and analyze blockchain-based systems that we are involved in and interested in.

It makes sense to me that analytics tools for blockchain-based systems will be open, community-driven, and composable. And that describes Dune.xyz.

#blockchain#crypto

The Opening

I like to think of investing in new things a bit like a football running play. Imagine you are the running back. You’ve been handed the football and you are looking for a hole to open up and run through. What you really want is some running room beyond the opening.

We’ve known for a while that crypto is the next big tech architecture. We’ve known that once the wave breaks on the shore, there will be enormous opportunities unleashed. Like the web. Like mobile. Like the PC.

But what has been hard to see is the opening. It wasn’t trading/speculating, although that has been huge. Coinbase announced yesterday that 68 million verified users. It wasn’t DeFi, although that has also been huge.

What we have been looking for is the consumer opportunity to emerge. Until you have billions of consumers around the world using a technology, you don’t have a new wave to ride. So like the running back, you wait and hope you don’t get hit.

But in the last few months, the opening is emerging. In slow motion. I can see the left tackle move his man off the line. I can see the left guard move his man off the line. And there is running room. The defensive backs are on the other side of the field.

I’ve always thought the opening would be at the intersection of gaming, online communities, and social networks. Why? Because those are the mainstream consumer experiences where geeks tend to be the first adopters.

But it is hard to take on the existing gaming companies with a new architecture. The user experience around new stuff always sucks and who wants to play a game with a shitty UI? It is also hard to take on the existing social nets. Why would someone with a million followers on Instagram or TikTok or Twitter leave those behind for a new social net? So the existing incumbents are the defensive line. They look impenetrable. Until they aren’t. That’s when the opening emerges.

The opening is emerging around NFT experiences, something we’ve been excited about for quite a while now. But not the NFTs that Sothebys sells for $69mm. Not even the CryptoPunk that sells for $7.5mm. But when a party emerges online that anyone is invited to attend and the 500 person group picks up a punk with a party hat and they all change their social network avatar to this, well that got my attention.

PartyBid is cool. That’s why I wrote about it on Friday. TopShot is cool. And so is Axie. And so is the Bored Ape Yacht Club. But what is cooler is that these NFT experiences are operating at the interaction of gaming, communities, and social nets. And they are not taking on any of the incumbents directly. They are building on top of them all.

I am not saying NFTs are the next big thing. I am saying that consumer experiences built on a crypto stack are the next big thing. I am saying that NFT experiences are showing the way. They are the left tackle that you can run behind into the opening. Where enormous opportunity exists.

#blockchain#crypto

Crypto and the Infrastructure Bill

I mentioned the infrastructure bill here last week. I continue to be impressed by the way Senators and the White House are working across the aisle to get a very big piece of legislation across the finish line. It is not done, but it sure looks like it will get done.

As I mentioned in the post last week, there is language in the initial draft of the bill requiring crypto “brokers” to report gains and losses to the IRS. The Treasury expects this provision to produce upwards of $30bn in new tax revenues over the next ten years.

I personally have no issue with crypto gains and losses being treated the same as stock gains and losses and we have been doing that at USV for quite a while now. But I do have concerns that the way “brokers” are defined in the context of crypto is very different than how it is defined in the traditional financial sector. The language in the initial draft is overly broad, infringing on privacy, and technically unworkable. Crypto industry participants like miners, wallets, smart contracts, and other kinds of hardware and software cannot carry the same obligations as “brokers” like Coinbase and Square Cash.

But here is the good news. The crypto sector has come together to get the language changed in a way that I have never seen before. Everyone in crypto is working together, staying on message, working all of the avenues, and creating the appropriate amount of pressure on the process. And while we do not yet have the language we need, we are getting there and I am hopeful that we will land in a good place.

It is also the case that when a government decides that a sector is an important producer of revenues, that is a sign that it has arrived. Many out there think these new regulations are bad for crypto but I think they are a bullish sign. Crypto is here to stay and is a mainstream industry now.

For these reasons, I think this is a watershed moment for crypto in the US. The industry has come together like never before and is acting in concert, professionally and productively. It is on message and effective. And the government is getting in business with the crypto sector to finance it’s own needs. That sounds like a win to me.

#blockchain#crypto#policy#Politics#Uncategorized

Stablecoins vs CBDCs

I have written about stablecoins in the past. I think they are a very important part of the crypto asset landscape. Two of the top ten crypto assets by market cap are stablecoins, Tether ($62bn) and USDC ($27bn). You don’t buy these assets to generate gains because they are price stabilized. You hold them like cash, to be able to move in and out of trades, purchase things, etc.

Countries around the world are looking at stablecoins and thinking “we should issue these assets via our central banks.” That is called a “central bank digital currency” or CBDC for short. China is the farthest along on a CBDC but many other countries around the world are thinking about CBDCs or building them.

Yesterday, SEC Commissioner Hester Pierce suggested that stablecoins are preferable to CBDCs.

Hester focused on the privacy concerns around CBDCs, and I agree with her that I would rather hold USDC than a Fed issued digital dollar.

But there is another more important reason to want stablecoins to win over CBDCs – competition.

When you have competition, you get innovation, new features, composability, and a host of other important benefits. When you have a monopoly, like the US Government or any government, pushing out the alternatives and forcing us to use their digital dollar, you lose all the value of competition. And that would be a terrible thing.

I am all for central banks issuing digital currencies. But they should compete for our usage with market-based stablecoins. Then we get the best of both worlds. I hope policymakers in the US and around the world understand the importance of competition and allow stablecoins to co-exist with CBDCs.

#crypto#policy

Funding Friday: Ethereum: The Infinite Garden

ETHEREUM: THE INFINITE GARDEN is a “feature-length documentary film that explores the innovative real-world applications of the Ethereum blockchain, the die-hard community of enthusiasts and developers, and its creator, Vitalik Buterin, whose vision for the internet has the potential to change the world.”

The film is being crowdfunded on the Ethereum blockchain and the campaign ends at 6pm eastern time today.

When you choose to back the project, you will have a choice to pledge one ETH and get an NFT from the film or pledge less and get a token recognizing your contribution.

I backed the film earlier this week and as of this morning, the film has raised 500 ETH of the 750 ETH goal.

You can back the film here.

#crowdfunding#crypto