Posts from crypto

What Will Happen In The 2020s

It’s 2020. Time to look forward to the decade that is upon us.

One of my favorite quotes, attributed to Bill Gates, is that people overestimate what will happen in a year and underestimate what will happen in a decade.

This is an important decade for mankind. It is a decade in which we will need to find answers to questions that hang over us like last night’s celebrations.

I am an optimist and believe in society’s ability to find the will to face our challenges and the intelligence to find solutions to them.

So, I am starting out 2020 in an optimistic mood and here are some predictions for the decade that we are now in.

1/ The looming climate crisis will be to this century what the two world wars were to the previous one. It will require countries and institutions to re-allocate capital from other endeavors to fight against a warming planet. This is the decade we will begin to see this re-allocation of capital. We will see carbon taxed like the vice that it is in most countries around the world this decade, including in the US. We will see real estate values collapse in some of the most affected regions and we will see real estate values increase in regions that benefit from the warming climate. We will see massive capital investments made in protecting critical regions and infrastructure. We will see nuclear power make a resurgence around the world, particularly smaller reactors that are easier to build and safer to operate. We will see installed solar power worldwide go from ~650GW currently to over 20,000GW by the end of this decade. All of these things and many more will cause the capital markets to focus on and fund the climate issue to the detriment of many other sectors.

2/ Automation will continue to take costs out of operating many of the services and systems that we rely on to live and be productive. The fight for who should have access to this massive consumer surplus will define the politics of the 2020s. We will see capitalism come under increasing scrutiny and experiments to reallocate wealth and income more equitably will produce a new generation of world leaders who ride this wave to popularity.

3/ China will emerge as the world’s dominant global superpower leveraging its technical prowess and ability to adapt quickly to changing priorities (see #1). Conversely the US becomes increasingly internally focused and isolationist in its world view.

4/ Countries will create and promote digital/crypto versions of their fiat currencies, led by China who moves first and benefits the most from this move. The US will be hamstrung by regulatory restraints and will be slow to move, allowing other countries and regions to lead the crypto sector. Asian crypto exchanges, unchecked by cumbersome regulatory restraints in Europe and the US and leveraging decentralized finance technologies, will become the dominant capital markets for all types of financial instruments.

5/ A decentralized internet will emerge, led initially by decentralized infrastructure services like storage, bandwidth, compute, etc. The emergence of decentralized consumer applications will be slow to take hold and a killer decentralized consumer app will not emerge until the latter part of the decade.

6/ Plant based diets will dominate the world by the end of the decade. Eating meat will become a delicacy, much like eating caviar is today. Much of the world’s food production will move from farms to laboratories.

7/ The exploration and commercialization of space will be dominated by private companies as governments increasingly step back from these investments. The early years of this decade will produce a wave of hype and investment in the space business but returns will be slow to come and we will be in a trough of disillusionment on the space business as the decade comes to an end.

8/ Mass surveillance by governments and corporations will become normal and expected this decade and people will increasingly turn to new products and services to protect themselves from surveillance. The biggest consumer technology successes of this decade will be in the area of privacy.

9/ We will finally move on from the Baby Boomers dominating the conversation in the US and around the world and Millennials and Gen-Z will be running many institutions by the end of the decade. Age and experience will be less valued by shareholders, voters, and other stakeholders and vision and courage will be valued more.

10/ Continued advancements in genetics will produce massive wins this decade as cancer and other terminal illnesses become well understood and treatable. Fertility and reproduction will be profoundly changed. Genetics will also create new diseases and moral/ethical issues that will confound and confuse society. Balancing the gains and losses that come from genetics will be our greatest challenge in this decade.

That’s ten predictions, enough for now and enough for me. I hope I made you think as much as I made myself think writing this. That’s the goal. It is impossible to be right about all of this. But it is important to be thinking about it.

I know that comments here at AVC are broken at the moment and so I look forward to the conversation on email and Twitter and elsewhere.

#climate crisis#crypto#economics#employment#entrepreneurship#Food and Drink#hacking energy#hacking finance#policy#Politics#Science#VC & Technology

What Happened In The 2010s

My friend Steve Kane suggested I take a longer view in my pair of year end posts this year:

And so I will.

Here are the big things that happened in tech, startups, business, and more in the decade that is ending today, in no particular order of importance.

1/ The emergence of the big four web/mobile monopolies; Apple, Google, Amazon, and Facebook. A decade ago, Google dominated search, Apple had a mega hit on their hand with the iPhone, Amazon was way ahead of everyone in e-commerce, and Facebook was emerging as the dominant social media platform. Today, these four companies own monopolies or duopolies in their core markets and are using the power of those market positions to extend their reach into tangential markets and beyond. Google continues to own a monopoly position in search in many parts of the world, has a duopoly position in mobile operating systems, and controls a number of other market leading assets (email, video, etc). Apple owns the other duopoly position in mobile operating systems. Amazon has amassed a dominant position in e-commerce in many parts of the world and has used that position to extend its reach into private label products, logistics, and cloud infrastructure. Facebook built and acquired its way into owning four of the most strategic social media properties in the world; Facebook, Instagram, Messenger, and WhatsApp. Most importantly, outside of China, these four companies own more data about what we do online and also control many of the important channels to reach us in the digital world. What society does about this situation stands as the most important issue in tech at the start of the 2020s.

2/ The massive experiment in using capital as a moat to build startups into sustainable businesses has now played out and we can call it a failure for the most part. Uber popularized this strategy and got very far with it, but sitting here at the end of the 2010s, Uber has not yet proven that it can build a profitable business, is struggling as a public company, and will need something more than capital to sustain its business. WeWork was a fast follower with this strategy and failed to get to the public markets and is undergoing a massive restructuring that will determine the fate of that business. Many other experiments with this model have failed or are failing right now. When I look back at the 2010s, I see a decade during which massive capital flowed into startups and much of it was wasted chasing the “capital as a moat” model.

3/ Machine learning finally came of age in the 2010s and is now table stakes for every tech company, large and small. Accumulating a data asset around your product and service and using sophisticated machine learning models to personalize and improve your product is not a nice to have. It is a must have. This ultimately benefits the three large cloud providers (Amazon, Google, Microsoft) who are providing much of the infrastructure to the tech industry to do this work at scale, which is how you must do it if you want to be competitive.

4/ Subscriptions became the second scaled business model for web and mobile businesses, following advertising which emerged at scale in the previous decade. Startups that developed the skills to execute a subscription business model with positive unit economics delivered fantastic returns to investors and capital flowed into this sector as a result. This was a very positive development as subscriptions better align the interests of the users and the developers of mobile and web applications and avoid many of the negative aspects of the free/ad supported business model. However, as we end the decade, a subscription overload backlash is emerging as many consumers have signed up for more subscriptions than they need and in some cases can afford.

5/ Silicon Valley’s position as mecca for tech and startups started to show signs of weakening in the 2010s, largely because of its massive successes this decade. It is incredibly expensive to live and work in the bay area and the quality of life/cost of life equation is not moving in the right direction. The physical infrastructure (transit, housing, etc) has not kept up with the needs of the region and there is no sign that it will change any time soon. This does not mean “Silicon Valley is over” but it does mean that other tech sectors will find an easier time recruiting talent to their regions and away from Silicon Valley. And talent is really the only thing that matters these days.

6/ Cryptography emerged in the 2010s as a powerful technology that can solve some of the web and mobile’s most vexing issues. Cryptography and encryption have been around for a very long time, well before the computer. Modern computer cryptography came of age in the 1970s. But the emergence of the internet, web, and mobile computing largely did not integrate many of the central ideas of cryptography natively into the protocols that these platforms were built on. The emergence of Bitcoin and decentralized money this decade has shown the way and set the stage for cryptography to be built natively into web and mobile applications and deliver control back to users. Credit to Muneeb Ali for framing this issue for me in a way that makes a lot of sense.

7/ Technology inserted itself right in the middle of society this decade. Our President wakes up and fires off dozens of tweets, possibly while still in bed. We are all hostage to our phones and the services that we rely on. Our elections are conducted using machine learning technology to segment and micro-target important voting groups. And bad actors can and do use the same technologies to interfere in our elections and our public discourse. There is no putting the genie back in the bottle in this regard, but the fact that the tech sector has such a powerful role means that it will be highly regulated by society. And there is no putting the genie back in the bottle in that regard either.

8/ The rich got richer this decade. Axios wrote in a recent email that:

“The rich in already rich countries plus an increasing number of superrich in the developing world … captured an astounding 27% of global growth.”

But the very poor also had a great decade as Axios also reported:

The rate of extreme poverty around the world was cut in half over the past decade (15.7% in 2010 to 7.7% now), and all but eradicated in China.

The losers in the 2010s were lower middle class and middle class people in the developed world whose incomes stagnated or fell.

Technology played a role in all of this. Many of the superrich obtained their wealth through technology business interests. Some of the eradication of extreme poverty is the result of technology as well. And the stagnation of earning power in the lower and middle class is absolutely the result of technology automation, a trend that will only accelerate in coming years.

9/ This a post publish addition. A huge miss in my original post is the emergence of China as a tech superpower and a global superpower. There are many areas (digital money for example) where China is light years ahead of the western world in technology and that will likely accelerate in the coming years. Being a tech superpower is a necessary condition to being a global superpower and China is already that and getting more powerful by the day.

I will end there. These are the big mega-trends I think about when I think about the 2010s. There is no doubt that I left out many important ones. You can and will add them in the comments (wordpress for now), emails to me, and on Twitter and beyond. And that is what I hope you will do.

#crypto#entrepreneurship#machine learning#policy#Politics#VC & Technology#Web/Tech

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

Digital Money

I was listening to this podcast on the treadmill this morning. It is a conversation between Peter McCormack and Andreas Antonopoulos about Bitcoin, Privacy, Freedom, and a lot more.

At one point Andreas says that we have digital money already, but it is largely debits and credits on ledgers in banks and other financial services companies. He also says that cash is currently only about 8% of global money and that number has been going down steadily over the last fifty years as digital money has taken over.

His point, and it is a good one, is that cash is decentralized money. But money that is registered on a ledger maintained by a corporation that is highly regulated by the government is an entirely different thing.

After listening to the podcast, I bought some more Bitcoin this morning.

#crypto

The AVC Helium Hotspot Discount Code

Last Thursday I wrote about the Helium launch in NYC and suggested that readers might want to purchase a Helium hotspot.

Well, I have good news. AVC readers can buy a Helium hotspot with a discount.

Here is how you do it.

1/ Go to the Helium Store and hit the Order Now button

2/ Put AVC100 into the field called “Referral or Promo Code”

3/ Complete your order

I enjoy earning Helium tokens every day with my hotspot. I hope they will turn into something someday.

#crypto

History Doesn't Repeat Itself, But It Does Rhyme

So goes the famous Mark Twain quote.

I thought of this in reading a few blockchain sector reports this morning.

David Kelnar‘s “blockchain primer” is a very good summary of what is promising about the crypto sector and what is challenging.

In his summary at the end, he writes:

Tim Berners-Lee developed the protocol for the web in 1989. 10 year later, in 1999, its potential was glimpsed — but technological, commercial and economic challenges brought expectations back to earth with a crash. 15 years later, Tim’s vision for globalised information, e-commerce, and communication was realised. The Bitcoin white paper was published in 2008. 10 years later its potential was glimpsed — but technological, commercial and economic limitations brought expectations down to earth with a crash.

https://medium.com/@dkelnar/fa610002b999

I take that as a suggestion that the crypto sector is following essentially the same timeline as the web sector. Facebook launched in Feb 2004, four years after the start of the internet crash. So using David’s timeline, the killer app for crypto might launch at the end of 2021 or early 2022.

But then there is this chart from Morgan Stanley’s recent report on BTC and Libra:

As you can see in that chart, Morgan Stanley’s timeline for Bitcoin is much faster than for the Nasdaq. It seems that their implicit argument is that the crypto sector will move much more quickly through its ups and downs than the web did back in the 90s and 00s.

I am more in David’s camp than Morgan Stanley’s camp. I think the crypto sector is progressing, but slower than I would like. I remain long term bullish but short term frustrated with the crypto sector. As I have been for quite a while now.

#blockchain#crypto

The NYC Helium Network

On Tuesday night, our portfolio company Helium launched the Helium Network in NYC.

As many of you know, Helium is a peer to peer low bandwidth wireless network that anyone can run a hotspot for. I wrote about our hotspot in our apartment in NYC a few months ago.

When you operate a Helium hotspot, you earn Helium tokens. We earned about 7 Helium tokens yesterday with our hotspot.

The Helium network in NYC is already 133 hotspots strong and the map of lower Manhattan looks like this:

If you would like to buy a Helium hotspot and start earning Helium tokens you can do that here.

The cost of Helium hotspots are $495 right now but early adopters earn Helium tokens at a higher rate. As the cost of Helium hotspots come down to what you are accustomed to with wireless networking equipment, the competition for earning tokens will go up and the rate at which you earn tokens will come down too.

This is token incentive economics at work in building out wireless infrastructure and I am excited to watch this happen.

#crypto

A Decentralized Archive

The Internet Archive and Wayback Machine are awesome.

You can see that in 1998, AVC.com was pointing to something called Fishnet that looked like this. And you can see what AVC looked like in September 2008.

There are many archives, some of them quite specialized, in the physical and digital world. But they all suffer from the same problem, which my colleague Dani explained yesterday:

Archives are extremely important: the survival and ongoing availability of knowledge helps with the continuation of human progress. While there are existing digital archival projects out there, they are mostly donation-based and face the risk that their funding could run out, their hosting provider could one day go out of business or a government could force them to remove files.

Dani wrote that yesterday in our blog post welcoming Arweave to the USV portfolio. Arweave is a decentralized protocol that enables archiving and the funding to support it at web scale.

The key innovation is a sustainable funding model for archives which Dani explained in her post:

Arweave had to invent a new method of paying for storage, one where you can pay once, and store forever. While that sounds almost too good to be true and took us a long time to wrap our heads around, it will be true provided the cost of storage continues to decline at a predictable rate. Machines that provide storage to the network get paid out in small increments over time as they continue to prove that they have held onto archived files. 

Decentralized infrastructure is one of our favorite investment themes in crypto (Filecoin, Helium, Arweave, and at least one unannounced investment) because of the resiliency and sustainability of decentralized infrastructure (just look at bitcoin mining for an example of that).

We think infrastructure will tend to move to decentralized models over time and archives are a great example of that.

#crypto

Bringing It All Back Together

Early-stage companies are exercises in experimentation, iteration, and figuring things out. You try one thing, it sort of works, but you see a tangential opportunity and go after that. Sometimes that leads to a full-on pivot, other times it leads to an evolution of the opportunity.

This process can create multiple products, services, projects, and it can look messy. I love it when founders bring it all back together into one cohesive package. That doesn’t always happen, but when it does, it is a thing of beauty.

That happened this week with our portfolio company Numerai. I saw this tweet by Numerai founder Richard Craib:

If you have not been following Numerai, let me explain.

The initial idea behind Numerai was to build a quant hedge fund using “the crowd” to surface the machine learning models. They do that by running the Numerai Tournament and taking the best models and operating a hedge fund with them. That is what Numerai does and that business is working well.

Along the way, Numerai observed that incenting the players in the tournament with a crypto-asset they could stake on their models was a better way to crowdsource the best models. So they made a crypto-asset called Numeraire.

Numeraire is a crypto-asset that you can trade, own, and, if you are playing in the tournament, stake.

So then Numerai was in several businesses, the hedge fund business and the crypto business.

And then the team observed that there was a generalization of the thing they had built that had much broader applications – a decentralized marketplace for predictions. So they created a protocol called Erasure that allows anyone to build markets for predictions.

It started becoming a fairly messy story.

But last week it all started coming back together when team successfully ported the Numerai Tournament to operate on the Erasure protocol.

This accomplishes several things. First, it starts to tie all these loose threads together and the story becomes easier to understand. And also, you have a very successful application, the Numerai Tournament, running on Erasure. So developers can see what Erasure is good for and can start building other things on it.

I am excited for the Numerai team. And I quite like this example of how things get messy as you expand the opportunity but you can clean things up by bringing it all back together and would encourage founders and teams to look for opportunities to do that whenever possible.

#crypto#entrepreneurship