
A16Z struggles to earn passing grade in crypto fund II investor letter - 1cvmask
https://standardcrypto.wordpress.com/2020/04/30/a16z-struggles-to-earn-passing-grade-in-crypto-fund-ii-learn-by-doing-classroom-project/
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wpietri
Amen to this part: "Yes but what PROBLEM are we trying to SOLVE?"

Every time a blockchain-based solution comes up, I try asking that question.
There's only occasionally a real answer. Then my next question is, "How
EXACTLY does this solve the problem BETTER?" The answers there are almost
always tautological, some version of, "because blockchain!"

(For what it's worth, I give the original bitcoin paper [1] full marks on
these points. It has a clear thesis: distributed e-cash will solve particular
problems for particular people. It turns out it was wrong on every count, but
at least the idea was clear.)

A while back a friend asked me to meet with a first-time entrepreneur pal. The
entrepreneur had a business plan that was, like so many others, "existing
business, but blockchain". After some explanation of how it would work, I
asked, "Ok, how does this help your users?" The answer was, "It's more secure,
because blockchain!" I said that wasn't sure it really was more secure. But
either way, how could customers know it was better? Because the customer
experience for the blockchain version and the non-blockchain version were the
same. Either way, it came down to a company saying, "Trust us!" Would the new
company's customers see a claim of blockchain usage as better? And better
enough to compensate for the product limitations imposed?

They didn't really have an answer for that. And, unsurprisingly, I never heard
back again. Nobody likes it when you tell them their baby is perhaps not the
most beautiful child ever. ¯\\_(ツ)_/¯

[1] [https://bitcoin.org/bitcoin.pdf](https://bitcoin.org/bitcoin.pdf)

~~~
seibelj
Blockchain is good for permission-less financial innovation including raising
funds. It doesn't matter if the SEC considers a digital asset a security if
everything is offshore and the purchasers are offshore or anonymous. It is a
financial network without regulation.

Regulation can pierce areas of the network that interface with physical
entities, just as regulators can regulate pieces of the internet they can
control but lack capabilities around the darknet. This is what blockchain is -
purely digital and open financial networks.

~~~
mochapot
There is a group of people who assert that laws will not apply to them because
technology obscures their identity. Those people are wrong.

Blockchain is an append-only database. It does not create sovereign citizens.

~~~
kyboren
> Blockchain is an append-only database. It does not create sovereign
> citizens.

Telecommunications push bits over a wire or the ether. They do not create
"cyber spaces". My point is: There are some interesting applications of these
funny distributed systems that do lots of work to maintain an increasingly-
consistent cryptographically-secured append-only shared state. Your statement
is a bit too reductionist.

Frankly I'm surprised to read this kind of thing on Hacker News. I suppose the
days of zeal for revolutionary self-sovereignty are truly over:

> Governments of the Industrial World, you weary giants of flesh and steel, I
> come from Cyberspace, the new home of Mind. On behalf of the future, I ask
> you of the past to leave us alone. You are not welcome among us. You have no
> sovereignty where we gather.

> This is our world now... the world of the electron and the switch, the
> beauty of the baud.

~~~
wpietri
When I first read that, I too was inspired by it. But I don't think it aged
well. Cyberspace ultimately isn't a space, any more than there was a
"telephone-space" or a "telegraph-space" before that. Blind techno-utopianism
is an understandable but erroneous reaction that keeps happening, and it
generally ends up being ridiculous: [https://www.amazon.com/Victorian-
Internet-Remarkable-Ninetee...](https://www.amazon.com/Victorian-Internet-
Remarkable-Nineteenth-line-ebook-dp-B07JW5WQSR/dp/B07JW5WQSR/ref=mt_kindle)

~~~
kyboren
> Cyberspace ultimately isn't a space, any more than there was a "telephone-
> space" or a "telegraph-space" before that.

Cyberspace is not a physical space, indeed, but that's missing the forest for
the trees. The Internet has enabled a totally new social paradigm for which
'cyber space' is an apt term. Do you disagree that a person's experience and
patterns of use on Facebook is fundamentally different from someone whose only
electronic means of communication is the telegraph?

> Blind techno-utopianism is an understandable but erroneous reaction that
> keeps happening [...]

Techno-utopianism is related to but distinct from to the traditional hacker
rejection of the state as a valid authority over the Internet. I don't
consider either _The Declaration of Independence of Cyberspace_ or _The
Conscience of a Hacker_ "blind techno-utopianism". Idealistic, definitely.
Heady with anticipation for the world-changing implications of the Internet
and frustrated by political dinosaurs who don't get it, sure. Blind or techno-
utopian, no, I don't think so.

Your comments are dripping with disdain for the idea that cyberspace might be
something fundamentally new and that people might imagine a new paradigm for
governance that may be better suited to it.

It is sad to see such cynical pessimism and lack of vision from someone who
has the skills that might help to turn their vision into reality.

You _can_ use technology to make the world a better place. It's up to you to
actually want to do it.

------
Qasaur
>Bitcoin lightning makes higher throughput blockchains irrelevant.

Lightning is a UX disaster that is not easily solvable as the headaches are
part of the protocol itself (opening/closing channels with nodes etc.). I've
used some of the various apps that have been released and I find it very
difficult to see how "normal" people are going to understand and use it at
all. Instead of trying to innovate with new blockchain designs, there is a
significant amount of minds trying to hack together bandaids for Bitcoin, a
protocol and blockchain that has already been crippled by Blockstream and the
scaling debacle.

If one steps back and takes stock of the ecosystem, I find it very difficult
to see what value proposition BTC has other than reputation and being a first
mover. Store-of-value is something that Monero can do better as it guarantees
privacy which I'm sure a lot of people would like. Instant transactions is
something that NANO has solved on the protocol/blockchain layer (and without
using clunky hacks like Lightning) whereby transactions are settled almost
instantly and at zero cost.

Quite frankly, the only thing BTC has going for it is brand value -
technically it has already been superseded by other protocols, but BTC
maximalists (such as the author of the article) are ignoring this reality
likely due to sunk-cost fallacy.

So no, I disagree strongly with the author. There is a lot that can be built
within the cryptosphere, and I think trying to gatekeep innovation by limiting
it to the BTC protocol is extremely disingenuous.

~~~
poontang1
> Lightning is a UX disaster

Lightning absolutely was a UX disaster, but things are improving quickly.
There are wallets now that manage your funds completely without the notion of
channels, and thats how it should be for most users. You don't even care whats
going on under the hood, because it's all automatically managed.

> Store-of-value is something that Monero can do better

Monero has worse scaling issues than Bitcoin and is even harder to use for
most people.

> Instant transactions is something that NANO has solved

Every design decision is a trade off. Something free and instant is also
infinitely spammable.

If every transaction requires a PoW, its not actually free, and if it's easy
enough for a phone to do, its 1000x easier for an ASIC to do, and still
doesn't prevent spam.

No one wants to actually store spam data forever, and a lot of blockchains
have the issue no one one is actually incentivized to store the crap forever,
and _someone_ has to.

I completely agree Bitcoin, at it's base layer could be a better protocol, but
nearly every other protocol you'll encounter has made design trade offs that
make it less decentralized in the long term

~~~
tromp
> nearly every other protocol you'll encounter has made design trade offs

MimbleWimble makes pretty good tradeoffs. It improves on both privacy and
scalability, while sacrificing transparent supply auditability.

It also does away with all the bitcoin script complexity while still
supporting most functionality with "scriptless scripts" including multisig
outputs, atomic swaps, discreet log contracts, and even payment channels.

~~~
poontang1
Agreed. I like MW a lot, it's just far from usable for normal people at this
point.

On the downside, I don't see any path for such privacy centric projects
getting any regulatory support whatsoever, and sadly I think this is needed to
become a mainstream thing. I still think MW has immense value, it just may be
relegated to niche usage.

------
jariel
"but Bitcoin is a digital alternative that is gaining acceptance and adoption
around the world."

If by that they mean ' _losing_ adoption and acceptance around the world'
then, sure.

BTC has obviously lost the game at being any kind of 'currency' and as a real
store of value beyond the speculative type, it's not quite there.

Are there any serious funds putting BTC in their portfolio as a matter of
regular discourse?

When Buffet pulled out of stocks and went 'cash' a few years ago, did he
allocated 4% to BTC? No, why not?

The industry is in a death-march, the path forward for blockchain, and such
things is not quite clear.

~~~
everfree
To be fair, Buffett doesn't invest in anything he doesn't fully understand,
and his strong suit is corporate fundamental analysis.

------
ashtonkem
It’s funny watching two true believers argue about who’s doing a better job
chasing their shared vision.

The narcissism of small differences comes for all of us, it seems.

~~~
vertak
Thank you for posting this, it made me look up narcissism of small differences
and it sums up this article well. Maybe it would be a better idea to start
infighting once bitcoin and other crypto’s make it mainstream.

[https://en.m.wikipedia.org/wiki/Narcissism_of_small_differen...](https://en.m.wikipedia.org/wiki/Narcissism_of_small_differences)

------
flarex
Tone is very tribalistic and low level. "If it's not Bitcoin it's not crypto".
Irrational dismissiveness of innovation because their investment is at risk
from competition.

Like the saying goes "It is difficult to get a man to understand something,
when his salary depends on his not understanding it." Similar dynamic here.

~~~
sparkie
If it's not bitcoin, it does not inherit the fix for inflation. If you have a
useful innovation, it is possible to deploy it as a bitcoin sidechain, or
colored coin on bitcoin, which retains the fix for inflation (no need to
create new tokens), whilst enabling whatever developments you've created.

There's one, and only one reason why people prefer to do the print your own
token strategy: to generate lots of low cost tokens early on with the
expectation of exchanging them for real wealth later on when an exchange
market with some liquidity arises and you can market your product to naive
investors.

If it's not bitcoin, it's a money grab. It really is that simple.

~~~
tromp
> the fix for inflation.

Bitcoin is a fix for unpredictable and arbitrary emission. But its finite
supply, said to be modeled after Gold's, is questionable.

Gold may have a finite supply, but it's been mined for millenia and has slowly
increased its supply rate over time, and will likely continue to do so in our
lifetime.

In contrast, Bitcoin's emission which ranges from 2009 through 2140 is heavily
tilted to the first few years.

Its final century from 2040 through 2140 accounts for only about 0.5% of
emission.

The only point of the halvings is to be able to claim "finite supply". A
constant reward would still have the yearly supply inflation rate (stock to
flow ratio) going to 0, albeit more slowly. So crucially, supply would still
be scarce, would be more predictable (time independent), more fair to late
adopters, and be much closer to Gold's emission over our lifetime.

It would also avoid the inherent instability [1] of mining rewards dominated
by transaction fees.

If we further consider the fact that coins inevitably get lost, then even a
constant reward will yield a softcap of supply, where yearly emission merely
serves to balance the yearly losses.

Unfortunately, practically all cryptocurrencies subscribe to the notion that
early miners must receive greater rewards, even when they often already enjoy
lower difficulty.

[1]
[https://www.cs.princeton.edu/~arvindn/publications/mining_CC...](https://www.cs.princeton.edu/~arvindn/publications/mining_CC..).

------
seibelj
> _Stable coins are just bank liabilities in the best case, and more commonly
> fraudulent mafia money laundering ponzi schemes like tether.

Bitcoin lightning makes higher throughput blockchains irrelevant._

Bitcoin maximalist hit piece. All other coins are worthless to the bitcoin
maximalist.

I love BTC but there is a lot of innovation in crypto, almost all of which is
not on BTC.

~~~
grubles
The part about Lightning making "higher throughput blockchains irrelevant" is
correct though. Blockchains inherently do not scale unless you sacrifice
decentralization, and once you've done away with decentralization then you
don't need a blockchain. You're better off for many reasons using a database
instead.

~~~
seibelj
Lightning is a complex piece of technology. It basically requires an ISP-like
layer-2 solution where nodes peer with each other in order to route payments.
This is not a silver-bullet solution to scaling. ZK rollups[0] are another
solution and are live on Ethereum right now.[1]

[0] [https://docs.ethhub.io/ethereum-
roadmap/layer-2-scaling/zk-r...](https://docs.ethhub.io/ethereum-
roadmap/layer-2-scaling/zk-rollups/)

[1] [https://loopring.org/#/protocol](https://loopring.org/#/protocol)

~~~
grubles
Lightning is live right now too, and has been for two years. The "ISP"-like
(???) layer-2 thing you're referring to is just the fact that Lightning is
decentralized _and_ also scales, which is probably why the author accurately
claimed that it makes many-TPS blockchains irrelevant.

ZK rollups are completely new and they do not scale nearly as well as
Lightning, which performs at nearly 500 transactions per second /per payment
channel/. So take the number of channels existing currently on the Lightning
Network and multiply by 500 and you have a theoretical ceiling. It comes out
to some multiple millions of transactions per second.

~~~
seibelj
As a typical client, when using the Lightning network you open a channel with
a peer, which requires an on-chain (slow) transaction and locks up funds. If
you don't wish to do this with every single person you want to transact with,
then you select a peer who is a major node (exchange, payment processor, etc.)
who already has channels with the other major nodes. This will allow you to
quickly route payments to anyone affiliated with the large network.

This is why it is like an ISP layer-2 solution. IP packets route through the
internet in a similar way.

------
ketamine__
If future funds aren't investing in Coinbase, Etherscan, and CoinMarketCap
because those companies already exist then the risk profile is much higher.
All of these companies can make money in up and down markets. It's less
obvious that other crypto startups can do the same.

------
mbloom1915
mostly accurate piece. I can't say I agree with the stablecoin analysis since
many are being used as novel financials instruments, but I see where he is
coming from.

