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A16Z is re-registering as a financial advisor, renouncing its status as a VC (forbes.com)
347 points by zt 16 days ago | hide | past | web | favorite | 343 comments

a16z ("our" partner was Chris Dixon) led our seed round at Wit.ai. Working with them on a day-to-day basis was an incredible experience. They never asked for anything, but were always ready to jump in instantly when we needed anything from sales intros to offices in Palo Alto. When we got an offer from Facebook we founders wanted to accept it. They initially disagreed with us, but once we confirmed our decision they supported us 100% in the negotiation process. That's what I call class.

a16z - also Chris Dixon - led our round at Keybase. We only have great things to say about both the firm and Chris. Chris sits on our board and has been a class act the whole time.

Also: during our fundraising, we faced a number of the "Monday pitch meetings" -- this is where you've gone through the early crap talking with VC's and are invited in to pitch to the partners. It's typically the last step before an offer. a16z's partner meeting was, by far, the most tech-savvy and aware group. It seems obvious that VC's would understand the technology they're investing in, but honestly, that's often not the case. We faced a lot of brand-name VC firms that couldn't understand what we were working on. We'd get a sense of that and quickly adjust our pitch to focus on what they could understand.

For those asking "Why give them so much credit when they're just doing their job?" -- there are special occasions when a startup's interests and its investors' interests are not aligned. The first big opportunity for a VC to mess with you is the period between a letter of intent and closing the round, when all the smaller details come up and are negotiated. a16z was excellent in the process and we closed quickly without issue.

A later possibility of disagreement is what ar7hur describes here, and here's why it happens: VC's have zero risk aversion and aim to maximize expected value in dollars, which is what you'd want as an investor in the VC. But especially if you're a first-time founder, your dollar-to-utility curve is anything bit linear. Most humans wouldn't trade $5 million for a 1-in-10 chance at $100 million. This discrepancy is the source of a lot of possible problems. How VC's behave during both subsequent rounds and possible exits is perhaps the most important measure of them from a founder's perspective.

tl;dr very happy with a16z and Chris Dixon.

Did you guys ever eventually work with VC firms who didn't understand your product? I get a sense that there might be a big mismatch but wonder how much that really affects things day to day.

Great note to hear that there are legitimate VCs like a16z who aren't just after their own interests. Did you work with other investors as well? If so, would love to contact you privately regarding your experiences as I'm looking to fundraise soon.

>They never asked for anything, but were always ready to jump in instantly when we needed anything from sales intros to offices in Palo Alto. When we got an offer from Facebook we founders wanted to accept it. They initially disagreed with us, but once we confirmed our decision they supported us 100% in the negotiation process. That's what I call class.

As an outsider, I'm curious as to how bad the VC situation is in SV that doing your job is called out as exceptional. How common are the "Russ Hanneman's"?

Russ Hanneman is a pretty accurate portrayal of a combination of of any average real estate / non domain investor / rich person + the worst parts of someone like Jason Calacanis. Jason has a lot of upside (i used to work with him), but he brings a lot of "swag" which I think Russ Hanneman is based on. The non domain investor is the part where they tell you to work on ridiculous shit but have lots of money so they expect you to listen even though it's a horrible idea.

It's a good question.

The VC situation _outside_ of SV is generally considered much worse as far as I know. Such that characters in the HBO show would be depressingly accurate or even lightened up a bit.

There are great investors everywhere, but "a deal with the devil" can be the nature of most VC investments if you're not lucky/careful (disclaimer, 2nd/3rd hand)

Thanks for sharing this.

It's interesting this is the top voted comment when it isn't really substantive to the article's subject matter.

Seems substantive to me: it's a testimony from a founder working with a16z about the benefits of the 'services' model of a16z.

As a would-be founder, this new move from A16Z makes me worry they won't focus on helping startups like this anymore.

Anecdotes like this help quell that fear a bit, even if wrongly.

Why would you want to wrongly quell a fear?

I want to adjust my fear to the real level of risk/uncertainty; in this case, that's still above zero, but the anecdote above helps drop it down.

Why would you assume that wrongly quells the fear? I would tend to assume that the demonstrated character (good or bad, good in this example) of the principals of A16Z would remain the same across the company change.

I'm not assuming anything. The comment I'm replying to states that this helps to quell a fear "even if wrongly".

To me, this seems like saying that removing the batteries from your smoke alarm will help you sleep, even through house fires.

Haha, OK, I'm doubling down on upvote fraud here. Someone is clearly artificially upvoting sibling replies to my parent comment to displace it.

My parent comment received 14 upvotes and was ranked as the top response for the 4 hours after posting it.

Then, in the span of one hour, every other comment reply received enough upvotes to displace my parent comment. Even, "Thank you for sharing this".

Is there a way to call @dang over? It makes me sad that HN is being gamed.

I appreciate your concern for the integrity of HN—the fact that the community here feels so strongly about that is one of the best and most community-like things about it. However. If you read the site guidelines (https://news.ycombinator.com/newsguidelines.html), you'll notice that:

(1) commenting on voting on comments is off topic;

(2) insinuating astroturfing is not ok;

(3) you should email us instead: hn@ycombinator.com.

Re #1: a moderator correctly marked your comment off topic. That lowers its rank. Re #2: I looked at the upvotes. There's no trace of abuse that I can see. People are far, far too quick to assume manipulation when the truth is simply that large subsets of the community like different things. That's why we have that guideline.

tl;dr - A16Z is reclassifying themselves as an "investment advisor", which will allow them to make riskier bets (crypto, real estate, etc). They'll still invest in startups like any other VC firm.

I feel like there's some misunderstanding of what these terms are. All VCs are investment advisors (either Exempt Reporting Advisors or Registered Investment Advisor depending on assets under management and investment types).

The article is vague in what it actually means, but it sounds to me like A16Z is going through the process of giving up its VC exemption to the Investment Advisers Act and registering as a RIA. It could also mean they're registering as a broker-dealer and getting its relevant employees licensed as such (e.g. Series 65)

Source: I run a VC firm.

Here is some more info: https://www.strictlybusinesslawblog.com/2018/05/31/the-ventu...

it's renouncing the IAA exception, registering as RIA, i confirmed with the Forbes journalist yesterday

What is an RIA?

I know what these things are: hedge fund, private equity, wealth management, venture capital.

Which is A16Z now closest to? Or is there a class of financial firm I'm not aware of?

Edit: I'm also curious, does this place any material restrictions on their startup investment activity?

Registered Investment Advisor. Legal entity that allows you to manage other people's money.

VCs, hedge funds and wealth management tend to be RIAs. Private Equity I'm unsure. Wealth managers are all either RIAs, brokers, or banks.

The article is unclear. A16Z are forgoing a certain exception that VCs have, I'm not sure what their legal structure was beforehand.

You can look up all RIAs on the SEC website https://adviserinfo.sec.gov/

Yes, that's the interesting thing here, so we've put it in the title above. Hopefully that will nudge the discussion to be more specific and less lame.

thanks dang! You rock

A totally n00b question.

Isn't VC the person with the money, so they are more in control.

While an "investment advisor" is just advising or suggesting where the money can be put for maximum returns like an investment advisor in banks? So, presumably less in control.

I don't understand why a title change was needed. Any technical or legal reasons?

From 30k ft--in the financial industry, the VC title afforded a carve out from SEC oversight if its business was focused around certain qualifications (e.g., invested primarily in new-early stage private companies).

This classification, in turn, also limits what an entity with a VC status can ultimately do and invest in.

In this case, a16z has ambitions that outstrip the limited definition of VC in the eyes of the SEC. Under their new classification, they still have the monies as an 'investment advisor' but aren't hamstrung on what they can invest in. It will, however, change the way they will be required to operate due to new regulations that come with the investment advisor classification.

Related, an article from the NVCA on the subject from December. [0]

[0] https://nvca.org/blog/need-update-definition-vc-heres/

wpennington answered the overall question better than I could, but one clarification on this:

> Isn't VC the person with the money, so they are more in control.

Most of the money VCs invest isn't their own. The money is allocated by "limited partners" (entities such as pension funds, endowment funds, sovereign wealth funds, rich individuals/families), and the VC firm uses their expertise and network to invest the money on the LPs' behalf, in exchange for a "management fee" and a cut of the returns.

The VC firm's partners do usually invest some of their own money (to have some "skin in the game"), but it's a token amount compared to the outside money they're investing.

Due to their role as custodians for huge amounts of other people's money (which, particularly in the case of pension funds, ultimately belongs to ordinary people), there are substantial regulatory controls and requirements.

Totally--and this is a really good point to clarify, especially if one would like to understand more broadly how VC works. I intentionally abstracted the "where does the money come from" in my original reply to focus on the classification itself, but that admittedly left the comment lacking this useful context. LP and venture dynamics are both interesting and important to understand the full picture.

> Most of the money VCs invest isn't their own.

To underscore tomhoward's point--VCs are largely (already) stewards of other people's money (their LPs). So while they are set up to be "the person with the money" from the market's perspective (e.g., if you are looking to get your company funded), they are acting as investment advisors (e.g., where and how to spend the fund's money--and by extension the LP's money--for a fee). Albeit with a specific legal exemption set forth in the Investment Advisers Act that governs certain activity depending on how they are registered* (this is what is changing for a16z). No matter how they are registered, they do have compliance requirements as custodians of other people's money.

*Under the Investment Advisory Act, they can be registered as: (1) ERA - exempt reporting advisor (what we are referring here as a VC in the traditional sense), or (2) RIA - registered investment advisor.

As it relates to a16z, they are giving up their IAA exemption as a fund (registering as an RIA vs ERA). No need to get into why that matters again (see other posts that have already addressed it well). The point being, VCs are already in many ways "investment advisors" as custodians of other people's capital (and sometimes their own) through their funds and they have compliance requirements, just different depending on how they are registered.

> Isn't VC the person with the money, so they are more in control.

They are the person with other people‘s money.

> While an "investment advisor" is just advising or suggesting where the money can be put for maximum returns like an investment advisor in banks?

That is basically what they are doing. Making dcisions where to invest their client’s money.

They will or already did?

Cryptocurrency prices jumped 20% because of a well executed 100M order

The article reads like advertisement for A16Z.

But imagine, if you are a VC and you invest in a Brothel then you risk your reputation etc...

But if you act like an advisor for Mr. Evil Money, then it's not you who is on the hook, right?

Basically, it means they want to do something more aggressive and risky and maybe the opportunities in VC space are disappearing.

still surprised I haven't seen any revenue shares of those kind of businesses on the blockchain, ever since 2013's crypto-securities bonanza

either the revenues are that high such that nobody has a desire to sell some of the company, or there is a language barrier in the host jurisdictions where these can legally operate, or nobody has considered it as the incumbents are so comfortable with their licensing/turf that they don't need to change a thing

the technology is so much better now than 2013 and nobody calls them crypto-securities anymore, it is such an obvious use case for price discovery, liquidity, and acceleration of public policy

> crypto, real estate

Crypto maybe, not real estate doesn't sound as risky as startups.

Maybe it depends on what type of real estate.

> which will allow them to make riskier bets (crypto

Sounds like they'll blow up their wallet next

Skepticism might be warranted, but it should be noted by now that decentralized finance has a place in the present and future of our planet and it's not going away. I strongly encourage technologists to keep an open mind and do in depth research into the space.

Yes, 2017 was over-hyped. The tech was not mature then, and while it has matured some since then, there's still quite a ways to go.

Bitcoin Lightning network is growing. Ethereum has successfully navigated core upgrades and has a clear path to scalability. Other platforms are doing great innovative things.

But to the core of the argument that crypto has no use case. It's 2019. We've seen our internet rights to speech and expression violated by companies imposing their values on their user base. We've seen digital ghosting, deplatforming, fake news manipulation, propaganda and all kinds of insidious behaviors from corporate giants that are too big to be truly accountable anymore.

Bitcoin et al. are a very real promise that the future of banking and finance and money will be decentralized. Which as far as I'm concerned, is about freedom as much as speech is. You don't have any freedom if you have to beg VISA or PayPal for permission to spend your money. That alone should be enough to justify the existence of block chain technology and we should all be cheering on its eventual success.

But besides that, the tech is being used in novel ways. From gaming to loans to tokenized asset trading. Cryptocurrency is programmable in a way that is just not possible with dollars.

>We've seen our internet rights to speech and expression violated by companies imposing their values on their user base.

>Bitcoin et al. are a very real promise that the future of banking and finance and money will be decentralized. Which as far as I'm concerned, is about freedom as much as speech is. You don't have any freedom if you have to beg VISA or PayPal for permission to spend your money.

The moral high ground you are trying to claim in your second argument is undercut by your first argument. If this was all about freedom, we would see similar sized investments in open and decentralized platforms focused on free speech. The reason we aren't seeing that is obvious. It is much easier to see a path to profitability in the cryptocurrency space.

Most cryptocurrency investments aren't about freedom, they are about carving out a piece of the pie from the existing financial services industry. There is nothing immoral about turning a profit, just be open about it. It is dishonest for cryptocurrency investors to claim their intent is to save the world especially considering how much electricity and therefore fossil fuels some of the popular cryptocurrencies waste.

Sell the tech on its own merits and accomplishments. There is a reason why the "making the world a better place" pitches have been parodied for years.

> we would see similar sized investments in open and decentralized platforms focused on free speech

This is already a mostly solved problem. There are lots and lots of places on the internet, when I can engage in speech and it won't be censored.

Yes, the big platforms might censor you, but there are still lots and lots of small platforms that won't or can't.

What free speech is he referring to? The only speech I know of that has been censored is terrorist groups. It makes me uncomfortable when I see people here complaining about that.

Since you brought it up, I would generally agree with you and am not too concerned about free speech on the internet. More than just terrorist groups are being censored, but all of the speech that I have seen disenfranchised has been speech that is in my opinion objectionable in one way or another.

A lot of people in the US don't seem to realize how extreme we are as a country when it comes to free speech. We fetishize free speech in a way that I feel is not healthy. I don't think any country's laws are perfect in this regard, but all the other western democracies seem to be just fine with their laws against things like hate speech. I don't see how the US allowing hate speech is beneficial to the country or its people.

This opinion tends to be an unpopular on HN and I figured I would meet the original OP on their terms.

Western democracies with hate speech laws are less democratic because the range of legally permissible opinions is smaller.

If mere functioning is your goal for the country, then certainly countries without strong free speech protections can function. They can even function without democracy at all.

But most people want more for their country.

Western democracies with weaker free speech protections do function, but they also have a substantial pressure outlet in the form of websites hosted in other countries that don't kowtow to oppressive governments.

Cross reference this list[1] with this one[2]. I just don't see any evidence for a claims like "Western democracies with hate speech laws are less democratic".

[1] - https://en.wikipedia.org/wiki/Democracy_Index

[2] - https://en.wikipedia.org/wiki/Hate_speech

The only thing the democracy index gets right are the broad strokes. But then again, so could a high schooler with wikipedia and a free afternoon.

It's not implemented well enough to detect the fine differences between western countries.

Hate speech laws reduce the range of discourse. They suppress dissent. That's inherently undemocratic.

I think the reason so many people feel that it's important to allow dissenting and objectionable speech is that the perception of 'harmful' speech is mostly subjective.

Relegating that permissiveness to a particular entity allows that subjectivity to be enforced in perverse ways.

Many people feel it is better to tolerate the objectionable and hurtful speech than to allow a 3rd party to use subjective judgment to censor.

Daily stormer and Alex Jones?

...unless you think they are terrorists.

The KKK certainly is a terrorist group. Alex Jones is being sued and whatever platforms don't stop him from spreading malicious lies could be liable as well.

The problem with decentralized money is that there is no way to manage the supply - you can only commit to a given supply curve, but you cannot adjust it according to the state of the economy.

Money is a collective action problem, a public good - it requires a solution that bounds everyone - just like defence.

Some people think this is a problem. Others, a feature. At least now we have the ability to see what happens.

You can have decentralized money without crypto - just use gold parity - but somehow no country uses it now. Maybe they are all corrupt - but maybe it is just not good way to manage the economy.

And maybe it's not, and the government is taking advantage of it's position of power?

Competing tethered currencies aren't gone because they're a bad idea, they're gone because they've been made illegal.

Crypto gives the power to operate such a currency back to the people in a way that can't be stopped.

> just use gold parity - but somehow no country uses it now.

Thats fine. If you don't like deflationary currencies, then feel free to not use them.

Other people disagree, though, and are preferring deflationary currencies.

Everyone can get what they want.

It's worth noting that because of the power the U.S. has over global finance it's hard for other countries not to follow its lead. So when Nixon went the route he went, the rest of the world was to a large extent forced to follow suit.

> you can only commit to a given supply curve, but you cannot adjust it according to the state of the economy.

Why do you think this? Ethereum has changed its inflation schedule a few times recently.

It seems you are basing this on the hard capped supply model of bitcoin which is not the same as every cryptocurrency.

Then it’s not decentralized?

that's a feature to combat hyperinflation. to whoch country's economy would it be adjusted to if its a global financial instrument? individual currencies will be adjusted for sure. Bitcoin can act like a global Gold reserve

Why can’t you do that?

The fundamental problem is probably with the possibility of fork - if it is decentralized then everyone can fork it if he disagrees with the way it works.

But maybe there are some good in-between solutions, less dogmatic, more pragmatic.

Forking is not a problem. It's users voting with their feet.

The possibility of forking is a necessary deterrent in cryptonetwork governance.

If the maintainers of a network become compromised or get coopted by special interests, the collective owners of the network(the holders of the cryptocurrency) have the right to exit.

The right to exit is a necessary part of governance.

You cannot have an binding agreement between everybody if anybody can get out at any time. My thesis is that managing money supply requires such an agreement. Of course you can have unmanaged money - historically we always had that - with gold standard and shells. But it is probably less efficient - because it means you cannot adjust money supply to the state of economy.

decentralized finance has a place in the present and future of our planet

There is no guarantee that decentralized anything has a place in the future. So far the trends have been depressingly centralizing, whether it's government, finance, manufacturing, or even our great hope, the Internet.

The costs of centralization is starting to seep into people’s day to day life though. People tend not to act to abstract threats but rather tangible issues.

Tech people have been warning about this forever because they have a strong grasp of the consequences and they also better understand what we have (or had) with the internet and other parts of the economy and politics.

I’m starting to see far more ‘regular’ people outside of tech concerned about the top down centralization of communication and payment networks.

It's not a tech thing. "Small/big government" / hegemony / balance of power is an age old debate.

What do you think decentralized finance even is?


> Ethereum has successfully navigated core upgrades and has a clear path to scalability.

And for all this technical progress there's still the human problem that the core team/individuals decided exploiting vulnerable contracts' and hard forking the failed DAO were morally right ideas.

As long as those team members are involved then the truth is that no one in the Ethereum ecosystem can escape the Spectre of their will. They've historically proven to be operating as simply a different centralized body of power that isn't a government issuing fiat.

This is the Vitalik jump request. All the miners immediately ask how high. Centralized in a Slack channel.

That's democratic consensus. It's not centralized. You can fork if you want.

They've historically proven to be operating as simply a different centralized body of power that isn't a government issuing fiat.

I can imagine at least a couple of scenarios where it might be in the interests of (some?) investors to spruik such a thing.

There’s a lot of power being generated by, and flowing within and between, various organisations throughout the world. It’s probably possible to tap in to that a gather some of it close to you, especially if you are a group of tech minded wealthy folk.

>>> There’s a lot of power being generated by, and flowing within and between, various organisations throughout the world.

Could you clarify? Do you mean flowing as in transactions between major banks or major manufacturers? Or something less obvious?

>You don't have any freedom if you have to beg VISA or PayPal for permission to spend your money. That alone should be enough to justify the existence of block chain technology and we should all be cheering on its eventual success.

Where is it you live that Internet service is provided by a free market, that can't be disabled?

I can think of more cases of Visa and PayPal cutting off payments (e.g. to alt-right media organizations, Backpage, gambling) than ISPs. It's of course their right not to process payments for whomever they want, and I personally haven't shed any tears over the organizations I've mentioned, but I do wonder whether it is a good thing that payments are so centralized they effectively become an extragovernmental regulator, especially because their motive is loss prevention and public image rather than public interest.

Most of the inhabited Earth actually... https://blockstream.com/satellite/

The article doesn't say much about it in relation to a16z. There is a16zcrypto.com . I am very involved in this space, I am wondering how a16zcrypto is structured compared to traditional VC. For many crypto startups it probably doesn't make much sense to base in US.

Decentralized finance is a myth. Governments only exist because they control the money on behalf of the country. Decentralization of finance would remove that control and hence fundamentally undermine the governments control

Substitute “religion” for “finance” and the Roman Catholic Church of the Middle Ages would agree with you.

> But to the core of the argument that crypto has no use case.

Oh come on, this american-centric meme has to die off already. Drugs. Every drug-related transaction I know or heard off for the last ~2 years have been done through bitcoin.

In some aspects, US is ahead of the globe. In others, though - like having people such as drug dealers who meet their clients in person and make transactions in cash - it's way behind.


Not the OP but... yes, among countless others.

10 years ago, people who clamored about a subset of the NSA's dragnet could have been justifiably labeled "conspiracy theorists".

Cultures and public opinions change over time. In America, and certainly for the most part on the internet, the ability to express opinions, including and especially controversial ones, is both a hallmark of and litmus test for freedom. Censoring controversial statements based on the current cultural temperament is antithetical to it.

Conspiracy theorists have limitations. See Alex Jones getting sued. If you’re actively promoting something false and malicious that harms people, your speech can be restricted. That’s not new.

How, exactly, does Bitcoin (and other shitcoins) being nominally 'decentralized', and whose main use after 10 years is still speculation and scams, relate to nazis and right wing trolls occasionally get kicked off twitter?

>How, exactly, does Bitcoin (and other shitcoins) being nominally 'decentralized', and whose main use after 10 years is still speculation and scams, relate to nazis and right wing trolls occasionally get kicked off twitter?

Perhaps because the people you label "right-wing trolls" are, sometimes, actually just people with different opinions, and deserve (at least in their minds) some protection? They aren't merely getting kicked off Twitter; in some cases they are being demonetized.

It's all well and good to sit back and say, "too bad for them", but it would be diligent to at least concede your "side" may not win this fight, and one day you might be getting the label.

That doesn't explain why Bitcoin is useful for anything other than relieving stupid people of their money?

"put a dent in the universe" ... "disagreeableness" ... "weaponizing his popular blog" ... "Being number one"

A phrase from each of the first four paragraphs. Is this parody, or just pandering cliche?

The investment returns on the funds sounded unimpressive given the time period. I found some info online from the WSJ suggesting the first fund was on track to return around 250% since 2009. Just investing in the NASDAQ would have returned over 500% over that same period. Am I missing something here or is the performance as unimpressive as it appears?

The article itself includes: "The firm’s first and third flagship funds, $300 million and $900 million, respectively, are already expected to return five times their money to investors, sources say. Its $650 million second fund and $1.7 billion fourth fund are expected to return three times their investment capital, good for the top quartile of firms, and are expected to climb."

Selecting the NASDAQ in 2009 is a bit of a cherry-pick.

I don't think selecting the NASDAQ in 2009 is a cherry pick given that is when the first fund started and we're talking about a tech focused fund. Even if the numbers here are more accurate than the WSJ, that still indicates the first fund is returning on par or slightly below what investing in the NASDAQ would have done over the same time period.

Venture as an asset class sucks.

Returns also tend to be inversely correlated to fund size and fund reputation. Top 5 or 10 firms generate virtually all the returns in the asset class.

2009 was the end of the biggest market drop in a half century...

I had the same reaction. I've gotten better returns than A16Z over the same time period just through index funds and picking stocks of companies I like. Granted, I'm investing a tiny fraction of the amount they are, and I don't get to be a mover and shaker in Silicon Valley, but I was really not impressed by the overall return on investment.

VC has historically done slightly better than the stock market, but returns over any time period are inversely correlated with how much money is flowing to VC (ie when everyone wants a piece of the action more bad deals are done, terms are better for companies etc) - so you'd expect the current period to produce okay returns (but probably less than the S&P). People imagine VCs return 100x or something, but if that really happened it would reveal an absurd amount of under-investment or really bad negotiating by founders.

And given that these reasonable but not stellar returns put them in the top quartile (and VC has high variance even relative to hedge funds), you can guess how well things have gone for other folks.

It seems like reasons you might invest in a VC fund could include portfolio diversification (if returns are counter cyclical or have low correlation with other asset classes), risk profile or expected performance. It would seem a little surprising if tech focused VC funds had low correlation overall with the NASDAQ but maybe it's the case. If it's mostly about risk profile and VC is riskier then at least according to traditional theory it ought to outperform the NASDAQ over a good period for tech like the last decade but would underperform in a down cycle.

It's somewhat hard to calculate the correlation because VC is so illiquid, but for sure it provides diversity and has historically been an excellent investment. The variance across VCs is also huge relative to other types of asset managers, so you have the potentially for really obscene returns. If you have enough money that you don't need to be liquid it is a good investment.

What you're describing doesn't sound like a particularly good investment. You replace the problem of picking stocks with the problem of picking VCs and have less liquidity. You have the potential for really obscene returns picking stocks too but there's no real reason to think picking VCs is any easier.

That is correct. There are not ETFs for these kinds of investment classes, so similar to hedge funds you would need to believe that you are capable of picking the right managers. You also need to be an accredited investor to gain access, and funds like A16Z mostly take institutional money (endowments/sovereign wealth funds etc). Like hedge funds, management fees are very high. But folks want the allure of pre-ipo tech companies...

So Hedge Funds, PE, and VC all converging into a more continuous spectrum of asset allocation strategies.

Of everyone I follow it seems it’s only a16z still believes in crypto.

What is there to believe or not believe in? It is what it is. Bitcoin is a perfectly functional means of financial exchange, and has use cases that beat regular cash, and other use case where it sucks compared to cash.

> and has use cases that beat regular cash,

Tell me.

Censorship resistant electronic, financial transactions.

The evidence shows that it is much easier to censor a credit card payment, or bank transaction, than it is to censor a crypto transaction.

Which only matters if you're trying to do illegal things on an international scale. Locally, you've always got cash.

There are lots of perfectly legal things that get censored all the time, by both the government and private companies.

Adult content is one area that comes to mind. If you run a business in this area, on the internet, which is perfectly legal, you will quickly find that every major financial institution refuses to do business with you.

There are payment processors that cater to that market. They charge large fees (up to 20%) for card transactions, though that's actually due to the crazy-high chargeback risk. People's spouses tend to discover their subscriptions, then they declare it wasn't them, their card was stolen, and a chargeback follows.

Indeed, that's my point.

If you do business in one of these controversial areas, then you will quickly find that you are being charged extremely high costs and/or kicked off of their network.

They're not extremely high, they're the cost of doing business.

And the world would be a much better place if it was harder to impose higher costs of doing business on controversial, but legal businesses.

Which is why I support solutions that undermine attempts by a couple monopolies to impose larger costs on legal, but controversial businesses.

Fair, though this isn't the technology that'll solve that. You've just centralized the decision making to the PRC which controls more than 51% of hash power. All it takes is a strongly-worded memo from Beijing and they can censor payments and rewrite the blockchain.

That said, with $1.26 transaction fees + 1-2% to buy BTC vs. even 20% for a credit card in this high-risk MCC, the breakeven is ~$7, and while I'm not sure what adult content costs on a monthly basis, I'd imagine the fee difference isn't a whole lot.

It's also not an imposition, nobody is required to use credit cards. Adult content is largely and lucratively ad-supported. Some businesses choose to offer content on a subscription model like the NYT paywall, and some choose not to. I don't see anything inherently wrong with the status quo. The cost of doing business is being passed down. They accept credit cards because even at a 20% fee, it's in their interests to do so. If it wasn't they'd stop. Either way, they're recovering their fees from customers.

I mean, buying a bunch of miners in order to 51% attack a network is significantly more difficult than making a phone call to a Visa or MasterCard executive.

It is also not enough to censor a singular Blockchain. You'd have to get the hardware to attack all the chains, because then people would just move to the other ones.

This is still not impossible. That's why I used the words "censorship resistant". But it is certainly much more difficult than a phone call to 2 or 3 executives who control the major financial companies.

This is proven by the fact that censorship just isn't happening on most Blockchains. The actual state of the network proves that it is difficult, because it isn't happening.

You can talk all you want about theoretical attacks, but those attacks aren't happening, so it works. Whereas there are many examples of the "phone call to Visa" that are happening right now.

My understanding is 2 or 3 miners in the PRC have all that 51%, and in China, when Beijing says jump you say how high or you may end up escorted from your penthouse at the four seasons in Hong Kong to seek medical treatment on the mainland and never be heard from again (https://www.google.com/amp/s/www.nytimes.com/2017/01/31/worl...)

To circle back 80% of all hashpower is concentrated in 6 pools, 5 of which (>70%) are in the PRC. (https://news.bitcoin.com/chinese-mining-threatens-bitcoin/)

And yet, those pools aren't censoring anything.

They aren't stopping any transactions, and have never done so, in the 10 years that crypto has been around.

This is in comparison to visa and mastercard which censor people all of the time.

So for whatever reason that those pools aren't censoring anything, and have never done so, but the major finance companies are censoring transactions, is the reason why crypto is valuable.

Transferring money from one continent to another.

Calculate the full chain of costs then come back here with how it compares to Transferwise or other methods

Well… Cost:

a) BTC-BTC Transfer: Only BTC transfer fee. Beats TransferWise by a large Margin.

b) BTC-USD: Depends on many variables, including if the receiving country taxes BTC to fiat. Considering how expensive transferwise is, it's probably a wash.

Speed depends on if GP literally meant Cash. If so, BTC is obviously far faster and easier as you still need to get you cash into your bank account. Otherwise… Transferwise takes a few hours, BTC 10-20 minutes I think?

Privacy: The Banks and TW know who sent how much to whom. With BTC everyone knows that A sent X to B, but not necessarily who A and B are. As this transaction is public forever, I'd probably prefer TW from a privacy perspective, this of course changes with something like Monero.

Nobody takes BTC in exchange for goods and services, absolutely nobody. In this context it's at best an intermediate representation with huge FOREX risk. That means (a) is a false equivalence as unlike (b) it only represents a small slice of the transaction.

That's not true, there are large retailers that directly accept BTC, like Newegg [1] and Overstock [2]. There are also services like Bitrefill to purchase gift cards using various cryptocurrencies for use at places that don't directly accept BTC: Amazon, Ebay, Walmart, Best Buy, and Target to name a few of the 750+ supported [3].

[1] https://promotions.newegg.com/nepro/16-6277/index.html

[2] https://help.overstock.com/help/s/article/Bitcoin

[3] https://www.bitrefill.com/?hl=en

There are more that did and stopped than do. And to your own point of the ones that do, the vast majority do so via intermediary like bitpay because they dont want BTC they just want money. The trajectory of acceptance has a negative slope. Even Overstock doesn't accept BTC on mobile according to their help page.

Further, since you've got to foot the transaction fee (~$1.50) instead of the merchant and the merchant has already padded their prices for a 3% credit card fee, you're getting royally screwed. I pay with my 2% cash back credit card, get all sorts of warranties and protections, and you pay 3% + $1.50 and get nothing but losing your ability to file your taxes with TurboTax because they dont support crypto on Form 8949.

> Nobody takes BTC in exchange for goods and services, absolutely nobody.

I was simply trying to show that your original statement was hyperbole, as there are clearly notable retailers that do.

Also as a consumer, I don't see why your point about intermediaries is relevant (barring the marginal price difference between them). If you are planning on purchasing something from a business you don't really care if they are using Intuit or Square to process credit cards transactions, just that they accept credit cards for payments.

My point about intermediaries is that you are paying more to use Bitcoin than I am to use my credit card, and getting a lot less for it.

COGS: $10.00, retail after CC markup: $10.30. I get a 2% rebate, so I paid $10.09, and for that $0.09 I get a one-month interest free loan, chargeback abilities and numerous warranties.

COGS: $10.00, retail after CC markup: $10.30. You have to buy the $10.30 from an exchange for $10.51 (assuming 2% fee). You then pay another $1.26 for the BTC transaction and get back nothing, for a total of $12.07. That means your total fees paid are 23X the total fees I paid. No chargebacks, no warranties, no loan, 23X higher fees. Then, you have to report your cost basis to the IRS and can't do your taxes easily. That makes your payment method inferior for any normal, legal purchase. That's one of the reasons buyers don't want it. Sellers don't want it because it exposes them to enormous FOREX risk.

Yes, it's hyperbolic, however the fraction of businesses accepting BTC is already practically zero and falling, it's not unfair to round it to zero. Otherwise we would just be happy with Overstock.com gift cards as a medium of foreign exchange. After a 2% cash back rebate on a credit card their cost is negative.

Eh, if you really want to take cherry pick examples, let's take the lower 0,4% fee I pay to buy BTC. I get 0% cashback for my credit card (cashback is an exception in Germany, not the rule), and Coin Tracking Unlimited for one year is 0.037BTC (~$180.6525) instead of $185 paying with USD. And suddenly the point is 100% reversed and BTC is the clear winner and obviously far superior to Creditcards -.-

IMO I was picking a representative US example, but working one in Germany yields very comparable results. The difference is the interchange is capped 0.3% which means that the cash-back portion is irrelevant.

COGS: $10.00, retail after CC markup: $10.03. In Germany I would get a 0% rebate, so I would pay $10.03, and for that $0.03 I would get a one-month interest free loan, chargeback abilities and numerous warranties.

COGS: $10.00, retail after CC markup: $10.03. You have to buy the $10.03 from an exchange for $10.07 (assuming 0.4% fee). You then pay another $1.26 for the BTC transaction and get back nothing, for a total of $11.33. That means your total fees paid are 44X the total fees I paid. No chargebacks, no warranties, no loan, 44X higher fees. In Germany no tax liability is incurred AFAIK when using it as currency. That makes your payment method inferior for any normal, legal purchase. That's one of the reasons buyers don't want it. Sellers don't want it because it exposes them to enormous FOREX risk.

Companies that offer crypto discounts are unicorns. Why would they? It's more expensive and more risky to offer it. The only reason I can think of to offer a crypto discount is if you're not reporting to tax authorities like cash-only restaurants. Your one counter-example is by no means representative, and in Germany, you're even worse off than in the US in the average case, by double.

> Why would they? It's more expensive and more risky to offer it.

How? Risky? When the customer has literally zero way of doing a chargeback? And most businesses instantly transfer the received amount to cash, so there is no wallet complication.

> Sellers don't want it because it exposes them to enormous FOREX risk.

No, because the time they actually hold crypto is measured in seconds to fractions of them.

A streamer I watch allows you to donate with crypto and buy food for people. The Paypal way gives you less resulting money to buy food for people with because of tx fees. Crypto for them is safer and cheaper.

> In Germany no tax liability is incurred AFAIK when using it as currency.

I wish. You have to hold for 1 year, then whatever you do is tax-free. Before that, anything you do (incl. trading) counts for your income tax.

And FWIW, a) I don't buy anything with BTC, if anything I'd pay with ETH, Nano or any of the alts that have fast and cheap TXs but I'd buy things with a CC anyway because I find it too be simpler. b) Where I work the best tx fee we can get for CC Payment for 10€ is 0.395€

The risk is in holding it for any length of time due to its wild fluctuations and the fact seller taxes are due based on the amount of the purchase at the time it happens, not when the crypto converts to fiat. If they convert it to fiat via payment gateway crypto barely factors into this for them doesn't it? If there was a gateway that accepted goats and gave sellers cash, I mean, it doesn't really matter to the seller. They never see the goats anyways.

Re: the streamer, I don't think you're doing the math right. With a 0.4% + $1.26 transaction fee, PayPal's 3% would break even at ~$45. Whether they buyer or the seller pay the fee is irrelevant, the fee is paid. Either the buyer asks for more or the seller sends less, the net is the same. The difference here is fixed vs. percentage fee payment which reaches a break-even point pretty high up there for most purchases.

I based my tax treatment implications on this article: https://www.bna.com/germany-reaffirms-crypto-n73014476891/ ("But when the digital currency is used as a means of payment, or when it’s exchanged or sold, it will be exempt from Germany’s 19 percent VAT.") but I guess the capital gains still need to be paid?

The alts have even more risk due to their even more wild fluctuations and dreadful past performance.

USD-BTC and BTC-USD (or any currency) have a cost and a delay as well

Yes, I mentioned that.

MXN to GBP : I can't do it.

BTC to BTC :I can do it.

Non of the fancy services allow me to send money from Mexico to the UK.

It is crypto or paying for SWIFT, Western Union or similar. With very high costs.

Totally can, FairFX and TorFX (both UK-regulated money transmitters) will safely and securely make an MXN to GBP transfer for right around 2.5% and believe it or not Western Union is usually quite competitive. Next time check out cuex.com which compares options for you.

BTC is a nightmare. You have to find an exchange in Mexico (which won't run away with your money a la Quadriga) and they'll take 1-2% and sit on the transfer for a few days. Then you have to transfer from there to another exchange in the UK paying a BTC exchange fee, then cash out in the UK, they'll take another 1-2%. In the week the exchanges have been camping on your money if you ever see it again, the forex risk is astronomical as it regularly swings +/- 20% weekly. Then due to the inevitable change in value of BTC during the week your transfer takes, you now have reporting obligations to your local tax authorities in BOTH Mexico AND the UK. This may require hiring an accountant to resolve which adds yet another mess of fees.

Pay a service 2-2.5% and be done with it or:

1-2% fee to Exchange 1 + a few days FOREX risk + the current BTC fee of $1.26 + 1-2% fee to exchange 2 + the risk anyone in the chain is going to ruin you because they're totally unregulated fly-by-night operations then learn the nuances of both Mexican and UK tax law in regards to capital gains.

This is a common crypto shill talking point. It's been thoroughly disproven that crypto is better for international remittences than existing solutions. It's a solved problem.

> Totally can, FairFX and TorFX (both UK-regulated money transmitters) will safely and securely make an MXN to GBP transfer for right around 2.5% and believe it or not Western Union is usually quite competitive. Next time check out cuex.com which compares options for you.

I tried both of them and I can't (I am living in Mexico). I don't understand why you think BTC is a nightmare. For me, living in Mexico, and dealing with MXN and GBP (my brother is in Northen Ireland) it has worked wonders.

You are assuming that Bitcoin exchanges in Mexico are unregulated, when they are VERY regulated. You are making negative assumptions for every Crypto step while making positive assumptions for every step in your scenario. I does not make sense.

I'm not sure what you mean by it not working. I haven't tried but they're a regulated system, are you sure it's not on your end? Have you been reporting your capital gains and losses over the course of the transaction on both sides? If not the tax authority may have some serious questions for you.

And why wouldn't I make negative assumptions of crypto [1], [2], [3], [4]. There's a scammer at every single level and being intentionally resistant to censorship, control and authority makes that impossible to stop. It's designed to support scams.

Remember the man who lost $420,000USD while attempting to use Quadriga to exchange USD for CAD when moving to Canada using exactly the approach you're describing? [0] It's like asking me why I've got negative associations with the "Titanic II." Something about what happened to the first Titanic.

Last, based on my research, it appears Mexican crypto exchanges aren't regulated yet, and that regulators are about to shut them all down [5]. "Because cryptocurrencies are such complicated technologies, the argument goes, average citizens can’t understand how they work and should not, therefore, be allowed to buy them." I'm 100% with your regulators.

[0] https://www.bloomberg.com/news/articles/2019-02-09/software-...

[1] https://www.theglobeandmail.com/business/article-gerald-cott...

[2] https://www.chepicap.com/en/news/4366/roubini-on-tether-it-s...

[3] https://www.theverge.com/2018/3/22/17151430/bankruptcy-mt-go...

[4] https://www.forbes.com/sites/cbovaird/2019/03/22/95-of-repor...

[5] https://coincenter.org/entry/new-regulation-would-effectivel...

> I'm not sure what you mean by it not working. I haven't tried but they're a regulated system, are you sure it's not on your end? Have you been reporting your capital gains and losses over the course of the transaction on both sides? If not the tax authority may have some serious questions for you.

It is actually very simple: A lot of these services do not provide services in Mexico. Really, the passive aggressive comment is not necessary.

I assume that you live in the UK or the USA. Usually what happens is that people that live there live in a "technological bubble" where all of those first-world services are available. But most of them do not have service in most of other countries.

I work in a B2B payment company and have had the opportunity to deal with these kind of issues. Believe me that cross-country payments is nowhere a solved problem. The blockchain technology definitely has something on it if used correctly.

Sorry, it wasn't intended to be passive-aggressive, I was curious what the issue was, since by reading their documentation it should work. The tax question was a separate issue with using crypto, not an implication it was related. You didn't really address any of my criticisms however including the pending shutdown of crypto exchanges in Mexico or how reporting requirements factor into your cost calculations.

Either way, another legitimate option for you to consider is an Interactive Brokers account which has great forex options (interbank rates) and Mexico is a supported country. They charge a commission of 0.2 basis points (0.2/100 of a percent) with a minimum of $2USD per order. There really are a lot of legitimate options that don't require cryptocurrency. People have been trading currencies for hundreds of years.

There's a great writeup on the way you can do it here: https://gfmasset.com/2018/09/better-than-transferwise-saving...

For interest you can even do USD-CAD exchanges with zero spread via Norbert's Gambit (https://medium.com/young-wild-and-cheap/the-norberts-gambit-...)

> MXN to GBP : I can't do it.

Both https://www.currenciesdirect.com/ and https://www.smartcurrencyexchange.com can do it.

Currencies Direct: https://ibb.co/BTzRGq3 nope

SmartCurrencyExhcange: https://ibb.co/4RGXvbc also nope

They don't have MXN/Mexico, along with a lot of other currencies from Latin America, Africa and Asia


Interactive Brokers easily beats Transferwise

IB is a stock and similar trading platform and not a transfer company. What am I missing?

You can do forex at interbank rates. Major gotcha is to have bank accounts in both countries with your name. Just fund your acc from one country, do forex, withdraw in another.


Buying drugs, avoiding taxes, money laundering, etc.

Micropayments on the web without users having to create an account. For example paying a few cents for reading a news article, without an account on the news site and without the high fees for a payment processor. (Via Lightning Network)

Example news site: https://yalls.org Example browser extension for great UX: https://github.com/wbobeirne/joule-extension

Or even nanopayments for single API calls, between the browser and a server or between servers.

Example pay-per-call web service / API: https://lightning.ws (disclaimer: my project, based on another project by me: https://github.com/philippgille/ln-paywall)

Seeing how slow and expensive both BTC and ETH are, micropayments aren’t really viable, tbh.

The mining and gas fees for BTC and ETH respectively are going to be higher than the cut a payment processor would take.

The one advantage that you might be alluding to is that bitcoins are divisible into satoshi’s, which are much more granular than cents.

I was specifically talking about the Lightning Network, a second layer that facilitates Bitcoin's smart contract capabilities to enable off-chain payments via so called payment channels. There's no mining involved during transactions in the channel - only for opening and closing a channel, making the transactions almost instant. Thanks to proper routing you can reach most of the peers even with a single channel. It even adds some privacy because it uses onion routing, and the payments are not less secure because each off-chain transaction can be used as valid on-chain transaction should either party wish to do so, closing the channel.

There's much more to it, many smart people have put a lot of thought into LN, so I recommend reading the whitepaper and other documentation about it.

Not enough thought. With 7tx/sec it will take 35 years to open a channel for everyone on earth and another 35 years to close it assuming nobody is born. I believe that's in the white paper, actually. Either way you'll be paying $1.26 to open a channel and another $1.26 to close it, so paying Stripe 2.9% + $0.30 makes the fee break-even point vs having a wallet on your micropayments server funding with $76, any less, Stripe wins.

Search for "channel factories" - it allows multiple channels to be opened with a single on-chain tx.

And looking at how many people use a custodial Bitcoin wallet today (e.g. Coinbase), many will probably use custodial LN wallets as well, with only the wallet service requiring a channel. Not recommending this of course.

Also, my use case was regarding micropayments (e.g. for reading a news article) and nanopayments (e.g. for an API call). That's below $0.30. If you're now going to say that you could top up some balance (like $20) and just deduct a cent from that for every payment, that was exactly the other point of my use case: No accounts required, neither in the DB of the news or API service, nor in the DB of some payment processor that must keep your credit card data.

So it's not just about fees, it's also about privacy.

To your point, micropayments aren't a limitation of the existing financial system. People just don't want them. The issue is that people have a limited capacity to make decisions [1], and having to decide if every single site they visit or article they want to read is "worth" the $0.005 just sucks. It's the reason that Netflix and Apple Music is so successful while buying individual songs and videos via the iTunes store is cheaper in the long run, and probably even in the short run. The real value is being able to roll up the content into a monthly pass model and handling the payouts not as micropayments but what they are -- accounting. Has there ever been a successful micropayments system?

The reason we don't have micropayments isn't an accounting issue, fee-related or a technical issue -- or even a privacy issue -- it's a human biology issue. IMO hooking it up directly to a wallet without topping off isn't going to change that, especially since you still have to top off the BTC wallet regularly as you get paid in real currency. Boat-anchoring two things that are complex and people don't really want (crypto + micropayments) isn't going to make the two work all of a sudden.

The only way to really solve the news business model with something other than ads is a Netflix-for-news. I hope that Apple News becomes that because newspapers deserve to exist.

[1] https://en.wikipedia.org/wiki/Decision_fatigue

While I don't agree that crypto is currently generally usable for micropayments, I'm not sure the current ~$0.045/transfer fee for ETH is really more than a payment processor would take.

And that's if you want really fast confirmations.

With Bitcoin I recently sent a $30 transaction (non lightning) for around $0.05 in fees. That's 0.1%. It wasn't "low fee" either - it was confirmed within the next block. Bitcoin transactions are charged by the byte, so I could have sent a million dollars for $0.05 as well.

Fees are $1.26 right now, domestic ACHs are largely free. What was your FOREX risk? Did you figure in that you now have to report your transaction on Form 8949, can no longer use TurboTax and will have to spend hours figuring out your reporting obligations or paying an accountant? If you're just going to break the law the rest of the calculus probably doesn't matter as much.

As of 2019, you can definitely use TurboTax to report Bitcoin transactions. And if you use Coinbase, there's deeper integration there, as well.

TurboTax Deluxe I assume? The up-sell cost does still have to be factored in, though it's good to know, thanks!

That hasn't been my experience. I pay some services with BTC via CryptoPay and is really fast.

What is the alternative? Card? 2% + .3 fee. That's expensive. ACH? takes 5 days to be processed.

What is the fast, cheap digital alternative?

Venmo and the like. Any ledger will work just fine if it's built for fast payments. That ledger doesn't need to be distributed and/or decentralized. Solving trust is an oversold benefit of BTC in my opinion.

>Venmo and the like.

Works great if you're settling transferring between friends doesn't work for buying/selling goods[1], otherwise you get charged the same 3%. Also, the "free" transaction aspect is most likely a loss leader.

[1] https://help.venmo.com/hc/en-us/articles/217532097-Can-I-use...

Solving trust is the only benefit of Bitcoin, but I think you’re underestimating the importance of financial sovereignty.

Lack thereof is currently working for 7.5 billion people. Bitcoin works for basically nobody.

If you think present financial systems are working well for every inhabitant on the planet, you probably spend a lot of time in a very comfortable bubble.

Besides, talking worked well for thousands of years, what use would humanity have for the Internet? /s

Well, that depends, is the internet worse than writing letters? Because bitcoin is worse than money.

The reality is that for the rest of the world bitcoin is missing the initial distribution problem. Nobody in Venezuela has bitcoin. How are they going to get it? If they can trade with other countries, they would just get USD and be better off. If not, then net, it's zero sum. That's really all there is to it. Even after that, it's like cash if cash had a $1.50 transaction fee for handing it to your buddy. Not exactly tenable in countries where thats basically a daily wage.

You might have a point if that were true, but it’s not... https://twitter.com/btcven

Edit: ...and LN transactions are essentially instantaneous and free. Also you can’t program cash without a middleman.

Nothing about the twitter account refutes what I'm saying about Venezuela. There's a certain quantity of BTC there already, and it's not nearly enough to replace all the money down there. They can't mine any because any big clusters of compute get nationalized [1], [2] and rewards are going down. That means they can either trade with outsiders, and in that case, doing so for USD they'd be 5X better off over the last two years. Or they trade with each other, in which case, it remains zero sum. Unless they are somehow more efficient at mining BTC than the Chinese who control more than 51% of the hashpower?

Nothing in that twitter account refutes that in Venezuela the minimum wage is $6.70USD per MONTH [3] so a single transaction fee is nearly a WEEK of wages. And that's up from $2.20 per MONTH so a single transaction fee was THREE WEEKS of wages.

LN transactions are "instantaneous and free" once you open a channel ($1.50) and lock in your balance, then close out your channel ($1.50). Again, two weeks wages.

Bitcoin is not a solution to the problems of Venezuela. Changing the government is. They're totally disconnected.

[1] https://bitcoinist.com/venezuela-now-requires-bitcoin-miners...

[2] https://www.newsbtc.com/2018/05/31/officials-in-venezuela-be...

[3] https://www.reuters.com/article/us-venezuela-politics-wage/v...

You claimed "Nobody in Venezuela has bitcoin." I provided evidence of a group making a difference in Venezuela using Bitcoin, so it does refute your previous statement.

I pity someone who is so offended by a simple technology.

Again, if they can trade with foreigners, they're better off with real currencies. I'm not offended, I'm exasperated. Bitcoin has been a solution in search of a problem for a decade, and each time it stumbles on an idea it's proven not to be effective and it's off to the next goalposts. This time it's Venezuela for some reason. They have real problems, and they need real solutions, not magic internet beans. If they really wanted to help the Venezuelans they'd do it using the best system, not their system -- this helps them, and hey, if the Venezuelans are better off for it, I guess that's fine too.

You're using Venezuela as an example of the success of "real currencies" hahaha

Look at Bitcoin's yearly lows, and tell me more people aren't finding it useful every year. Again, YOU mentioned the Venezuela example, and IT IS BEING USED THERE. I never claimed it would save that country, nor have I heard anyone else make that claim. Clearly some people there find it more useful than other alternatives to their hyperinflationary fiat currency.

Bitcoin doesn't care about Venezuela nor any other specific use case. It keeps existing because people keep running the software. You can deny this, but there's no point being exasperated over it. Just let it go and concentrate on whatever you do care about.

But don't go around claiming fiat currencies are the final solution when situations like Venezuela are happening right before our eyes.

I don't claim Venezuela's currency is an example of success. I'm saying that their currency's failure is a result of the failure of their government, and even waving a wand and switching everyone over to BTC (which again, the initial distribution problem) won't magically make their government work. They can't control BTC but they sure can control the populace. They'd make it illegal and beat everyone with BTC until they handed it in to the central government, and smash everyone's computers. Bitcoin's weakness there is still a rubber hose. I'm saying that trading existing BTC between themselves is a zero-sum problem since the total quantity of BTC and the total quantity of Bolivars (hence the total value) remains exactly the same within Venezuela, and mining isn't an option due to nationalization and low yields.

Trading with other countries opens up many different options for storing value like fiat currencies backed by 'stable' governments like AUD, CAD, NZD, USD, EUR -- or assets like gold, equities, real estate, etc. Each of which would have stored value 5X better than BTC over the last 2 years. However, the real issue remains, you have to trade to obtain either these assets or BTC and nobody wants to trade anything for Venezuelan Bolivars because they in turn don't believe they'll get anything for them. That won't be solved until the government is replaced.

Until the government is replaced any BTC "solutions" for the Venezuelans are efforts to legitimize BTC and increase the value of the holdings of the "helpers," not to really solve the problems on the ground there. If they were trying to help, they'd just raise money for NGOs.

What does any of that have to do with Bitcoin?

Ah, we’re on the same page! It solves nothing for the Venezuelans.

Anonymous transactions at a distance.

Sometimes it's nicer to send money than it is to authorize someone to take money from an account, especially if you're unsure of the recipient's ability or desire to protect that account information (credit card number, bank account info, etc). For me, Bitcoin has effectively replaced cashier's checks.

Popmoney, Venmo, Square Cash all allow you to do that without the massive FOREX risk and tax reporting requirements.

Cool, and I use some of those too; but there have been cases _for me_ where BTC has been a lot easier.

>Bitcoin is a perfectly functional means of financial exchange

Okay. So where is the Venture Capital going, and where will the returns stem from?

how are those things related? do all mediums of financial exchange require venture funding? does all crypto qualify as fincial exchange?

@haralabob and @naval both still seem believers.

Also, Initialized Capital (a VC fund operated by YC alums Garry Tan and Alexis Ohanian) seem still to be big backers.

care to share your list? because everyone I follow (jack, woz, YC, winkl bros, naval, draper VC,sergey and others) are pretty much allin block/coins

Quite hard to do. Just followed pg, some other vc's and then Twitter started suggesting others (Tech VC's, Stock traders) in mobile explore tab.

btw pg is not against crypto. he is neutral/positive imo

A contrarian bet has outsized returns.

And USV, among the top ones.

Has anyone read Albert Wenger’s http://worldaftercapital.org/ ? That’s my favorite thing about USV’s mindset.

they must be holding some pretty big bags lol

I also wouldn't be surprised if they made huge investments during crypto mania that are now worth pennies on the dollar. Being bullish is the only way to get other people to buy them and stem the bleeding.

I still believe (not that you follow me haha). You don't? Why not?

If they're now an IA, they're not able to talk about their investments publicly? Doesn't that hurt the value proposition for startups/etc. taking money from the new a16z?

As a financial advisor, will A16Z have fiduciary responsibilities towards advisees that it doesn't now?

(I don't know this area, other than a little small business personal finance, but I recall hearing about some fluctuation in rules about financial advisors, within the last few years.)

I've had my morning coffee and it's dawning on me what this means (dawning slowly because it is quite a change). Yes, A16Z gets to extend its reach, as if investing in seed and growth stage tech companies wasn't risky+lucrative enough.

Maybe I'm conservative, but I'd rather they stuck to their knitting (which they're pretty damned good at). There are downsides to this 'diversification' first and foremost, losing focus, but also risk. Basically, I can't help but think of SV's overall trend towards Too Big To Fail.

I'm not a fan of crypto at all. Re-structuring A16Z so that they can bet on that seems worse than silly. Real estate? Perhaps they can bet on Chinese ghost cities as well.

Kind of depressing that they gave up on the "GPs must have been operators" rule (presumably due to pressure by LPs or the press). Do any large VC firms still maintain that?

I think Matrix still does. Lots of smaller/newer firms as well (i.e. Craft Ventures).

I don’t know much about their business but I tried listening to their podcast, it was just ads for their companies and ideas. Couldn’t take it.

Well that will all but stop now that they’re an RIA so perhaps it’s worth giving it a second listen in a month or two.

Agree, too much promotion. If you can get through (god bless 30 second skip) they do have some interesting guests that I have not heard elsewhere.

Honestly, I don't understand the implications this has on their investing activities or the mechanism of this structure. I also don't fully understand the regulations around VC Funds and RIA's in USA (I'm from India).

From what I understand though, a16z is trying to breakaway from investing in the limited scope of securities (e.g. equities) of private companies. They want to offer a suite of wealth management services to their Investors in addition to VC investing.

But then, will the Investors pool capital in the Fund and the Fund be advised by the RIA? Or will the RIA directly advise the Investors? The structure isn't too clear to me. Apologies for the ignorance.

Matt Levine's take is this is due to fact that "private markets are the new public markets"[0]. The lines between public and private markets are blurring so this is a prudent move by A16Z.


As companies stay private longer, and get bigger and raise more money while staying private:

* The secondary market for private shares becomes more important.

* VC's now may have more asymmetric information or more reasons to invest in public markets.

* Mutual funds are competing with VCs in later private rounds so why should VCs be able to compete with Mutual Funds in public markets.

* The obligatory crypto reference.

Another one he doesn't touch on is maybe it's difficult to efficiently deploy > $10 billion in just private markets?

[0] https://www.bloomberg.com/opinion/articles/2019-04-03/buying...

I kinda think getting rid of the VC status is better than you can encourage investment in something unethical and risky without being on the hook because "we are just the advisors, it's the person with money who takes final shot with what they wanna do with their money"

I can see why it can help if the opportunities are shrinking in the legit space.

Maybe the winter is finally coming?

Dear Gentlepeople, can I point out the Elephant in the room, or better the one leaving it. The most interesting part (especially for HN) is not where A16Z is going, but what it is leaving behind: VC. Setting aside the shift in social tide for a moment, why does A16Z think there will be no more profit in VC? Any thoughts?

They don't, they're still doing VC. This just lets them invest in other things as well (like crypto).

That may be true, but the fact that they need the new path to make larger investments outsides of VC raises the question how much VC money will be left. Furthermore the change still implies that they think other investment opportunities might be more profitable than the one they were actually quite successful in.

Does this mean they are going to try to syndicate IPOs as well?

Get your portfolio companies coming and going.

By stopping the investment or no-investment-for-free shares?

interesting link https://a16zcrypto.com

If it looks like a duck ...

Quack, quack!!!

> venture capitalists have long traded a lack of Wall Street-style oversight for the promise that they invest mainly in new shares of private companies. It was a tradeoff firms gladly made—until the age of crypto, a type of high-risk investment the SEC says requires more oversight. So be it, says Andreessen Horowitz. By renouncing its venture capital status, it’ll be able to go deeper on riskier bets: If the firm wants to put $1 billion into cryptocurrency or tokens, or buy unlimited shares in public companies or from other investors, it can.

Pitchforks and funding purism aside (forget about blockchain debates), crypto assets are here to stay. They're the new publicly traded vehicles and function as a way for new startups to raise capital from new truly global 'capital markets' along with being a valuation metric. a16z figured this out. They knew what happened with facebook in SecondMarket [1] and also knew the largest upside in shareprices (aka IPOs/exits) are dictated by a public market marketplace, not with private startups.

Factor what Fidelity with $6T AUM has already released in rolling out global crypto services [2].

Separate crypto, as a capital raising vehicle and trading vehicle, from 'blockchain' and then it all begins to make sense. Real scientific and technical due diligence will help too [3].

[1] http://fortune.com/2012/05/18/facebooks-pre-ipo-pricing-hist...

[2] https://www.coindesk.com/coindesk-most-influential-blockchai...

[3] https://medium.com/@492727ZED/vectorspace-ai-due-diligence-d...

As a side note, I generally like reading, but I cannot for the life of me pay attention this circus of an article. The animations give me motion sickness.

I see comments here which indicate there may be something worth reading in there, but my brain is screaming at me to ignore it. The whole thing feels like an advertisement.

Perhaps it's because suits are making a corporate comeback.

Firefox has a "Reader View" that's super convenient for things like this. Automatically shows a button in the address bar on sites it supports, and it turns the page's content into a simple mostly-text view with some nice customizations:


Unfortunately "reader view" does nothing to aid with the "rambling narrative" model that articles these days have. I read through the first half of this one before I gave up: the salient points can easily be condensed into a couple of paragraphs even with some embellishment to avoid being merely a list of facts.

I truly mourn the death of the "printable version" link

Is the title intentionally clickbaity, or does the author just not know that "blowing up" could mean two completely opposite things?

a16z is not the object of the "blowing up". There is no clickbait or ambiguity.

I'm disheartened by the power wielded by so few in the American King Making Machine called the Silicon Valley.

and their power and risk ability (affinity?) even affects businessmen trying to run sincere business for profit all the way here in India too

Big capital cornering resources is an age old problem. First natural resources, then large factories and now intellectuals. Rising from bottom is getting difficult.

Why? Isn't that the way everywhere else works? I'm not losing any sleep over it.

It’s a clear feature of the economic system, but to a growing group it’s more of a bug.

Stay asleep then

are DC or Wall St different?

Does it matter if they are? The statement stands.

I take it as an offering of deeper perspective, especially to one who is disheartened.

This is not the first, and won't be the last, group of successful people who rise to top-tier power through offering to propel middle-class folks into entry-level upper class power at great risk to society.

Move fast, break things.

And I take it as the sort of statement that can apply to literally anything. Chicago, Tulsa, Burbank, Dungeons and Dragons, antique mold collections, etc.

It's a silly thing to say on its own.

if a thing has generality of a law of physics ... i mean you can't be disheartened by the 3rd Newton law, can you?

A16Z’s unapologetic bet on cryptocurrency and blockchain companies is big for the industry. As crypto heats up again and blockchain 3.0 projects emerge (Cosmos, Polkadot, Ethereum Proof of Stake) VC will help legitimize the industry.

Can you provide a single problem where the right solution space is blockchain? Ive thought about this a good amount, and cannot come up with a single use case where current established centralized technology is not a better solution.

Seconding this request. Whenever I ask a crypto bull this question directly they just call me an idiot without providing any actual examples.

There is a legit use-case in micropayments with certain crypto implementations that don't share the blockchain's massive centralisation (what else do you call "every transaction has to be accepted on one shared append-only log"?), that would allow for offline P2P transactions if you have some trust.

These cryptocurrency implementations along with some infrastructure would let you build a cheap low-cost micropayments system where you would just need to have some local trust. You could build out a federated payment network and build out infrastructure based on needs. All while avoiding the massive waste that comes from "everyone store every transaction ever"

The problem of credit card companies and the like charging really high rates still affects a lot, and "Paypal, but federated" could help tackle this with some cryptocurrency concepts in the background.

Though to be honest, I don't think this is going to happen. The communities are so focused on completely trust-free models that they don't see how they could build something extremely useful with way less cost and more utility by being more flexible on that point


Why not just use the real Paypal?

Paypal micropayments cost 5% + 5 cents.

cryptocurrency micropayments could potentially be much smaller. What if you could pay per packet the wifi access point forwards for you? Or pay per watt some charger gives you? Maybe nanopayments is a better name for them.

Re Paypal cost, is that micropayments to businesses? I just sent my friend $0.01 and it was free, with a linked bank account. Understood that the bank account payments take a while to settle but we're talking about micropayments so settlement time doesn't really matter

Fair point about nanopayments. But what's the win? Why split up the cost per single watt or packet? No one cares about losing one cent per day due to rounding errors

> But what's the win? Why split up the cost per single watt or packet? No one cares about losing one cent per day due to rounding errors

Honestly with this question you've summed up most of my feelings about blockchains. Humanity feels like it's become more powerful in some very specific way. We have a new tool and we're trying to figure out what it's good for.

I've pattern matched this to early reactions to the internet. Many of the critics pointed out that the internet didn't really make anything new possible, we could already quickly communicate with people across the world! But, it radically lowered the cost of that communication and put it into a format computers could use and that was enough to put companies like Blockbuster out of business.

It's really hard to work backwards from a new tool to places it could successfully be applied. And if 10 years from now we haven't found a use for nanopayments I'll admit it was a silly idea, but it sure does seem interesting.

> And if 10 years from now we haven't found a use for nanopayments I'll admit it was a silly idea

Why do you need another 10 years? Bitcoin has already been around for 10 years. The micropayment and tipping use case has been explored fully and has failed.

ArpaNet was started in around 1969; it was only really good for email, and few people had a computer anyway so it wasn't very useful for them.

NSFNet started in 1985 and with it the US could finally transfer Megabits of internet every second! By that point more people had computers but they weren't on them enough for things like e-commerce to make any sense at all.

It took until 1991 for the Web to be invented, and arguably in 2000 the web had still failed to really find it's niche.


I make no claims as to whether crypto will have as much of an impact as the Internet had, I suspect it will impact only a few domains. However, we're still decidedly in the ArpaNet phase. Bitcoin can only process ~5 txns/second, Ethereum can only process ~13/sec. This isn't good for anything at all! I'd argue the nanopayment use-case hasn't been explored at all, because there's still no good way for me to spin up a server and accept nanopayments with it. Bitcoin transaction fees just spiked to ~$1, ETH transactions currently cost 15 cents.

You're looking at a steam engine the size of a building and telling me it'll never fit onto a train. And you're right! It took something like a hundred years for them to be compact and strong enough to power any vehicles.

A lot of people with a lot of money are working on newer designs which can process a lot more transactions for a lot cheaper, it's only once those cryptocurrencies have been built that the experimentation can really begin.

RE the charger, that problem has mostly been papered over because people are willing to pay a decent amount over the cost ceiling for this kind of service (China you can pay $1 or so to rent a battery charger, and that's way more than the cost of the electricity).

Though the idea of even jokingly giving miniscule amounts of money to friends has some traction in stuff like WeChat. If the systems were more open then you could run a collection system on your site pretty easily.

> Why not just use the real Paypal?

Some of us are banned for no actual reason from Paypal. Some others, banks.

Illegal stuff?

This is where I've landed too.

1. Making money by trading fun bucks.

2. Anything where you need a currency but all the way better options aren't viable (crime).

For (2) one of the real values is being able to carry (practically) unlimited cash with you. Right now, USD in cash is capped at $100 notes to make it inconvenient to move large quantities.

With crypto, you fly anywhere in the world with a private key in your luggage. That key could have $100 or $1,000,000,000.

Thinking of international drug smuggling, one serious problem is moving all of the cash out of the country. Crypto solves that easily.

Department of Homeland Security published this handy flowchart which NIST republished: https://imgur.com/a/RlUj9Ed

I have found it to be very useful during these conversations.

Synaptic Health Alliance has a good use case for using blockchain technology to share a directory of healthcare providers across multiple organizations while avoiding the free rider problem.


Why do you need a blockchain to do that?

What other architecture would you recommend? There's no single entity which can be trusted to maintain a centralized database.

I challenge that requirement. Why no single entity can be trusted? It's like saying the banking system doesn't work because no single entity can be trusted with maintaining a database of transactions. That's self evidently false.

Which single entity can be trusted? None beyond the US federal government exists today, and they don't want to do the job.

I suppose in theory all of the industry players could get together and establish a joint venture or nonprofit company specifically for the purpose of creating and maintaining an accurate database of provider contact information. But that seems a lot more complex.

Doesn't seem that complex to me. Insurance companies kinda do that already. It's not a technology issue, otherwise Google or Microsoft would have figured it out already, it's a governance and legal issue. Blockchain doesn't seem to be bringing to the table anything valuable in this case.

Transactions that are in violation of the law (evading capital controls, buying illegal goods, money laundering) and are not done in person.

Also, replacing trust in centralized banks with trust in mostly-centralized crypto software developers and mostly-centralized majority of miners.

IMO the original use case of just Bitcoin is still by far the most compelling. A non-inflationary store of value not unlike gold, but it can be transferred for a very low cost anywhere in the world in minutes.

I think the same arguments that come up about privacy can also apply to currency - I'm not doing anything illegal, why I do I care if I'm being monitored? or I'm not buying anything illegal, why do I care if banks and payment processors can block transactions? It's nice to have an alternative and be able to do things outside of that system just in case.

I don't, however, really understand the fanatics that want every cup of coffee they buy to use crypto. I definitely don't see any practical benefit to that.

Why don’t you think companies can inflate the crypto money supply in the same way that they inflate the fiat money supply?

Companies don't own the blockchain.

Not sure if you're familiar with crypto by this comment, but inflation control was the key feature that enabled Bitcoin (and the rest) to exist.

The whitepaper is worth a read: https://bitcoin.org/bitcoin.pdf

A single entity at one point had over 50% of the mining power for Bitcoin, effectively owning its blockchain.

This isn't really true. The only thing you can do with 50% of the hashpower is determine the most recent block. And it still has to be a legitimate block. You can't undo history very far. And to the extent that you can, transactions either go through as intended or get reversed, and the owners keep their money. Money doesn't get redirected.

Any blockchain going through repeated attack would be pointless to use anyway, so anyone with such hashpower has an incentive to cooperate in the long-term. It's also not possible to stop others from contributing hashpower, so you don't really own it in a meaningful sense.

It would be possible to fork to create a higher limit with that hashpower. It would also be possible to have 51% without making it publicly known. But nobody needs to bother with that when they can just double spend.

A fork can be made with any amount of hash power, it doesn't need to be the majority. A fork happening doesn't mean it will be followed, or even contentious.

51% attacks do not allow double spending on the blockchain. If a block is overwritten the attacker may choose to change the destination of their own transactions for that block, but the previous spends are undone. This is why merchants wait for multiple confirmations. Typically 6, which would require a 98% attack to undo.

At this point it'd take a nation-state to produce that much of bitcoin's hashpower, if it's even still possible.

Having just over 50% of mining power does not effectively mean you own the blockchain.

s/effectively owning/effectively determining the concept of 'truth' on/

I don't understand this question. Why do you think Bitcoin is inflatable as such?

Because I don't see any reason why Bitcoin can't be a fractional-reserve asset.

You can have fractional-reserve only because the public cannot see any difference between money from M0 and M1. In crypto the public uses M0 directly. For now at least. There are some M1 constructs - at MtGox there were 'codes' redeemable for bitcoins, but they are not transferable between exchanges.

> In crypto the public uses M0 directly

Hey, the public also use bank notes with unique serial numbers. That has no bearing at all on institutions who hold your assets for you, as they don’t generally let you audit them.

When it comes to laundering money and ponzi scheming cryptocurrency is second to none in terms of cost, risk & speed.

Edit: Strugglinng to type on my phone.

You got me there. I am in the 99th percentile of crypto bears but I myself have used Bitcoin very effectively to buy illegal drugs, buy illegal steroids, and bet on sports illegally. Bitcoin is truly second to none in these domains.

If you're doing those things because you think your transactions are anonymous...you're putting yourself at risk. Bitcoin is not private, like at all.

You are 100% wrong! Traditional banks have order of magnitude more fraud than crypto, and the nature of blockchain makes it extremely easy for analysts to trace money laundering with little effort. Google “chainalysis”

Handshake.org decentralizes the root zone and obsoletes certificate authorities. Basically, it lets you register new TLDs that are censorship-resistant, seizure-resistant, and tamper-proof.

At the expense of no one getting do your site because they don't use a custom DNS server?

The alternative is having your domain shut down for “sensitive” content in pretty much any country outside of the US and Canada.

One problem that I think blockchains could be well suited for is the storage of police evidence. Not physical evidence of course, but anything that could be turned into data. There was a scene in the show Billions where U.S. prosecutors tampered with evidence in the from of notes taken while interviewing persons of interest. Since blockchains are at their core a tamper-proof append-only data store, if those notes had been stored in a blockchain that evidence tampering would have been impossible. Any time the stakes are high enough a centralized technology can become vulnerable to people being bribed, etc.

Note that my use of the term "blockchain" here isn't limited to public blockchains. You most likely wouldn't want to store police evidence publicly on a blockchain like Ethereum. You'd want that to be private, but there do exist private blockchain consensus algorithms like BFT that do have the same tamper-proof properties without requiring a public proof of work network.

Why does this need a blockchain rather than being simply cryptographic signing?

Securely signing a cryptographic message with a provable timestamp still requires a trusted third party, as far as I know. A trusted third party can be corrupted.[1]

Writing data on a decentralized blockchain inherently provides a secure timestamp that cannot be modified without being noticed. Not to mention the extreme costs involved with trying to rewrite a blockchain's history. [2]

I disagree with the parent comment on one thing-- I would much rather trust a public blockchain with a respectable hashrate over a private blockchain. You could simply store a salted hash of the data on the public blockchain, and still keep the actual evidence private.

[1] https://en.wikipedia.org/wiki/Trusted_third_party [2] https://en.wikipedia.org/wiki/Trusted_timestamping

> still requires a trusted third party

That would be the judiciary. If they -- the people with the guns and the resources of the state -- become corrupted, you'd be unwise to think that your cryptographic signatures are going to help much.

In the example given, having lodged the evidence with the court would have prevented the abuse.

> you'd be unwise to think that your cryptographic signatures are going to help much

It was you who suggested simple cryptographic signatures in your initial reply to the parent comment. I was only pointing out that securely signing a message with a timestamp requires a cryptographic entity known as a "Trusted Third Party". Please see the first link in my original comment.

> That would be the judiciary. If they -- the people with the guns and the resources of the state -- become corrupted, you'd be unwise to think that your cryptographic signatures are going to help much.

If there was verifiable proof on a globally distributed blockchain that evidence had been tampered with by a judiciary member of a democratic country, I find it very hard to believe they would get away with it in the long term.

> I was only pointing out that

No, you were pointing it out and then saying that the flaw of this system was that the judiciary could be corrupted.

> If there was verifiable proof on a globally distributed blockchain that evidence had been tampered with by a judiciary member of a democratic country

Putting aside the many many political and practical ways in which this fantasy will stay firmly a fantasy, why does this need a blockchain instead of simply a published list of documents, if this is globally distributed?

How does a distributed public ledger help with it?

It provides more protection against deletion. But also note that my comment was explicitly not limited to distributed public ledgers.

The only difference between a block chain and the database is that block chain is public so a rando can validate that nothing has been deleted.

Game items like weapons and shields in an RPG game. Imagine if there is a global database of such items and different game developers build different games around it. So you could use your items in different games.

What centralized entity would you trust to run and maintain this database? What if this centralied goes bankrupt and shuts down the servers? If you are a small game developer, you are screwed. Even if it's Google, you still can't be certain that Google will not shut down the project and turn off the database like it has with certain projects in the past.

A public open blockchain is a neutral database that it would be reasonable for many small game developers to use for this purpose without fearing that it will get shut down, or the rules would be changed.

As a game designer (on the side) I definitely wouldn't want to give up control of balancing my game to some third party item creator. Items balance is too game specific for this to work unless you're just taking the name and some general type and implementing your own take on it, in which case I don't see much point.

... what? Game developers are just going to invent their own items, with their own mechanics and stats and balance, for their own games. Why would they share across games?

This is a made up problem.

> to use for this purpose without fearing that it will get shut down, or the rules would be changed.

Looking at the hard forks in existing cryptocurrencies I wouldn't trust the rules to not change

Making it hard to change the rules is one of the value propositions of decentralized blockchains. Hard forks are pretty rare and when do happen, they are contentious the original chain survives (for example Ethereum Classic).

Compare this to a centralized entity like Blizzard changing rules in World of Warcraft. Wouldn't you agree that it's much much easier for Blizzard to change the rules in their game, than to change the rules of a blockchain by hard forking?

But Blizzard doesn't change the rules willy nilly just to screw with you. They change it for balance or in-game economy reasons.

Blockchains are essentially paperclip optimiser machines.

For bitcoin - paperclips are PoW hashrate.

The network rewards people that contribute to it's growth.

It doesn't care about people and people values - it's like a new kind of living organism that uses people as substrate to exist

Real estate, particularly with regards to ownership and property title.

Ownership of a property is a difficult concept to prove, and there is an enormous industry of title insurance which exists to dig through the records and insure a purchase against unknown claims against the property.

A public ledger would make property title/ownership simple and knowable.

Overall I think blockchain technology is incredibly over-hyped, but does have some suitable applications, particularly where public records are involved.

> A public ledger would make property title/ownership simple and knowable.

Only if all the property records are already in the ledger, right? If I buy a house via blockchain, someone can still come along and say their great-aunt should have inherited it 80 years ago, before blockchain records existed. So you still need title companies.

For sure - and digitizing that data would take a very long time so it wouldn't be a drop-in replacement for title.

It wouldn't be easy, but it is a good use for the tool.

Why is this better than the government keeping records, and having court remediation and error correction, rather than “oh my computer got hacked and now my house belongs to someone else”?

Company ownership information seems like much the same thing, and is a solved problem in all countries (that want to have solved it).

If the government's records were up-to-date and perfect, the title industry wouldn't really exist. Having publicly-accessible digital records would make the concept of property ownership simple and deterministic to figure out.

And "my computer got hacked" is kind of a blanket argument against using technology in general - by that same argument you should probably never use digital banking/investment or anything online to manage your life, and nothing should ever be digitized.

> If the government's records were up-to-date and perfect, the title industry wouldn't really exist

Why would a blockchain magically fix this?

> "my computer got hacked" is kind of a blanket argument against using technology in general

Many (most?) financial actions you can take with a computer can be rolled back if shown to be fraudulent, because the asset isn't stored on the computer itself. This is specifically not true of crypto assets.

I've heard this argument, and I don't see how it works. It relies on trusting the information put onto a blockchain.

It most definitely does require a base trust - however that's not an argument against the solution, just a challenge to implementation.

We implicitly trust a tremendous amount of digitized information because we trust its sources - for instance, digital banking works because we trust banks to only log verified transactions to our account. Sourcing that information is absolutely very difficult, but it doesn't mean it can't or shouldn't be done.

Requiring trust is absolutely an argument against the solution. Once you're willing to trust someone, you may as well use a database and a contract.

I have also thought about this a good amount, and the answer is any place you want a market. Markets are a very interesting thing, and when they exist all sorts of things happen, but especially real time price discovery.

What digital assets enable are markets around digital goods. Software can be funded and operated using new tokens specifically for that project. I believe it can be one solution for financing and creating real gains from open source.

Agreed that markets are very interesting, and agreed that real time price discovery is a thing that happens in markets...

But I still fail to see how blockchain is relevant here? A centralized system for managing supply and demand equilibrium through dynamic price changes seems like the best system here.

I do not feel as though have answered my question - would you mind expanding on your answer?

Agreed. It seems like a trusted third party exchange will always win out due to:

1. Better efficiency 2. The third party is there to help when things go wrong 3. The legal system can help when 2 won't work 4. It's more accessible to the less tech-literate 5. The third party always has skin in the game, and therefore an incentive to always be improving the system

Well said

I don't know how anyone over the age of twelve cannot see #2 and #3

Code has bugs. Things will go wrong. You need lawyers.

Blockchain allows you to run certain types of programs in a purely decentralized manner. You can create a smart contract and allow anyone to use it, and pay for its operation, forever into the future without maintaining any infrastructure. The user pays.

The use cases are novel and not necessarily directly applicable to current problems, just as the Internet was novel and required entrepreneurs to invent new business models.

But let’s imagine you created a new protocol for email. You decide that all emails in the new protocol require the use of a token. You are now incentivizing early users to bootstrap, improve, develop, and promote the protocol. What was previously unfundable is now profitable.

I’m only scratching the surface, but with some imagination you can see how “not crazy” this is.

Much easier to charge users using their own credit cards. Don’t see what crypto is solving here?

In your email example, what is the advantage to you over charging a subscription? How do you create ongoing revenue?

No one profited from the creation or success of the SMTP protocol except those who created services that operated on top of it.

Similarly, someone creates a new open-source project and AWS hosts it and earns all the money.

Blockchain allows you to create protocols that actually profit as more people use the base layer. This is a brand new thing.

Censorship resistant financial transactions.

It is much more difficult to censor crypto payments than it is to censor credit card, paypal, or bank transactions.

Crypto payments being censored just isn't something that is happening, even though crypto has been around for 10 years. The evidence proves that it is more difficult to censor.

Only in a separate digital realm that never touches the rest of the world. In the rest of the world there are laws that are enforced by force and no amount of math is going to prevent a SWAT team from dragging a crypto punk into a slammer.

Censorship is something that can be done by both the government, and private companies.

It is something that happens with or without a court order, to people who have broken zero laws. Yes, the government often censors perfectly legal financial transactions, to people who aren't criminals.

And crypto makes such censorship against people who have broken zero laws, much more difficult. It makes it no longer as easy as just calling up a bank, or a couple credit card companies, and telling them to cancel all of their transactions to people who didn't commit any crimes.

It makes it no longer as easy as a couple monopoly companies making a quick agreement to screw over an entity that didn't do anything illegal.

Only in the realm of digital stuff. The moment it hits real physical world it becomes clear that the entire castle is built on sand, using sand. Since we have not figure out yet how to feed ourselves and house ourselves using the crypto assigning it such attributes is rather odd.

> Since we have not figure out yet how to feed ourselves and house ourselves using the crypto assigning it such attributes is rather odd.

Of course there is a way to do this. You go to a store and pay for food with crypto if the store accepts it.

Is has an advantage over credit cards, as a couple companies could block your transactions, whereas this is much more difficult with crypto.

Lots of in person stores have had problems with the visa MasterCard duopoly.

Being able to escape from the risk of censorship from visa and MasterCard, for brick and mortar stores, is useful in and of itself.

Money is digital. And you can use digital money to pay for physical things. And you can get around censorship, enacted by private companies, using digital payments that are harder to censor, and this works for real life physical goods.

I’ve thought that a potential use of blockchain would be proof of ownership of certain digital items such as an mp3 or an e-book.

Such a system could allow you to move purchases between devices and apps, and prevent vendor lock-in.

US expat trying to receive money overseas. US banks won't serve you unless you have a US address. Many lie and say it is illegal. The usual work-around is to establish some kind of US address through a relative or friend. Still ends up being costly and slow to do transfers. Some startups have tried to address it but it is still not very good.

Coinbase like to claim they have solved this issue but it is total BS because they won't let you purchase BTC on their platform without a state ID. Useless for an expat who moved overseas long ago.

But if I need to be paid by someone in another country who can buy BTC then that is usually the best solution for me.

It is a small market so not a driver in the crytocurrency space.

> US expat trying to receive money overseas. US banks won't serve you unless you have a US address.

I admit to knowing almost nothing about the US banking system, but is it really true that one can't make an electronic transfer using an IBAN (International Bank Account Number)?

I live in Austria and just paid a number of invoices, through online banking, to bank account holders in France, Czechia, Slovenia and the UK. All I needed was their IBAN.

Of course you can make an electronic transfer, as long as you can manage to keep a bank account open at a US bank. But don't let them find out you are living overseas or they will close it.

As long as you have social security number, some banks will do it at least. I chose HSBC USA because I was living in China and they were super used to that.

This is why we have Transferwise, Revolut, N26 and a bunch of others.

I have looked at many alternatives to banks. They are better than banks but not by much. For small amounts Transferwise is ok, but the fee isn't capped and keeps going up with the amount of the transfer. I do substantially better via the bank transfer method I use when I need to transfer larger amounts. Revolut might be ok if you are from the UK (I am not), although paying a monthly fee for an account seems unattractive and they have a high markup on debit card transfers to "exotic" currencies. There are others. None that good.

fleecing rubes and money laundering.

I think the centralized solutions are certainly better for the people who have no major issues with the centralized solutions. That’s nearly a tautology, of course. But it’s pretty reasonable to consider there may be many people and use cases that do not work with the centralized solutions, even if those work great for you and for everyone you know.

> consider there may be many people and use cases that do not work with the centralized solutions

The comment you’re replying to is actively soliciting examples of those

Yes, and my point is that being unable to come up with examples based on personal experience is not very convincing evidence that no examples exist.

public tracking of government money. public ledgers have been used since ancient Athens. This one can be tamper proof. Second public tracking of charity and how the money reaches correct targets and how it is spent.

Anywhere where there is no trusted intermediary, or their fees are too expensive.

(And yes that’s a much smaller space than the block chain hype machine makes it out to be, but it is something tangible.)

> Anywhere where there is no trusted intermediary, or their fees are too expensive

Such as......?

Extremely common in international transactions, to name one space I work in.

Not sure why you are being downvoted, this is a very obvious use case for large sums of money transferred internationally, especially in certain jurisdictions.

why not payments...which is what bitcoin was founded to do (though perhaps has moved too much into store of value territory)

As with other blockchain techs, the question I have for this is: is using bitcoin for payments superior enough to replace current payment systems (credit cards, PayPal, bank transfers)?

My gut feeling on this is no, having used it with some frequency over the past 7 or 8 years, and I've yet to hear a really convincing argument about why Bitcoin is so much better.

AFAICT none of the blockchain tech has the ability to scale to the volume of something like Visa due to it's decentralized nature.

I'm not convinced that there are essential technical reasons stopping decentralized systems from scaling into the 10Ktps range that we would need to compete with VISA.

We would have to make a few changes though - we couldn't send all transactions to all nodes - instead we'd need a tree of confirming networks or something. And we might need a 2PC protocol for transactions. (Eg first I send money and generate a hash. Once thats been confirmed you can commit a receive money message. Or something like that).

But I acknowledge that the burden of proof is on me here. And I'm not convinced its worth doing - I agree that there aren't many good use cases for this.

There are some solutions like lightning network.

Also, no one is saying that blockchain in its current state solves all problem better than what we have now. What matters, and why some people would bet on certain blockchains/tokens/projects/etc is the belief that there are certain projects that have real potential to disrupt a big incumbent like Visa.

Is it price comparible with TransferWise while still offering me the same protections? Payments are a solved problem for the majority of cases

Unseizable money.

It may not be easily seizable, and with the right security practices it may be nearly impossible to seize directly.

But governments could announce certain coins are not spendable and enforce that on companies or people subject to their jurisdiction. Prosecuting anyone who accepted one of those coins with a crime.

Those types of tyrannical governments already have people operating in black markets. Crypto doesn't really change that it just makes the bad government's job harder which the vast majority of the world would agree is a good thing. The people of Sudan, Syria, Turkey, and the Phillipines among others are grateful that cryptocurrencies give them an option of having freedom.

Which is why privacy technology is being implemented in blockchains like ZCash, Monero and Ethereum.

Gold but for the internet. I.e. value store that is digital and government independent. It is kind of fringe niche - but I think it will stay.

A means of financial exchange for countries with hyperinflation.

My favorite examples both involve markets: (for the sake of convenience I'll talk about these two products as if they already exist and work. They don't.)

1. Althea (https://althea.org/) is incentivized mesh networking. Currently, mesh networking is an under-provisioned public good. It's a public good because how would you even pay for it? If you want to provide bandwidth to some mesh network you need to spin up your router and then form some sort of business arrangement with all the other routers in range. If you want to consume bandwidth from some mesh network you must first form a business relationship with every router you'll be using. With a protocol such as Althea all you have to do is start your router and set a price in $/byte . Your router broadcasts that price, and assuming the price is competitive packets will start to be forwarded and you'll start to receive payments.

With Althea all of these business relationships I described before are still formed! However, they exist in the form of standardized smart contracts which are cheap and quick to create. Like in all liquid markets, there's no negotiation over terms.

While incentivized mesh networking is theoretically possible without a blockchain, the transaction costs are so high that I'm not aware of any deployments. The blockchainless answer for reducing transaction costs seems to be: create some central entity which everyone signs up for. It collects information on who routed packets through who and collects and distributes payments accordingly.

The blockchain answer gives you:

- no intermediary who takes 20% just for matchmaking

- an easy way of paying other parties

- no need to sign up or register for anything. You're just communicating with your peers!

2. Filecoin is distributed file storage much like Amazon's S3. Currently, there are only a couple suppliers (Google, Amazon, Microsoft, etc) who store your files. They have some healthy competition and economies of scale which bring your price down but supply is still rather limited: mostly because there's no standardized "file storage contract". Also, they seem to enjoy premium pricing, even with all those economies of scale they manage to be most expensive options. Backblaze and some company called Wasabi are much cheaper for what appears to be the same service. Can you really trust them though? My data is important. I'll put it into S3 just to be sure.

The Filecoin network goes through some crazy steps to prove that providers are actually storing the files they claim to be storing and actually replicating them the number of times they claim to be replicating them. This lets you trust any supplier on the network and turns object storage into a commodity. Filecoin also has the same blockchain benefit of requiring little registration. Do you have a desktop computer with a 2 TB hard drive, even though you're only using a few hundred GB of it? Start the Filecoin daemon and wait, after some time passes you'll have money.

This 0-registration is a level of UX which blockchains cannot currently provide but in principle they could. However, it's something that would be very difficult for any central service to provide. And again, the file storage becomes a commodity without any intermediate market-maker taking x%. The blockchain acts as that market-maker.

Censorship free apps and content

I think people look at only payments and all the media hype is around payments.

A lot of things with M2M communications, be it microgrids, industrial IoT networks, self driving cars that can manage payments and invoicing themselves, blockchain networks can be very effective. Fetch.ai was an interesting project that came out.

Data marketplaces are interesting, checkout numeraire and ocean network

Having non fungible assets on the internet currently is an impossibility, say having a special gun in fortnite that no one else can have. This may not appeal to everyone but I know a lot of gamers who would treat these as assets. I’m not sure but I don’t think any service on the Internet today can guarantee that only one copy of a digital piece of information exists, Blockchain’s can.

Current internet infrastructure depends on us trusting one organisation to manage critical infrastructure and I don’t think that’s really the optimum way for anything.

Governance and management of networks was something we've never thought of, but some of the best experiment in governance are running in the crypto world. I do think networks like Google and Facebook were something people never imagined, and the capitalistic model clearly rewards the builders asymmetrically. A network like Google or Facebook was built by its users and is still being built by its users. SV has propagated this stupid ideology that 10 upstarts were able to build a network that powerful and all the credit should go to them. I'm not sure what the solution to this is, but I do think users should receive a fraction of the value the networks make. And blockchains make it possible to build networks like this. Steem is an interesting experiment but hasn't gained much steam.

BAT is a great experiment that could change the direction of the internet. I'm not sure if their model would work, but I do think its an experiment that must happen. The future of the internet is at stake with the ad driven cess pool that it has become.

In terms on energy inefficiency, this has been a problem people have acknowledged and have been trying to solve, I think we’re less than 2 years away from a breakthrough in PoS which would make PoW redundant.

Either way, I think people obsess over payments too much. I'd obsess more over how this is the first time in the history of mankind we don't need a third party to supply trust. There is no trust premium on services, which can upend multiple services, finance being the obvious one but I think it's much larger than finance. I do think that there is a lot of noise in this space and its hard for anyone rationally observing to get a clear perspective on what's going on. I could go on all day and maybe even write a scifi fantasy but yeah, there's a lot of people working towards building the future, sadly its a small fraction compared to the number of people speculating and creating noise.

Creating frictionless markets which players can more easily enter without a gatekeeper (e.g. a monopoly). The trick is to tokenize and write smart contracts representing the entities and relationships. It's a long way to go before achieving this, but we'll get there. Hopefully.

Transferring money from one country to another. It might seem easy right now, but if Visa or MasterCard ban you or your recipient, or their region, or country then it becomes much harder.

Every instance of international money transfer being more difficult via Visa/MasterCard than Cryptocurrency is by design. When you hear about a government issuing new “sanctions on North Korea”, for example, those sanctions are implemented by making it prohibitively difficult to effect transactions with North Korea.

Just don't get banned by Visa or Mastercard

Oh, simple enough.

Actual real, obvious, explainable, practical applications of crypto and blockchain will help legitimize the industry.

Something seems so so wrong with the notion that, "aww shucks, we just need more VC attention! And then we'll become a real boy!"

I really hope VCs do the right thing by the environment and stop supporting any crypto company that involves the sort of excessive Bitcoin type mining we've seen today.

Whatever problem they supposedly solve does not outweigh the staggering impact to the planet.

Many of the newer, high profile blockchains have moved away from proof of work to proof of stake, which is not energy intensive

dream on

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