Posts from crypto

DefendCrypto.org

Over the last year, the SEC has been investigating a significant number of token offerings that took place in 2017. While some of those offerings were scams or worse, many of the ones that are being investigated by the SEC are serious projects, started by some of the top cryptographers and computer scientists in the world, and backed by the leading token funds and venture capital firms in the US and around the world.

Sadly, the SEC looks at crypto tokens and sees securities that they want to regulate as such. They cannot seem to understand that not all of these assets are securities, they cannot seem to understand that most are commodities, currencies, or utilities like frequent flyer miles. They cannot understand that crypto tokens are unlike any assets that have come before them and that crypto tokens need new regulatory structures. They cannot understand that their unwillingness to come up with new rules paired with their “regulate by enforcement” strategy is hurting the crypto sector, pushing it offshore, and is causing most of the new projects to raise capital outside of the US and/or put together legal structures that look like Frankenstein monsters.

I have seen this play out in multiple projects and also in the exchange sector, which I posted about over the weekend. For as long as I have been involved in the crypto sector, I have been advocating and advising that companies work with the SEC, cooperate with them, and educate them. But that has not worked. I am frustrated. So are many others. Even one of the SEC Commissioners has gone public with her frustrations.

One of the crypto projects that the SEC has been investigating, where I have had a front-row seat, is the Kin project that was birthed by USV’s portfolio company Kik, where I am on the Board.

Kin is a digital currency (not a security) that is in use in over 40 mobile apps now. Last month over 1mm users earned Kin in one of those mobile apps and over 300,000 users spent Kin in one of those mobile apps. Kin is one of the most used crypto currencies in the world.

And yet the SEC won’t agree to settle with Kin on reasonable terms. Instead they want to force Kin to become a security, which would decimate its appeal as a digital currency. Imagine that a user had to go to a securities brokerage firm like Schwab to purchase a token in order to be able to use Apple’s App Store. That is crazy and yet that is essentially what the SEC wants Kin and many other crypto projects to agree to do.

So today, Kin has launched DefendCrypto.org which is a crowdfunding effort to fight the SEC in court. Kin has contributed $5mm worth of BTC, ETH, and Kin to the effort. And others are contributing their crypto assets as well. You can do so here. I have contributed a number of my crypto tokens to the effort this morning.

Whatever funds are raised by DefendCrypto.org will be used by Kin to fight the SEC in court, to help secure a favorable ruling that could well set a precedent for the entire sector. Any funds that are left after this legal battle will be set aside for other similar legal efforts in the crypto sector.

It is my hope, and Kin’s hope, that DefendCrypto.org will be an inspiration for the many other important crypto projects that are silently battling with the SEC to come public and raise capital from the crypto sector for their fights.

The SEC is regulating by enforcement, not new rulemaking, and worse, they have taken a divide and conquer strategy. It is time for the crypto industry to come together and fight back. I hope that Kin’s efforts with DefendCrypto.org represent a watershed moment/movement that will pressure the SEC to think and act differently toward this important new sector.

Custody, Trading, Staking

In our talk at Consensus last week, we talked about security in crypto land.

There are a few highly trusted custody services in crypto, including the popular consumer and institutional custody services offered by our portfolio company Coinbase.

These companies have invested tens of millions, sometimes more, in building highly secure storage systems to keep their customer’s crypto assets secure.

There are also exchanges all over the world that people can use to trade crypto assets. While they may be great places to trade, they are often not great places to custody your assets.

And then there is “staking” which is a term I am using for all sorts of validation services that crypto holders are increasingly doing to secure networks that use proof of stake and other approaches to consensus. There are and will be more staking services that crypto holders can use to participate in these services and get paid for doing that.

Again, these staking services many not be great places to custody your assets.

What is emerging are different services that specialize in different parts of the crypto economy.

There will be best of breed offerings in each sector and there will be a few, like Coinbase, that will offer leading services across all of these sectors.

The nice thing about crypto is it is programmable money. It should be possible, and I think it will be possible, to use one service for custody, another for trading, and a third for staking.

But it has to start with custody. If you own crypto assets, you need to secure them. And that is often not at the place you trade them.

Cheeze Wizards

Our portfolio company Dapper Labs, the maker of the popular crypto-collectible game CryptoKitties, is back with their second game, called Cheeze Wizards, also built on the Ethereum blockchain.

Cheeze Wizards is in “pre-sale” mode right now. You can “summon” your wizard in anticipation of the game which will be played this summer.

I summoned a wizard this morning from the fire wizards region. I spent a bit more than half an ETH on it and I am ready to rumble.

Dapper built this game for crypto enthusiasts who will be drawn by the large prize pool (322.6 ETH right now and growing) and that is why some of the most powerful wizards (like mine) are quite expensive. That said, you can summon a “neutral” wizard for 0.07 ETH right now which is less than $20. The focus on a smaller number of higher value players fits with where Ethereum is right now in its scaling efforts.

The best way to play Cheeze Wizards is to add the Dapper wallet to your browser. You can do that here. Then send some ETH to it from your Coinbase account (or any other place you hold crypto). Then go to Cheeze Wizards, you will log in with your Dapper wallet, and you are ready to summon your wizard.

The folks at Dapper wrote a great blog post explaining why they made Cheeze Wizards, how it works, and what they hope will happen with it. That post also reveals a lot about where Dapper is heading with CryptoKitties, Cheeze Wizards, and all of the other games they have under development right now.

Video Of The Week: Consensus 2019

This past Wednesday, I appeared on stage at Consensus 2019 with Paul Vigna of the Wall Street Journal and Brian Armstrong, CEO of our portfolio company Coinbase.

The topic we were supposed to discuss was why crypto has been so full of bubbles and crashes. We did talk about that but we also talked about a lot more. The discussion is about a half hour.

Public Speaking

I don’t do as much public speaking as I used to. Fortunately my colleagues at USV have picked up the slack and we are still out there telling the world what we believe in and why. I think that is critical to building the brand of an investment business.

Because it is Blockchain Week in NYC, I have done a number of public speaking events this week and have two more today. I also did something up at Columbia University last week for a friend and do a fair number of public appearances for the K12 CS Education work I do.

All of that has had me on a stage a lot in the last week and reminded me that there is an art to public speaking. I have also witnessed a lot of people doing it poorly this past week.

I have three main rules that I try to live by:

1/ Be brief. It is possible to make a point in less than a minute. But many take five or ten minutes to do it. In a world where people take their phones out the minute they are bored, you simply can’t take a long time to make a point.

2/ Be bold. Stake out positions that will stimulate debate and get people talking. I am not suggesting that you should take a position you don’t believe in. But I do think it is important to go out on a limb from time to time.

3/ Have fun. Show your personality. Smile. Laugh. Enjoy it. The audience will pick up on that and it will make it more fun for everyone.

I have also taken to doing a lot of interviewing lately. When I get asked to make an appearance, I often ask if I can do the interview instead of being interviewed. I usually turn those into public conversations and that is a lot of fun and, I think, works for the audience too.

I am interviewing Olaf Carlson-Wee, the founder of the Polychain token fund, today at The Token Summit. I plan to have fun and will work to keep it snappy and provocative.

Crypto Spring?

On Monday, I wrote:

With the crypto winter seemingly coming to an end and spring on the horizon,

So why do I think winter is behind us and spring is on the horizon?

Well you can see in the chart of the entire crypto market that there has been a meaningful move off of the bottom in the last five months.

The entire crypto market hit the low point in mid December at roughly $100bn and has rallied over the winter and spring to almost $250bn. While there is no guarantee that we won’t go back and test those lows, I do think we hit rock bottom in December.

It is also worth noting that the daily trading volumes are now higher (almost double) than they were at the height of the crypto bubble in January 2018. Investors are back in the market and pushing it higher.

And this is not just about Bitcoin. Here is the total market minus Bitcoin:

It is a very similar chart with very similar volume activity.

The most exciting thing to me is what you don’t see in these charts and that is the fact that many projects have been quietly building out their systems over the last 18 months and we will start to see new public blockchains and protocols go live over the next 6-12 months that will show the power of new ideas and new technologies that are coming to market.

I love spring.

Blockchain Week NYC

It is that time of year again, when the entire crypto sector comes to NYC. It is called Blockchain Week NYC and there are a dozen or more industry events like the Coin Center Annual Dinner, The Third Annual Token Summit, Consensus, Women On The Block, and many more.

There will also be breakfasts, dinners, company sponsored events, etc, etc.

I will be at many of these events, speaking at a few of them, and am excited to see the crypto sector live and in person this week in NYC.

With the crypto winter seemingly coming to an end and spring on the horizon, it is a great time to take stock of the sector and get excited about it again. Except that I never lost my excitement. Sometimes you just need to hibernate for a year and last year was a good one to do that.

Finally, I am so pleased that NYC was able to secure the spot where the crypto industry comes together once a year. It makes sense that crypto would be big here, given the financial services talent, engineering talent, and commercial sensibility that has always been resident in this town.

If only our regulators in NYS would be as excited about crypto as I am and everyone who is coming to NYC this week is.

Crypto Fashion

Two of the more interesting and “out there” trends in tech are NFTs (non fungible tokens) and virtual celebrities.

So it was only a matter of time before developers started to work at the intersection of them

Virtual celebrities are characters made out of software that exist in games, social media, streaming audio and video, etc who have large and rabid fan bases. Here is an example of one.

Miquela

NFTs are crypto-assets that are unique and can only be owned by one person at a time. A well-known example is a CryptoKitty.

So I find it interesting that today an instagram celebrity (a real one) has chosen to wear an outfit that is actually an NFT and can be sold and owned by one of her fans.

The celebrity Johanna Jaskowska is wearing a dress that is actually a unique crypto-asset. It is “the world’s first couture digital outfit on the Ethereum blockchain.” She announced that today on her Instagram channel.

This is Johanna wearing crypto fashion:

I am interested to see if this idea takes off. The worlds of gaming, social media, AR/VR, and crypto are going to get richer and more lifelike over time. So I suspect something like this will eventually work and go mainstream.