All Altcoins All The Time

Token Economy #9

Token Economy #9

🌡️ Plasma, Filecoin ICO, Coinbase Series D, Decentralized Twitter, Tezos VC fund & more

🌡 Plasma

Without any prior announcement, Vitalik dropped us a pretty nice bomb this week.

He tweeted out a white paper for Plasma, co-authored with Joseph Poon.
Joseph is best know for his work in ideating Lightning Network (which today announced feature freeze towards a quick release of version 1 🎉).
For the uninitiated, LN is a tool that basically transforms BTC into an actually usable payment method, by recording transactions in lightning channels that get reconciled to the main blockchain once in a while, instead of having to write every single tx to the mainnet.
Think of it like micro-payments for Bitcoin.

But Ethereum already has a Lightning Network-like protocol, Raiden, which implements the same mechanics.

So what’s the hype?

Plasma in a sentence:
A network of child blockchains to offload transaction and computation load from the main net.

The point of Plasma is that not only asset transfers are moved off chain to new channels, but now also full smart contract computations can be moved.

The reaction to Plasma has been mixed, as there are many non-believers in child- and side-chains for security reasons.

Interesting things to think about:

– Ethereum vs Parity war?
It seems like there’s more and more a Vitalik vs Wood war going on. Gavin Wood (the co-founder of Ethereum) is busy at work at Parity (fixing multisig bugs and) developing Polkadot, a protocol with the same ambitions as Plasma, albeit a bit different — which is running a pre-sale now and will ICO soon.

– ETH holy trinity expanded.
Ethereum looks a bit like a Google or Facebook already, developing “internally” or embedding many different pieces of tech that are also being pursued by external teams. They already had Swarm for storage (which would compete with Filecoin, Storj, Sia, etc.) and Whisper for messaging. This looks like an addition to all of the above.

How will Plasma impact Cosmos and Polkadot?
Two very, very interesting projects were already working on inter-chain operability.
Cosmos, with the Tendermint protocol, raised $17M in a very successful ICO, and continues to ship like crazy.
Polkadot, mentioned above, is running a Filecoin-sized presale at the moment, so this will be a fun one to watch.

– Could this impact projects like IOTA too?
Some argue the tangle is now basically implementable on top of ETH itself..
We could see some specific IoT channels.

Whatever the case, the technical innovation going on in the space today boggles the mind. We are fortunate to be living in a time that will be remembered for all its new discoveries about decentralized consensus computing.

(Actual white paper here).
(10-minute summary here).

OmiseGo

OmiseGo naturally shot up in price like crazy after the Plasma announcement. ($2.75->$7)

Woah, wait, wait, wait, why are we talking about OmiseGo? And why would it go up in price?

You guys have to keep up with the politics, gossip, moves, etc!

Joseph Poon, who co-authored the Plasma and Lightning protocol papers, actually went to work for OmiseGo in June.

Well, OmiseGo is the first implementation of Plasma.

Are you as excited as we are??

So, say you weren’t aware of all of the above and missed out on having some cheap OMG (OmiseGo’s ticker). Well, not to worry — as long as you have an ETH wallet with at least .1 ETH, the OmiseGo team will just airdrop you some free coins.

We’ll all be getting it, and it will be 5% of the total token issuance. Probably not worth it to create hundreds of wallets given the chain snapshot has most likely already been taken.

⚠️ Filecoin

We’ve spent quite some space in the last issue covering Filecoin.

We left waiting for a response from Protocol Labs about all the questions that their token sale had raised amongst prospective participants, but ended up empty handed.
Protocol Labs, after a small Q&A where basically nothing got answered, proceeded to:
– change the pricing for the first hour: all contributions in the first hours were to be averaged to obtain a final price.
– moving the sale from Monday to Thursday.

Stefano was on The Bitcoin Podcast’s latest episode explaining his views, together with Ryan Shea from Blockstack and Richard Burton from Balance.

In any case, the big institutional and wealthy individual investors who had pre-funded their AngelList accounts and/or had ETH ready didn’t seem to be particularly concerned with the issues and pricing and started sending hundred of millions of dollars.

The sale nevertheless had quite a few problems, with double counting of transactions and continued downtime of the platform.

Filecoin had to pause the sale for more than two days, and it will be restarting at 11am PDT on Aug 12th.

They issued an updated blog post after a day of it being paused.

The same day the ICO kicked off, Neufund added Filecoin to their ICOmonitor, the tool they launched next week to evaluate ICOs on the basis of their transparency. Outcome: NON TRANSPARENT. Interestingly, it managed to get exactly 0 green flags.

Key red flags:

– there is no smart contract handling funds, fiat and crypto are centrally controlled by Coinlist and there is no way for any external auditor to monitor them. “You are as good as sending a signed transaction in envelope to Coinlist.”
– The SAFT agreement is such that one has to trust Filecoin to refund monies shall deadline for network launch not be met.

(Interesting comment about differences between Sia, Storj and Filecoin, which we haven’t linked to before)

I hope you’ll excuse the somewhat negative stance here, but this still feels like a massively greedy endeavor to raise hundreds of millions of dollars for something entirely unproven that may or may not exist in a few years.

I think that this does not help the blockchain space one single bit.

If we see nascent projects raising these sorts of sums, everyone else will be incentivized (and justified) in going out and doing massive ICOs with just a white paper. We’re seeing plenty of this (you don’t want to look at our inbox, promise) and it is entirely unjustified and detrimental to the long term success of this technology.

We do want a lot of money going to decentralized computing development, but the $xxxM that went to Filecoin (+Tezos, +Bancor) could have gone to dozens of teams working on other technologies, and more money could have gone to these big projects when the product was live/useful/used/derisked.

🔮 Leeroy

Leeroy: a web3 decentralized social network

When is the last time you felt you interacted with the future?

Well, today you’re in for a treat.

Leeroy is a decentralized, ETH based twitter clone.

Sure, it costs a fortune to use. You have to pay to tweet, retweet, follow, edit your profile, anything really (and the developers don’t get any of that).

But, the gas cost of posting has been reduced by 84%, down from 173,000 to around 25,000 gas.

Sure, it’s slow as hell.

But, it’s immutable and decentralized.

Sure, it sucks. But it’s the future.

If you want to spend some gas, you can follow us here: @ste & @yannick

The Reddit thread with comments is here.

📌 Token Economy

Coinbase raises $100M at a $1.6B valuation amid explosive growth

The rumours have finally been confirmed, Coinbase is officially the 1st venture-backed ‘unicorn’ in crypto land. Investors, led by IVP, with participation from Spark Capital, Greylock Partners, Battery Ventures, Section 32 and Draper Associates, are clearly betting on crypto achieving mass adoption and on Coinbase being best positioned to build a lasting brand in this space.

Investment will primarily go into customer service (never too late), growing GDAX and most interestingly building up Toshi.

The focus on GDAX’s NYC office suggests they are (predictably) positioning for traditional Wall street type institutional capital to flood the market.

However the focus on Toshi really gets our hopes up that behemoths like Coinbase (feels really weird to say this having visited their office when it was less than a dozen people) don’t get too focused on the speculative aspect of the market (even thought that’s where the money currently is, and will stay for a while).

They want to “to help accelerate digital currency’s shift from speculative investment to global payment network.” 👏🙏

A few interesting data points:

  • $1.5 billion pre money valuation (3x the valuation at Series C in early 2015)
  • $206 million raised in total
  • $25B exchanged to date, $15 billion exchanged in H1 2017, 10x growth in annual run-rate (putting Coinbase revenues in the $100-eds of millions).

This is Josh McFarland’s post on why Greylock invested and here is CEO Brian Armstrong’s post announcing the round.

Traditional Asset Tokenization

Stephen McKeon, professor of Finance at U Oregon, illustrates the potential implications and challenges of the tokenization of all the assets. The last sentence is particularly thought provoking:

“As the world’s assets become increasingly liquid, the concept of ownership will evolve in ways we cannot yet imagine.”

This is also a monster bull case for decentralized exchange protocols (e.g. 0x).

Losing Alpha: Why most new crypto funds are a sh*t deal — Ryan Selkis

Ryan Selkis (TwoBitIdiot) tells it like it is.

As you can guess, everyone’s has been asking us: “so are you launching a crypto fund?”

It seems like everyone and their dog is launching one, and Ryan has some ideas about it.

We entirely agree with the post, with one caveat: there is an opportunity if you are exceptional (like most things in life, I guess).
The definition of outstanding in our opinion won’t be limited to picking, and surely won’t be indexing, but will resemble much more a traditional venture capital model. That’s what we’re seeing the pros do (DCG, Pantera, Polychain, etc.).
Takes hard work, knowledge on how to build communities, company building experience, and all the such.

The additional opportunities might be for:
– experienced commodities / stock traders that thrive in such volatile markets.
– scammers that can manipulate the market with all sort of illegal schemes until exchanges get regulated.

VC 3.0 — How VCs position themselves in the world of blockchain

You can tell Lerer Hippeau Ventures has been doing some solid token thinking.

Here, Julian Moncada argues that VCs are in a great spot to continue to sell their product even to the new, different customer-base of token-enabled projects.

“successful VCs will find a way to differentiate themselves by doing a lot of things they already do: providing investment expertise as a service and managing the operational challenges of community building. On a more granular level, I still have plenty of questions. First and foremost, what’s the best way to economically structure a fund that does this?”

A 5-star system to evaluate crypto tokens

Muneeb Ali from Blockstack lays down a very simple 5-step token analysis workflow.

TL;DR:

  1. Code speaks louder than words
  2. A team with relevant expertise
  3. Peer-reviewed technology
  4. Usefulness of the token in the protocol
  5. Organic interest from developers & enthusiasts

If you’ve been missing any of these points in analyzing a token, it’s a solid addition. Anything that doesn’t fulfill the above is probably worthless.

On Token Value

Nick Tomaino writes about the difference in token types (work, usage, hybrid)

The interesting TL’DR:
I am now of the belief that it’s generally far too early in the space for models and metrics to accurately quantify value. If fundamental value as described above truly underlies usage tokens, work tokens and hybrid tokens, they’ll create many orders of magnitude more in value in the future (orders of magnitude not typically grasped by traditional analysis, much like early stage startups).”

This is a different post than Yannick’s “On Tokens Value”, which is equally interesting!

The Crypto J-Curve

cburniske showing off here.

But seriously, if you plan on trading crypto assets in the short-to-medium term, this is a fascinating read.

Trying to untangle the Current Utility Value and the Discounted Expected Utility Value is a great exercise 👊

Chris was recently on the Blockchain Insider podcast, worth a listen!

Crypto Capitalism is the new Venture Capitalism

David Sacks doesn’t shy off in explaining the revolution in the making.

TL’DR Tweetstorm:

1/ Crypto Capitalism is the new Venture Capitalism.
2/ With over 1500 ICOs launched or announced, it’s becoming clear that any startup that can ICO will ICO.
3/ As more VC moves to CC, VCs will have to become CCs.
4/ Traditional VC categories (seed, early, late, etc) get replaced with CC categories: pre-ICO and post-ICO.
5/ Post-ICO VCs will have to compete with hedge funds. Not a good place to be.
6/ Pre-ICO VCs will need an angel-like value-add. Not a natural place for a lot of them to be.
7/ Ultimately the SEC will determine how large the category of who can ICO is. But it could be quite large.
8/ Most VCs still haven’t wrapped their heads around this disruption. More to come. //

Kin ICO — Kik Messengers New Token Will Introduce Millions to Ethereum

If you still haven’t dug into Kik’s KIN currency and model, this is a very nice summary.

TL;DR: this one could be a game changer given that it adopts many proven dynamics already used in games and other apps, and most importantly could get young people interested in and used to the concept of crypto app coins.

Microsoft wants to make blockchain networks enterprise-ready with its new Coco Framework

Microsoft gets to play with Blockchain consensus and trust mechanics.

Coco is a framework for enterprise blockchain apps.

“The basic idea here is that you have a trusted box on which you can trust to put your blockchain code. That trust is established through tools like Intel’s Software Guard Extensions or Windows’ Virtual Secure Mode — and because it’s an open framework, it can also support other TEEs as they become available. With these TEEs you can then build a network of trusted enclaves that all agree on the ledger and Coco code they are running.”

Coco is compatible with any chain, adds privacy and governance, and can be run anywhere.

Proof-of-Intel-inside

Cryptotaxes: Money, money, money — must be funny in the crypto-world

Oh man, I thought we’d be done with taxes in crypto land.

That’s obviously not the case — so if you have the curiosity and stomach, this is for you. 🤓

A Hundred Years of Crypto Anarchy

For the neglected philosophical discourse, a great excerpt from a presentation Elaine Ou gave at last week’s Blockstack Summit, borrowing the title from Tim May.

“We now have the technology to create and enforce our own rules, and this knowledge cannot be stopped. We can either rail against the inevitable, or use these tools to build the world we want.”

The Ethereum of China Is Now a Top 10 Cryptocurrency

$NEO (fka Antshares) has been on an absolute tear lately (3x in a week, 5x in a month). Known as the Chinese Ethereum, at $1.6 billion in network value this one could be running for a while longer. The article goes through the possible reasons.

🚨 Growing pains

SegWit locked in this week 🎉, but the NY agreement is still super fragile and we might have another fork in November

No2x: bad governance model

A sample post from the growing movement opposing the NYA.

TL;DR: Decentralized consensus and protocol building is hard.

Cashing out of Bitcoin

We do like contrarian views here, so here’s one on Bcash.

👮 Law enforcement!

  • Police make arrest over London ‘cryptocurrency boiler room’
  • SEC suspends trading in Ciao Group stock after the company announced a rather obscure ICO
  • Bitfinex pulls out of the US market

🤡 ICO madness

Initial coin offerings now surpass early stage VC funding

In a recent note, Goldman Sachs points out that ICOs have surpassed angel and seed-stage funding for *all* internet companies since the beginning of the summer.

This is pretty incredible, must likely unsustainable at this pace, but despite the hype, the scams, the regulatory uncertainty, the irrationality all around, it shows what can happen if one removes frictions from fundraising.

~15k people registered for the 0x token sale

The process to register for the sale was built with Civic to minimize sybil attacks (once the registration period ended, 0x announced that it will no longer require Civic to purchase tokens on the day of the sale).

It was very easy to go through it with MetaMask on my side.

Let’s try to figure out how much ZRX you’ll be able to buy.

Max cap is $24,000,000.
Say the 15k is about right (it is).

That means that personal allocations should range in the $1,500 range.

My speculation is that ~10–15% registered people won’t go through with the sale for a variety of reasons, and so I expect the allocation to go up to around $2,500.

I also expect many people to buy less than the max, and so bring up the total buyable to ~$5k per person.

But we’ll have to wait for the sale on the 15th and the following days to really know!

😎 Cool new projects

Dust App

Like Digit, but for cryptos: round up spare change and invest in BTC/ETH/LTC.

Casa

Homesharing protocol, from the creators of Bedkin.com. Coming soon.

AIRSWAP: A Decentralized Exchange for Ethereum Tokens

Just during the 0x token sale registration period, ConsenSys came out with AIRSWAP, a decentralized exchange platform which implements the Swap protocol, a decentralized peer-to-peer protocol for exchanging ERC20 tokens on the Ethereum blockchain.

Not much else is known atm. Token available in October.

Introducing S3-style file sharing for Sia through the new Minio integration

Just an update here, but significant.

Sia now integrates with Minio, so that it can used as an S3 alternative super easily by developers.

Glint promises to turn gold into a ‘new global currency’

Glint, a stealthy London fintech startup has raised £3.1 million to tokenize gold 🤦‍♂️

Dharma Credit

A suite of tools that make it easy to plug a line of credit into any decentralized application (similar to a decentralized Klarna/Affirm). Launching on testnet in partnership with Metamask.

😬 First they ignore you, then they laugh at you, then…

Fidelity Labs Tests Digital Wallet on Fidelity.com

Fidelity customers who use Coinbase will be able to see their digital asset balances as part of their portfolio of investment accounts, directly on the Fidelity website.

Overstock Lets Customers Pay With More Than 40 Alt Coins

Overstock were early in accepting bitcoin, and now they are the first well-known retailer to open the door to other digital currencies via an integration with the ShapeShift.io API. Overstock customers spend about $50,000 a week with bitcoin, and that has not been growing much over time.

It will be interesting to see if offering other currencies creates an inflection point in user adoption of crypto for transactional purposes.

Bitcoin Mainstream Adoption in Philippines is Rapidly Increasing, Replacing Banks

It seems that Bitcoin adoption has achieved critical mass in the Philippines, the third largest remittance market in the world (worth nearly $30 billion), where Bitcoin was legalised by the central bank earlier this year. More and more merchants are starting to accept it too.

💰 New funds

Tezos allocates $50 Million in Venture Capital for Developers and Startups

Tezos keeps writing its own playbook.

After announcing a rather traditional treasury strategy a few weeks back (stocks, bonds, commodities etc), something Stefano criticized quite a bit on Twitter for the irony of giving money to a cryptocurrency project just to see it go back into the old-school financial system, it announced the launch of a $50 million venture fund to invest in projects and other venture funds committed to the Tezos ecosystem.

This is interesting (and awesome) in many ways:

  • Tezos is effectively a $232 million endowment with a tech arm
  • The traditional fee-driven model of allocating capital (retail->LP->GP->Cos) gets turned upside down: retail investors give money directly to projects they believe in, who in turn allocate the capital to GPs or other projects that directly benefit them. Companies become the ultimate (and most efficient) asset managers. Crazy?
  • It’s rare, but not unusual, for tech companies to become investors in their own platforms (see the Slack fund for example), more so if it’s in a nascent ecosystem.

Tokyo Bitcoin Exchange Coincheck Launches Startup Investment Fund

Tokyo-based Coincheck, one of the Japan’s leading crypto exchanges, will start investing in new startups with the launch of the ‘Coincheck Investment Program’, a new startup investment fund.

A first, to our knowledge, for an exchange to launch a fund.

More details about Science Inc. crypto incubator fund

The ICO is run by Argon Group on TokenHub.com. Offering Memorandum to come out in September.

👻 Fun Bonus

Old unpublished emails of Satoshi Nakamoto

Super interesting threads between Mike Hearn and Satoshi Nakamoto.

If you remember the Mike Hearn name, it’s probably because of his massively shared post about “the resolution of the Bitcoin experiment” where he basically announced he was leaving the scene because of a centralized control dynamic from Core.

Mike’s ideas on the problems with BTC have certainly stuck around given the recent fork, but now the combined value of BTC + forks is above $4k..

About us

Token Economy is written and curated by Stefano Bernardi and Yannick Roux.

If you’re building a new fundamental piece of technology for the future, please reach out 🤙



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