Surveying Last Week’s Bitcoin News

Bitcoin and blockchain technology is an area of ongoing interest for me. Although I’m not as involved in the space as I once was, I keep my eye on the news. The Bitcoin ecosystem can be quite insular, so I’m particularly interested in events that bubble up into the more conventional financial arena.

Last week saw a few news stories break about Bitcoin. 

Winklevii Amend BIT S–1, Again

Tyler and Cameron Winklevoss – the twin Olympic rowers and Facebook litigants turned prolific Bitcoin investors – filed an amended S–1 on their Bitcoin Investment Trust (the BIT), the proposed Bitcoin ETF that’s thus far eluded SEC approval to trade on a major exchange.

Note: the Winklevoss’ BIT is not to be confused with the Greyscale Bitcoin Trust, which is traded under symbol GBTC on the OTCQX exchange.

Their S–1 amendment, the sixth to be filed since the initial filing on July 1, 2013, reflects the Trust’s decision to cease negotiations with NASDAQ, instead signaling intent to debut on the BATS exchange. At least according to Investopedia, which can sometimes be a bit iffy on coverage, BATS is one of the most popular exchanges for ETFs. The proposed security would trade under the BIT’s initial desired ticker symbol: COIN.

The best article I could find about this amendment is this one on Seeking Alpha. Toward the end, there are a series of bullet points explaining the state of Bitcoin, the BIT, and the rest of the cryptocurrency ecosystem. It’s definitely worth checking out.

Fun Update: The Bitcoin Network is now ~22,800x faster than the Top 500 supercomputers combined

In December 2015, I published a short post updating the findings of Forbes contributor Reuven Cohen from November 2013. He found that the Bitcoin network hashrate was 256x faster than the combined compute power of the Top 500 supercomputers.

Note: Before all the computer scientists reading this start writing angry emails, Cohen explained the slightly squirrelly conversions Bitcoinwisdom makes between floating point operations per second and SHA–256 hashes per second. These statistics are useful primarily for entertainment purposes only.

In December of ’15, the Bitcoin network hashrate was around 600 petahashes per second, allegedly equivalent to 7.06 million petaFLOPs of raw compute power. The November 2015 list of the Top 500 supercomputers had a combined peak performance (R_peak) of 642 petaFLOPS. Divide the Bitcoin network speed in petaFLOPS by the combined Top500 from November 2015 and you arrive at almost exactly 11,000x faster.

Today, the Bitcoin network hashrate has increased significantly, up 153% to ~1,516 petahashes per second in only 7 months. Again, using some jiggery pokery on the conversions, that’s equal to 19.25 million petaFLOPS.

In June, the new list of Top 500 supercomputers was released. I summed the R_peak speeds of all the systems on the list to arrive at a total of… 845 petaFLOPs. So, divide one by the other and you find that the Bitcoin network is humming along at a clip 22,800 times faster than the top supercomputers combined.

So this is all well and good, but because the conversion between hashes and FLOPS is more or less meaningless, for all practical purposes, here are some no-bullshit comparative takeaways:

  • Remember that in 7 months, the Bitcoin network hashrate more than doubled in speed.
  • In the same period of time, aggregate peak speed of the Top 500 supercomputers increased by a comparatively small 30%.

This is testament to the fact that in the Bitcoin space, although it’s stayed out of the mainstream news, the technical arms race for share of total network processing speed has kept up its astonishingly fast pace. Gordon Moore, eat your heart out.

“Satoshi’s Law,” anyone?

China: The Seat of Power In Bitcoin’s “Decentralized” System

New York Times journalist Nathaniel Popper published a really good article about how China became the seat of power in the Bitcoin ecosystem.

(Popper’s work dovetails nicely with the research work I did for my undergraduate thesis. I intend to share some or most of what I found out at some point in the near future.)

Brexit: History, Market Failure & Science Threat

The late-breaking news on Thursday night that the United Kingdom voted to exit the European Union left global markets rattled and many scratching their heads. As John Goodman points out in his history of referenda for Atlas Obscura the UK overwhelmingly voted to stay in the European Community (the EU’s predecessor) in 1975. Obviously, much has changed since.

To me, the two most interesting aspects of the “Brexit” vote are the failure of prediction markets and the impact the move may have on science and technology in Europe. I don’t have much analysis of my own to share here, so in lieu of that I’ll share some links to some of the more interesting articles I’ve read as I’ve tried to wrap my head around the vote.

Failure of Prediction Markets

  • If you don’t know what a prediction market is or if you want to learn more, you might want to check out this list of resources from ConsensusPoint, a Nashville-based research group that specializes in prediction markets.
  • The Economist explains that prediction markets are subject to a number of cognitive biases that create a gap between expectation and reality. Their take: this gap can be exploited by the likes of pro-Brexit folks and such black swan political candidates as Donald Trump.
  • David M. Rothschild, an economist with Microsoft Research and proprietor of PredictWise, published an article analyzing the statistical upset of the Brexit vote. According to him, prediction markets failed due to market forces… most traders discounted the possibility of Brexit and held positions that would lose their entire value if (and when) the measure passed. In other words, it’s the same story as other market failures: over-confidence in one outcome and lots of unhedged risk led to a bad outcome.

Threats To European Science and Tech Research & Investment

  • Published before the vote, the MIT Technology Review explored the impact of a (then hypothetical) Brexit vote on British science research. Highlights from the article include: 83% of British scientists opposed Brexit; Britain is an outsized benefactor of EU funds for scientific research, receiving more money than it contributes to the fund (meaning Brexit has negative ROI for UK science); UK scientists may lose out on collaboration opportunities, much like Swiss scientists did when Switzerland tightened its borders in 2004.
  • Although the European Investment Fund has not announced any plans to change its relationship with the UK post-Brexit vote, there’s now a risk that the EIF will hold off on investing in new venture capital funds located in the UK, according to an article in FT Alphaville.

Remember, the Brexit vote is just the first step in what might be a long and messy divorce from the EU. In this particular case, researchers, technologists, entrepreneurs and investors might be caught in the crossfire. But a broader takeaway is the fallibility of prediction markets and polling data, which we should all keep in mind leading into the US election cycle.

Notes on Twilio, Line And The Open (?) Window

After several quarters of disappointing news from public tech companies (primarily those affiliated with Jack Dorsey, but I digress) and story after story about private tech companies’ reluctance to go public, Twilio may have blown open the tech IPO window on Thursday. Making its debut on the NYSE under symbol TWLO, at the price of $15/share, shares in the cloud communications company opened at $23.99, 60% higher than its initial offering. Shares hit an intra-day high of $29.61 and closed at $28.79, up over 90% for the day. (Shares in Twilio, like most other companies, experienced significant declines in Friday trading thanks to Brexit news.)

For more information and context on the Twilio IPO, check out some of these resources:

  • My friend Alex Wilhelm’s note on the IPO for Mattermark. (Also, thanks to Alex for linking to the EquityZen report mentioned below.)
  • This analysis from EquityZen shows that Bessemer Venture Partners owns 28.5% of Twilio. Bessemer generated a 27.4x multiple on invested capital on its Series B investment and 9.6x MOIC its Series C follow on.
  • That same report finds that Union Square Ventures generated an 82.3x MOIC on its Series A investment.
  • Fred Wilson, general partner at Union Square Ventures, says that Twilio’s was the best seed pitch ever. Proof positive that a live working demo trumps even the best pitch decks.

Whether or not Twilio’s public offering is a one-off success or the beginning of a trend is impossible to say, because it was the first major tech IPO this year. (One data point does not a trend make.)

The next scheduled IPO is for Japanese mobile messaging app Line, which is slated to go public on the NASDAQ on July 12. (More info on Line’s impending IPO can be found on the NASDAQ site.) Although all eyes will be on Line and the market’s reaction to its debut, there are some things to keep in mind (notes cribbed from Bloomberg):

  • Line filed for an IPO almost two years ago on the Japanese market at a valuation of 1 trillion yen. July’s IPO valuation, which will make shares publicly tradable on US and Japanese markets, is expected to be 588 billion yen, or 40% lower.
  • Facebook has steadily encroached on Line’s key product areas with the launch and continued expansion of Messenger, and its acquisition of Whatsapp.
  • Line’s average user is valued at $25 per user, less than half of the $55/user Facebook paid for Whatsapp.

Line is also unlike Twilio in that it’s not an infrastructure play. Remember that during a gold rush it’s best to invest in the people making the shovels, which is ostensibly why Twilio has performed so well… they built the platform that helped to catalyze the mobile app boom. Line has stiff competition from WeChat to the west and Snapchat, Messenger and Whatsapp to the east. And, unfortunately for Line, it’s one where the customers are more fickle.

Investors interested in this IPO should proceed with all the expected caution and due diligence, remember that one tech unicorn is not necessarily like another, and remember that past performance is not necessarily indicative of future results. There’s always room for an upside surprise.

3 Places To Start Learning About Marketplace Businesses

Earlier this week I published “A Beginner’s Guide to VC” on the Mattermark blog. There were a number of people who reached out to ask me to add more resources explaining certain business verticals. There is no possible way I could fit them all into that one post, and, so, I decided to make lists of great introductory resources to give investors, journalists, entrepreneurs, researchers and the otherwise curious a jumping off point to learning more.

Here, I want to talk about marketplace businesses. When you sit and think about it, most of the sites and apps we regularly interact with are a form of marketplace. There are, of course, companies like Ebay, Amazon, Etsy, and a number of marketplace platforms (Shopify, Magento, and their peers), but there are other marketplace categories. The online travel booking industry, on-demand services like Lyft and Uber, real estate sites like Zillow, and even consumer review sites like Yelp and Zocdoc are all incarnations of the marketplace idea.

So, we all use marketplace services to some extent, but unless it’s your job to analyze or grow these kinds of businesses, it’s surprisingly easy to not think about how and why marketplaces work and grow. Well, for those who want to learn more about marketplaces – whether you’re starting from ground zero or are just looking for extra reading material – I have some recommendations on where to start.

Without further ado, here’s that list:

Boris Wertz & Angela Tran Kingyens’s Book

Start with this excellent (and pleasantly short) e-book from VC firm Version One. Authors Boris Wertz and Angela Tran Kingyens explore the theory and practice of marketplace businesses while providing tactical advice on determining the business model, getting over the 2-sided-market problem and sustainably growing the business. The book’s concluding sections unpack the rise of new kinds of marketplaces (on-demand, community-driven, and decentralized marketplaces are all examples) and get into the nitty-gritty of metrics and dealing with investors.

Bill Gurley’s List of 10 Factors To Consider

Bill Gurley, general partner of Benchmark Capital, oversaw the firm’s investments in Ebay, Yelp, OpenTable, GrubHub, Uber, Zillow and many other leading marketplace businesses. Needless to say, he’s seen a lot, and in 2012 he did his best to condense some of those observations into a list of 10 factors to consider when evaluating digital marketplaces. Although this was written by a VC for an analytical audience (other VCs, journalists, commentators) entrepreneurs would do well to consider some of the factors he brings up. Some of the highlights include: frequency of purchasing activity, network effects, payment flows, and whether technology has the opportunity to add value.

Rishi Dean’s 7 Marketplace Design Patterns

At the time of writing, Rishi Dean is the head of product at Sittercity, a marketplace that connects child care professionals with parents. He’s thus spent a lot of time thinking about designing and scaling products and marketplace businesses, and he’s shared some of his thoughts on his blog. Like Gurley, Dean devised his own framework for thinking about consumer marketplace business models in 2013, which borrows and adds on to Gurley’s work. But I think Dean’s best work on the subject is from September, 2015.

In “The 7 Marketplace Design Patterns” Dean provides an analytical framework that categorizes marketplace businesses across three dimensions:

  1. Whether the marketplace is for commodity goods/services or something more “experiential”
  2. The degree to which consumers must consider their decision to use the marketplace .
  3. Finally, the degree to which the marketplace operator can predict the frequency of a given user’s transaction.

For each of the seven design patterns he gives example companies and goes into some detail about the tactical and strategic considerations marketplace operators (or investors in said operators) should keep in mind.

For those interested in the ecosystem of on-demand marketplaces, another post from Dean delves into 6 qualitative factors to account for when analyzing on-demand marketplaces.


Did you find this post interesting? Was there something I missed? Feel free to reach out and let me know.

Questions for Blockchain Experts

Here are a sample of questions I’d ask any blockchain expert today…

A couple of weeks ago, I had a back-and-forth email exchange with one of my favorite podcasters (also Chicago-based!). They were going to interview the author of a recently-published book about blockchains and the potential of blockchain supply chain as to how it could change the way business records, transactions, votes and other interactions are executed and recorded, and this person requested my input on questions for the interviewee. Unfortunately, the questions I posed came just a tad too late. However, the few questions I wanted to ask this blockchain expert are currently relevant and worth asking of anyone who claims expertise in blockchains and cryptocurrencies, so I decided to share them here on this blog.

Here are a sample of questions I’d ask any blockchain expert today:

  • Bitcoin has been called “The Internet of Money” or “The Email of Money”. Well, both email and the Internet are basically just a collection of core protocols, just like Bitcoin. One could argue, correctly, that the core protocols of email and the Internet haven’t fundamentally changed since their creation, and that their relative stability has led them to become great platforms to build on. Is the rapidly-changing nature of blockchain tech, and strife over Bitcoin’s protocol design, hindering blockchains‘ broader and sustained adoption as another core protocol?
  • In your opinion, what are the relative merits and drawbacks of closed/private blockchains like Stellar or Ripple? Is there a use-case for them, or is he an advocate only for open blockchains like Bitcoin?
  • (Keeping in mind that open blockchains like Bitcoin are most secure and resilient when they’re decentralized…) To what extent does he think that Bitcoin is centralized? Are there any risks created by centralization in each of Bitcoin’s three core economic areas: mining, exchanges and financial services?
  • Investors like Marc Andreessen seem to be staunch believers that the potential of blockchain tech is inextricably linked to Bitcoin. This is to say, he’s a skeptic of blockchains that don’t build on top of Bitcoin in some way. Are startup investors right to be leery of companies that build on a blockchain and mining infrastructure other than Bitcoin’s?
  • What are his thoughts on Distributed Autonomous Corporations (DACs) and how should startup investors think about companies aiming to build them?

Continue reading “Questions for Blockchain Experts”

A Reading List for First-time & Aspiring Entrepreneurs

In the past few of months, I’ve really enjoyed having coffee with folks who are just starting to figure out what they want to do with their lives. (I am still very much in the same boat.) When I was eighteen or nineteen years old, I had no clue what I was doing, and although I was so lucky to surround myself with a group of people who were also excited about starting their own projects, most of them would admit that they didn’t really know what they were doing back then either. And that’s fine. People learn, they change, and they do their best in the moment, given their experience and understanding.

For many of my friends, that fly-by-the-seat-of-the-pants approach worked out just fine; for others, including myself, well, that first project didn’t exactly work out, but others did or will. Nonetheless, one of the things that I noticed, in myself, my friends, and strangers whom I talk to about technology and starting things, is this voracious appetite for reading material. Especially when one is first getting started, a solid reading list is viewed as the best way to get up to speed with the culture, jargon and expectations of the field. (Although, ultimately, I think books about entrepreneurship are a lot like books about swimming. All might work well enough in theory, but putting those lessons into practice is the best way to learn something. At some point you’re going to have to jump into the pool.)

A sufficient number of people have asked me for reading suggestions that I wrote this post, which I hope will serve as a kind of reference I can share with people in the future. This is not 100% comprehensive. I’ve read (or at least thumbed-through) more articles and books than I accounted for here, but I’d consider this list a decent starting point. It’s the kind of list I wish someone gave me when I was 19 and clueless. It’s not perfect or complete, and it will be expanded over time. (Asterisks will precede the entry for those books that weren’t on the list when it was first published.) Continue reading “A Reading List for First-time & Aspiring Entrepreneurs”

2016: The Year of Better Time Wastage

I am going to be honest with myself here: I spend an unfathomable amount of time procrastinating important things. It was especially true this past year, during which I dropped back into college to finally finish. Although I did accomplish some legitimately good things as a result of procrastination – like downloading a small library of academic papers I’ve pulled from various databases and organizing it according to the Library of Congress’s classification system – but at the same time I spent truly ungodly amounts of time on reddit, Hacker News, Twitter, Facebook and lots of other places. Like, truly unfathomable amounts of time.

Retrospectively, it’s kind of horrifying, really. And to think that when I was just a few years younger I would spend lots of time reading and writing… Then, after a relatively brief but intense bout of depression, my procrastination habits changed. The endless, mindless, consumptive scrolling down auto-reloading streams of content to which I’d accustomed myself during this time in my life persisted, and became part of the fabric of my day-to-day existence. On the one hand, I consume far, far more content now than I ever have in the past, but that content is also unstructured. The content that is easiest to consume on a site like reddit is anecdotal, or commentary, at best a short narrative. Short, because, if it wasn’t it’d be “TL” such that most “DR”.

So, for 2016 I am not going to do anything too heroic. To say that I’d stop procrastinating is foolish, because everyone procrastinates in some way. To even set the goal of procrastinating less is probably not going to work either, because it’s not like I’ve quantified how much time I’ve wasted putting off doing necessary tasks. What I can do is make a promise to myself to make the things I do to procrastinate more mindful and active. For example, reading more books or academic journal articles about the things I’m already interested in or want to learn more about takes more cognitive effort, yes, but it also yields greater rewards. Like, rather than watching gifs or indulging a prurient appetite for bad news, about which I’ve already written, I could learn more about the world.

My goal for 2016 is to read forty books, roughly one every nine days. And, for an extra challenge, I want to read seventy-five academic journal articles as well. The challenge with the journal articles is that I also want to take some brief notes on each one: identifying the thesis statement, dependent and independent variables, and mechanisms of action where possible.

Why do this? First of all, my information diet heavily biases short-form content right now. I hope to be more regular with my own production of solid, high quality content if I have more informational “roughage” in my diet.  Second, since I started 2015 by “dropping in” to finish the last of my undergraduate degree in political science, and learning a lot of theory behind finance and venture capital – a field which interests me greatly – the menu of information I had to consume and digest was already set. In the last year, whatever time I spend binging on reddit or other sources of “informational junk food” felt justified because I had syllabus on syllabus of difficult readings to work through. Now that I’m basically done with undergrad studies, save for a final essay I’m currently writing, I feel the need to maintain a fairly regimented and rigorous load of reading such that I don’t succumb to an all-junk-food-all-the-time info diet.

You may have noticed that I used a lot of nutrition and diet-themed language in this post. It’s because I just started on Clay A. Johnson’s The Information Diet, a book I added to my “anti-library” (a concept from Umberto Eco I found by way of N.N. Taleb’s The Black Swan which you can read about on Brain Pickings) when it was first released. Now I’m actually committing it, as well as other books books in this anti-library to the positive one, and I’m looking forward to doing so.

China Journal, Entry 4. “Raid”

<< CHINA JOURNAL >> Dec 15, ’15, 2:45 AM

What. The. Fuck.

So our hotel has very thin walls. I was awoken out of a very sound sleep by some guy shouting in Mandarin at the next door over. The guy was forceful but calm at first. Then he barked again, louder and more angrily, with no response from inside the door. Then he shouted and broke down the door. A physical altercation ensued. There was shrieking. Continue reading “China Journal, Entry 4. “Raid””

China Trip Journal, Entries 1 & 2

Below are the first entries in a small journal I’m keeping to chronicle my first trip to China. I’m here on what may be the last school-organized trip I ever go on.

We’re currently in Beijing. I flew in this morning from Chicago by way of Seoul. We head to Shanghai in a few days.

The purpose of this trip is to expose students to the business climate and opportunities in China. I’ll keep notes about the meetings we go to off this blog, for the most part, but I’ll probably digest what I’ve learned into a post or two when I get home. But, before that happens, I’ll share journal entries here on my blog over the next week while we’re in situ.


<< CHINA JOURNAL >>

12/13/15 11:32 AM, Beijing

I just arrived in Beijing. I’m sitting on an express train to Dongzhimen, where our hotel is. Continue reading “China Trip Journal, Entries 1 & 2”