Posts from crypto

Our portfolio company Helium started shipping a new product called Tabs last week. Tabs competes with Tile and a bunch of other Bluetooth trackers and smart dog collars. But Tabs uses the Helium network (aka The People’s Network) and that makes all of the difference as you can see in this chart:

The Helium Network is powered by people like you and me who run Helium hotspots and earn Helium tokens. I wrote about my Helium Hotspot here on AVC last year. Since installing that hotspot, I have earned 8,266 Helium tokens. That is the People’s Network in action.

You do not need to own and operate a hotspot to use Tab. Anyone can use a Tab on the network.

I set up Tab today for my Citibike key fob which I lose all the time. It was as simple as downloading the Tab app on iOS or Android and capturing the QR code on my Tab. Now I will know where my Citibike fob is at all times.

Update: this is what my find screen looks like right now

I saw that the SEC and the OCC issued guidance on fiat backed stablecoins yesterday. Better late than never. Because fiat backed stablecoins are seeing significant adoption this year.

I wrote a post about stablecoin adoption in June in which I said this:

I was perusing the crypto markets today and noticed that Tether, the grandfather of all stablecoins, is approaching a $10bn market cap, making it the third most valuable crypto asset after Bitcoin and Ethereum.

I also noticed that USDC, the US Dollar stablecoin that Circle and our portfolio company Coinbase are behind, is approaching a $1bn market cap.

https://avc.com/2020/06/stablecoin-adoption/

Well, today those numbers are up by 50% and 150% respectively, as you can see on Coinbase:

I heard about a transaction that closed last week in which the buyer sent millions of USDC to the sellers’ wallet.

Instead of wire instructions, scan a QR code and hit send.

This is the future my friends.

I have written extensively on this blog over the last decade and a half about the significant negative consequences that the two large mobile operating systems have on distribution of software. I am strongly opposed to the monopolies that Apple and Google have over mobile apps that run on iOS and Android.

I am rooting for Epic/Fortnite in their battle with Apple over the 30% tax that Apple charges developers for distribution in their app store. But more than the tax, what bothers me about these monopolies is the innovation tax they impose on the broad tech sector with their terms of service/rules.

There is no better place to see that than crypto, the next big wave in computing (after web and mobile). There are a number of reasons that decentralized crypto apps (dapps) have not gone mainstream, but certainly one of them is that the Apple and Google app stores don’t allow a number of important features that decentralized apps require.

The founder and CEO of our portfolio company Coinbase, Brian Armstrong, explained this well in a tweetstorm last week:

He ended with this tweet:

Recently Apple announced a way for developers to suggest updates to the App Store policies. Our team is planning to submit a formal request for Apple to allow its users to earn crypto and see a list of decentralized finance apps. We'll keep you updated on what we hear back.

— Brian Armstrong (@brian_armstrong) September 11, 2020

Coinbase, Epic, and Spotify are not alone in their struggles with Apple and Google. They are simply large enough and protected enough to go public with their struggles. The truth is every developer that distributes software through these two app stores struggles with them.

In what world does it makes sense for two large and powerful companies to completely control software distribution on mobile phones? In no world does it make sense. It must stop.

One of the questions I hear on crypto is “what can I do with it besides trade it?” And that’s a good question because truth be told, there have not been great use cases for crypto other than storing value, sending value, and speculating.

But that is changing, as I mentioned in this blog post last week.

One thing you can do with crypto is make digital assets scarce. Bitcoin is scarce. There will be only 21mm Bitcoins. And Bitcoin is a digital asset.

So using the same technology, you can make any digital asset scarce.

And that’s a big deal. Ever since media went digital (mp3s, jpegs, movs, etc), media creators have been trying to figure out how to put the genie back in the bottle and largely failing. But if you create a crypto-asset, you can make it scarce.

Our portfolio company Dapper Labs has been working with the NBA and the NBA Players Association over the last year to create digital trading cards that are scarce. These digital playing cards are being made available via a game called NBA Top Shot. NBA Top Shot is invite only right now but if you read on, you will be given an opportunity to get an invite.

I’ve been playing NBA Top Shot for about a month now. I have bought something like 5 or 6 “packs” which contain a bunch of cards. When you buy a pack, you don’t know what cards you will get. Opening them is a lot of fun. Players are posting their pack openings on YouTube. Here is one of those videos:

Here is my collection of cards (sorry for the messed up formatting, I had to shrink my screen to get them all):

As you can see, I have put two of my cards up for sale in the NBA Top Shot marketplace. Like a good Knicks fan, I have to trade KP away. I’m only asking $25 for that card.

There is a lot more coming in this game, but for now the game play is buying, opening, collecting, and trading. And it is a lot of fun.

If you want to check it out, here’s a typeform where you can enter your email address and answer one quick question and then you will get an invite. I encourage you to buy my Joe Harris and KP cards so I can turn around and buy RJ Barrett and Julius Randle in the marketplace.

I encourage everyone to check out NBA Top Shot. For one, it is a lot of fun. And it also reveals something important about crypto and how it can and will change videogames, collectibles, and other sectors by making digital/virtual goods scarce and collectible.

Crypto has been on a tear in the last week.

Bitcoin is up 18% in the last seven days:

Ethereum is up over 30% in the last week:

But this isn’t the first time we’ve had a bullish run in crypto since the bear market started in early 2018.

If you look at the total market cap of all crypto tokens you can see that this bear market has had several moves up followed by downward price action:

So why will this time be any different? I certainly don’t have a crystal ball, but there are some underlying factors in this run-up that make me think it might be different this time:

1/ There is real fundamental activity in the decentralized finance sector where lending, borrowing, staking, swapping, and yield optimization are all growing significantly in recent months. This chart of the activity on the Uniswap liquidity network is indicative of that:

🦄 Every day I want to tweet about new @UniswapProtocol volume records but it's climbing too fast to keep up

🤯 $1.3B 30D volume ($15.6B annualized
🤯 $650M 7D volume ($34B annualized)
🤯 $150M 24hr volume ($54B annualized) pic.twitter.com/EgeBN1BniB

— hayden.eth 🦄 (@haydenzadams) July 27, 2020

This chart of the total value locked up in the Compound lending/borrowing system is another indication of that:

2/ There are a number of interesting consumer projects launching this summer, many in the gaming and NFT (crypto collectible) sector, that could bring more mainstream users to crypto.

3/ Gold has also been on the move recently. Gold is up 10% in the last month as capital looks for safe havens. I realize that using the words crypto and safe haven in the same sentence is hard for most people to understand, but I believe that one of crypto’s primary use cases is store of wealth and Bitcoin is particularly popular for that.

I don’t believe we have left the bear market behind just yet. But if the total market cap of all crypto assets gets above $450bn, where the first bear market rally stalled out in the spring of 2018, then I think we will be back in a bull market in crypto. And we aren’t far from that. A few more weeks like this past week and we could get there pretty quickly.

I was perusing the crypto markets today and noticed that Tether, the grandfather of all stablecoins, is approaching a $10bn market cap, making it the third most valuable crypto asset after Bitcoin and Ethereum.

I also noticed that USDC, the US Dollar stablecoin that Circle and our portfolio company Coinbase are behind, is approaching a $1bn market cap.

Unlike other crypto assets, the value of stablecoins, particularly “fiat backed” stablecoins, is not theoretical. These coins are backed by fiat deposits of people who have bought them. It is not entirely clear to me how fully reserved Tether is. But USDC is 100% backed by fiat. So that means that almost a billion USD has been paid for and set aside for USDC.

I’ve been spending a lot of USDC lately. I keep USDC at Coinbase and can spend it via the Coinbase mobile app. I’ve settled some golf bets with it, bought crypto with it, and am starting to use to buy crypto gaming assets.

I used to settle golf bets in Bitcoin. I have friends who claim they have tens of thousands of dollars in Bitcoin from golf bets I settled with them six or seven years ago. And we don’t play for a lot of money. So I don’t do that anymore. Settling in a USD backed stablecoin seems a lot more sensible. The same is true of most commerce and p2p payments applications.

I’m bullish on crypto as most readers know and I’m quite bullish on the stablecoin sector in crypto. I think their utility is just beginning to be understood in the west.

Our portfolio company Coinbase released an open source framework for crypto asssets to make it easier to list them on crypto exchanges. It is called Rosetta. Coinbase is encouraging blockchain projects to integrate Rosetta so that they can more easily list new assets on the Coinbase Exchange.

But as this Coindesk post outlines, any crypto exchange can adopt Rosetta so this could be something that levels the field for everyone.

Coinbase is putting Rosetta out to the broader community under an Apache license in the hopes that other exchanges will kick the tires on it. “All the code is available, it can be forked, it can be edited, so if there’s another exchange or another project that wants to put their code on it they can do that and also suggest their own changes,” Dalal said. “In a perfect world there are people building on top.”

https://www.coindesk.com/coinbase-open-sources-technical-standard-to-streamline-token-listings

Because different blockchains work differently, each crypto exchange needs to build their own interfaces to the blockchains in order to list them. That takes time and slows down listing new assets.

An open source middleware framework like Rosetta should make it much easier for exchanges to list new assets and allow them to support new assets more quickly. This would be great for innovation in the blockchain sector.

Our portfolio company Coinbase announced yesterday that it will acquire Tagomi to build out its institutional prime brokerage business.

This is an important moment in the maturation of the crypto trading business. At USV, we have used Coinbase to transact in the crypto markets and I’ve wanted advanced offerings like we get when we transact in the stock markets like buying or selling on a volume weighted average price (VWAP) and other things like that. Tagomi will bring those kinds of offerings to Coinbase and that will make it easier and better for institutions like USV to trade with Coinbase.

This is also a bit of a reunion for USV as one of Tagomi’s founders, Jennifer Campbell, was an analyst at USV when she co-founded Tagomi. Though USV was not an investor in Tagomi, we’ve always been rooting for Jennifer and her colleagues. Now, as part of Coinbase, we are all on the same team again.

Slowly but surely crypto assets are becoming mainstream holdings for institutions and the prime brokerage offerings from Coinbase will help accelerate that transition.

I read my friend Nick Bilton‘s book American Kingpin over the last few weeks. It is the story of Ross Ulbricht (aka Dread Pirate Roberts), the founder and owner of The Silk Road.

It is a fascinating story with many angles; drug and arms dealing, entrepreneurship, criminal investigation, and much more. I highly recommend the book.

It reminded me that The Silk Road was the original product market fit for Bitcoin. According to Wikipedia:

The total revenue generated from these sales was 9,519,664 Bitcoins, and the total commissions collected by Silk Road from the sales amounted to 614,305 Bitcoins. These figures are equivalent to roughly $1.2 billion in revenue and $79.8 million in commissions, at current Bitcoin exchange rates…”, according to the September 2013 complaint, and involved 146,946 buyers and 3,877 vendors

https://en.wikipedia.org/wiki/Silk_Road_(marketplace)

Those 9.5mm bitcoins, which certainly recirculated a fair bit, represented roughly all of the circulating supply of Bitcoin at that time.

That does not mean that all of the bitcoins that had been mined at that time were in use on The Silk Road. A much smaller percentage of them recirculated back and forth between customers and suppliers in the market.

But I have always believed that The Silk Road was where Bitcoin first found a massive use case and it was where many people first bought and used Bitcoin.

This has led to a narrative around Bitcoin and crypto that it is shady and only useful for illicit behavior. That is unfortunate and not true.

Many technologies that ultimately find mainstream use cases (the web browser, the VHS, etc) find initial product market fit in areas that are edgy at best. And such was the case with Bitcoin and crypto.

These “edgy” use cases prove out the technology, provide an initial user base, and lead to more mainstream adoption down the road. And that is what happened with Bitcoin and The Silk Road.