I say that, but a transaction on the Bitcoin ledger has been more expensive than $0.15 since mid-2016 and fluctuates wildly. Other cryptocurrencies might be able to handle this better. I'm optimistic about Stellar being a useful transaction network, but I don't think the value of 1 XLM is going to move much relative to 1 USD.
All you need for micropayments are low fees - that doesn't require a pseudo-anonymous collective keeping a shared public database of transactions. In fact it's better if you know who the counterparties are.
Companies like stripe, apple, google or banks like monzo could offer low fee transactions for example between two counter-parties who are both customers, bypassing payments networks and taking on a little more risk for a lower fee.
Payment networks are ripe for disruption, but I'm not sure bitcoin et al will do the disrupting - it's solving the wrong problems.
Oddly it kind of does, but for bad reasons.
Existing rules for payment processing basically require the payment processor to eat the cost of fraud. That means you can't have small transaction fees because they have to cover the cost of fraud or the payment processor goes out of business.
A payments system where there is no "payment processor" middle man to foist the cost of fraud onto thereby doesn't require that middle man to charge high transaction fees to cover it. In principle that could allow lower transaction fees.
> Companies like stripe, apple, google or banks like monzo could offer low fee transactions for example between two counter-parties who are both customers, bypassing payments networks and taking on a little more risk for a lower fee.
Scenario: Mal uses your payment service to buy goods from Alice, Bob and Carol and pays you with a credit card, possibly stolen. As soon as the goods change hands, Mal (or the real owner of the card) disputes the charge with the credit card company.
You have a bootstrapping problem. You need a way for the customer to get money into the system which doesn't impose the cost of fraud on you if the charge gets reversed after the goods change hands.
This could also be solved by changes to the law, but easier said than done, especially with a bunch of incumbents enjoying the larger vig from the status quo.
1) A significant portion of the cost of chargebacks is administrative, especially for small transactions. The banks at least nominally attempt to prevent customers from defrauding merchants, even if they fail more often than not, because if they didn't even try it would get a lot worse fast. But that costs money, and the money it costs is proportional to the amount fraud/chargebacks and not linearly proportional to the purchase price. Having to go through the chargeback process over a nickel is not something they're about, hence the minimum transaction fees. They also sometimes lose the money because it's not possible to recover it from the merchant for some reason.
2) If you're trying to become a payment processing system with low transaction fees which people can transfer money into using their credit cards, the "merchant" who eats the cost of fraud is you.
On the other hand, there might be higher responsibility for card-not-present transactions (i.e. someone entering a CC number into a web form over the Internet, or merchants deciding to accept a CC transaction while their machine is down and can't swipe, entering the transaction later as a card-not-present).
Not an expert on this.
One remark I'd share is that many crypto systems, in their basic transaction form, remove all consumer protections like that exist in the form of chargebacks. This can be a good thing if the merchant or marketplace is reputable and can be trusted to do the right thing. It could be a bad thing for consumer protection broadly though. The fact that you can easily charge-back a transaction provides a sort of lubricant that makes consumers more willing to spend online. You know that if a subscription company makes it really a pain in the ass to cancel, then you have the nuclear option to fall back on.
(OTOH, there's no such thing for subscription payments for blockchain. You'd have to build that custom as far as I know.)
If you want the convenience of it being online, here in Sweden we have something called swish, it's essentially a bank transfer initiated by via your phone number. It is free for non business transactions (I actually don't know how it works when used by a business). As far as I know bank transfers are free in most of Europe.
Also would this work if you try going from say, Swedish citizen/bank to German citizen/bank?
I think the potential gain in transaction fees would be worth this risk, particularly for companies which know both the customers well (e.g. already process all their transactions).
Cryptocurrencies don't address this, they simply pass the risk to the merchant instead which is far worse.
1. It allows you to forget (most of) the system's history without sacrificing the consistency of the system
2. It allows you to distribute/factor out the work of the system into lots of independent components
3. It maintains decentralization, whereas most "fast" "cryptocurrencies" actually just work by having a trusted central authority, once you peel back enough layers of obfuscation
The lightning whitepaper also says a minimum block size of 155mb is needed to work at scale. Bitcoin currently has a 1mb block size.
I dont see lightning network being useful on a large scale until thats resolved.
Where? I just checked and can't find it. This statement also seems nonsense in isolation - positing block size requirements involves a lot of assumptions about network topology and load.
"If all transactions using Bitcoin were conducted inside a network of micropayment channels, to enable 7 billion people to make two channels per year with unlimited transactions inside the channel, it would require 133 MB"
https://lightning.network/lightning-network-paper.pdf#sectio...
If everyone on earth was using lightning, I suspect most users would be using custodial lightning wallet providers (e.g. "Wallet of Satoshi" is very popular now). I doubt even 1% of people would elect to host their own node (although it's important that they be able to). 500 bytes is also a high estimate of channel opening transaction size.
The socially efficient end state I expect looks a lot like the current state of affairs (in terms of payment network topology), except A) small institutions (including individuals) have direct access to the same financial network used by large institutions if they want it, B) the financial network is trustless, C) transactions are non-repudiable. This is to be expected - there's no reason to expect Bitcoin would cause a radically different experience for the typical end user, except insofar as they will capture whatever passive benefits may be associated with saving in a hard currency. Paypal et al is already quite convenient and technically amenable to microtransactions. The benefits of Bitcoin, while substantial, mostly occur at the margins.
The block size limit was kept small in order for everyone to be able to run their own node.
so far block size increase has not been necessary. if hyperbitcoinization occurs and there is a bottleneck with lightning, block size increase is ok.
with lightning factories this may never be necessary.
if it is, it is.
The gist of it is you have a "multi core blockchain" that is only verified by a randomly chosen subset of validators that then sync their state back up to an oversight chain called the beacon chain.
The sharding design is integrated with that but won't actually be implemented until next year. First version of sharding will only store data; execution on shards will be after that.
The other thing going on is various layer-two systems called "rollups" which compress on-chain data to a minimum and prove its validity with either fraud proofs or a cryptographic zero-knowledge proof. Some of those are in or near production and can take today's Ethereum to about 2000 tx/sec, for simple transactions like transfers and exchanges. The data-only phase of sharding will multiply that by the number of shards.
The real issue is no one cares about microtransactions because they're "micro" - and not enough to actually live off. See the artists spotify pays for plays - living that microtransaction lifestyle and making nothing.
But not if your $0.01 transaction has a $0.30 minimum transaction fee.
Where do you see microtransactions being applied in practice?
Lightning network is capable of solving the issue though, as these transactions are done over a secondary layer.
The lightning network whitepaper states a base block size of 155mb is needed for it to work at scale. Right now bitcoin has a 1mb block size limit. And as you said, this size is intentionally limited, so i doubt we'll ever see lightning network work at scale.
This can be seen by the 0 fees on network on Alipay and WeChat Pay which don't use crypto and transact more volume now than Visa and Mastercard seamlessly.
With the rollout of DCEP why use the others?
Bad. Very, very bad.
> i'm really curious what kind of GP throws good money after bad on out-of-favor stuff like this. not that it can't work, its just unusual.
Crypto is at the intersection of ancaps and difficult, probably intractable engineering problems. That intersection is highly idealistic and highly motivated, with an almost religious zeal.
There's another reason too: faulty reasoning by superficial historical analogy. There's a crowd of people who think cryptocurrency resembles the early Internet, and that its detractors are wrong in the same was as Paul Krugman was when he thought the net would turn into nothing.
The difference of course is that the Internet was immediately useful to an exponentially exploding number of people. I got on the net in 1993-1994 as an early teen and immediately found a ton of fascinating stuff to do with it. I helped less tech-savvy people (including my step sister) get online and they started enjoying chat rooms and the very early web.
Nobody uses cryptocurrency except users in a few niches that have remained relatively stable since its inception: people using it as an alternative wire transfer method, black/grey market commerce, and enthusiasts who just think it's cool and go out of their way to use it for the sake of using it. Those niches exist but they aren't growing very fast.
Reason from first principles, not by analogy.
Essentially, EY expects public blockchains to do for B2B what ERP software did for internal operations. They're building zero-knowledge tech to make that sufficiently private and help with scaling.
Yes, but it's totally and completely unnecessary. If a company doing business with another company doesn't trust either the other company or a mutual jurisdiction to remediate -- they just shouldn't be in business together. No amount of blockchain magic fairy dust is going to change that.
Blockchain also only accurately reflects things solely encapsulated within the blockchain. As soon as you're trusting someone to enter data they can enter false data, and now you've got a permanent immutable ledger of hot garbage.
The video you linked leads with "it's been too complicated in the past to explain return on investment" lol, if you can't tell me if your product will save me money or not, your product is bad and will cost me money.
It's like going to buy a new fangled electric car, and you asking the salesman, hey, so how much will this save me on gas! And the salesman responds: "well that's hard to say." That's not a good sign.
You could run everything on one system, but companies don't like trusting and paying whoever runs that one system, so mostly they run their own systems, send messages back and forth, and do a lot of cumbersome mutual auditing. That's exactly the sort of thing EY works on for a living.
There's absolutely no reason that (1) Microsoft licensing should have taken a month to begin with, that's madness, you can buy a license on their website in seconds -- so it was a process and policy issue, not a technology issue and (2) there's no reason that if you trust Microsoft and Windows to validate that license information that you can't trust them to store that license information alongside your receipt/proof of purchase. None. They're required to hold on to it by law anyways. And if they don't honor it (and they will) you can always sue them.
Who on earth needs to validate MyCo has a license to Windows other than MyCo and Microsoft? Absolutely nobody. And if you don't trust Microsoft to honor the license in the first place why are you doing business with Microsoft?
Now beyond that, EY. They're not selling blockchain, they're selling SaaS apps built on top of blockchain technology because they need to meet CTO/CIO buzzword quotas. Their SaaS apps could be just as easily run on, wait for it, AWS.
The transnational nature of it is interesting. But otherwise ya, I agree. Very niche at the moment and not really exploding in use or use case.
So, the hedge seems to concern investing in a new computing platform that will gain traction around 2021-2023. Does either the thesis or hedge seem bad? Well, the thesis doesn't seem obviously bad in comparison to other VC theses out there (I mean, theses are sort of about putting a stake in the ground with regards to predicting the future). Let's agree the thesis is sound. Is the hedge still bad? I don't know. If you were to line up the other options, like A.I. and AR/MR/VR (are there any others?), I'm not sure one would really stand out above all the others. Maybe A.I.? But even then, they've already invested in the other options (especially A.I.), so at this point it's a matter of distribution of invested capital.
Could the crypto investments end up being complete and embarrassing failures. Definitely. But, I'm not sure how this risk really stacks up to a different hedge for 2021-2023. It doesn't seem to be obviously bad in comparison to the other options.
And numerology with suspect numbers at that; 1978 was the year after the introduction of the first viable personal computers, 1993 was, er, Mosaic came out I suppose, but it was not the year the web showed up (that was earlier) or the year that it started to see widespread adoption (that'd be, er, 95 or 96). 2007 was the year that smartphones became mainstream, if you don't count blackberries or other consumer quasi-smartphones. This all feels very cherrypicked to fit the thesis.
I don't know what their reasoning is, but I suspect it's a mix of everything discussed on this thread: ancap/right-libertarian ideology, an affinity for sexy tech regardless of usefulness, faulty reasoning by historical analogy, reality distortion due to having made money off the crypto bubble, and a bit of sunk cost fallacy.
I am willing to be proven wrong. Show me growing uses of cryptocurrency that are not one of: niche wire transfer applications, black/grey market commerce, cryptocurrency aficionados nerding out, gambling, speculation, fraud, or solutions in search of a problem. Those are all (except the last two) real applications to varying degrees, but they're not large, rapidly growing, mainstream, or of that much interest to business customers.
In other words show me something someone that doesn't care about cryptocurrency would use. The Internet in the mid-90s offered a ton of things people wanted to use even if those people didn't know what an IP packet was.
I have asked the above in various forums, Twitter, etc. for years and so far nobody can produce anything. The closest I've ever seen is this:
It's the only ICO project I know of that has actually shipped something usable and possibly useful. Still that's one singular example and it's not like they're going to displace Amazon S3 or Backblaze any time soon.
Is it a good thesis? What's your criteria? By any scientific criteria, of course, the thesis is asinine. However, if the criteria is other VC theses, then it is an adequate thesis.
"AI" is great at solving fuzzy matching and pattern inference, which opens up a world of interesting things. Image segmentation, image analysis, dynamic image infill, facial recognition, and so on can all benefit. Is it a be all and end all technology? Probably not, certainly not yet, but it's clearly, trivially and obviously superior for a certain problem domain.
Just because something happens "every 15 years on average" doesn't mean it happens on a 15 year clock and it certainly doesn't mean you can just throw a lawn dart and hit one in the face without using some logic, reasoning and due diligence.
An overnight success twenty years in the making :)
Everyone has had access to cryptocurrency for over a decade, yet it still only has its original niches. This is a niche technology, not the next revolution.
As an Ethereum user, I find Ethereum useful. Maybe my experience is not unlike that of the initial ARPAnet users?
While between jobs, I have paid my rent with a blockchain-based loan. I found Ethereum to be a much better creditor than a bank.
I've quickly and inexpensively sent money to friends in other countries.
> yet [cryptocurrency] still only has its original niches [after a decade]
On this point, you are misinformed. There are many niches, services, and new kinds of financial primitives that have emerged on Ethereum over the past few years.
Most cryptos (that are not ICO scams) are hammers looking for nail. Outside of some very niche use-cases, most are non-competitive with centralized payment systems. Keep in mind there is a difference between an investment vehicle and a currency, and just about anything is a decent investment if your risk tolerance is high enough.
The fervor by which they're pushed by fans is almost religious in that their arguments stem from asking you to ignore certain facts and have faith, usually in the holy whitepaper.
As the scriptures of the great Satoshi Nakamoto [1] foretold, the bankers are coming to steal our net worth through inflation. Therefore, help me move my narcotics proceeds overseas.
[1] (Satoshi is likely the international narcotics and arms trafficking, real-life, super-racist Bond-esque villain Paul "Solotshi" Calder Le Roux: https://www.wired.com/story/was-bitcoin-created-by-this-inte...)
Blockchain tech, specifically is this. There are a handful of interesting, viable use cases, but most are solved better in other ways.
During the ICO boom, they got access to tokens before they ICO'ed, usually at 70-90% discounts. They also make a lot of equity investments into the companies behind the protocol.
I have no idea what their numbers look like right now. And it will be hard to judge as most of their investments are illiquid at this point and don't know how they'll work out. Chia, Filecoin, Libra, ... haven't launched so could end up being worth a lot or could be worth 0.
And I'm guessing the Uber seed round wasn't available to the average investor. If you just look at the public companies available to everyone, another quick google says the best in the last decade was Netflix at 40X gain.
If you ask the SEC the majority of ICOs aren't available to the average investor either, and never should have been. Because the vast majority are pure, hot, unadulterated garbage like Dentacoin and IOTA - which emulates a ternary computer for literally no reason anyone can identify.
See: https://www.investopedia.com/news/bitcoin-pizza-day-celebrat...
It is by no means the best performing asset. Anyone with shares from the formation of a startup has outperformed.
Not to mention, at formation, you're more than welcome to pay market salaries to your founders, that's your perogative as a founder.
Society is fine with startup founders and "employee number 5" making their fortune because they put in actual effort to build a company.
The bitcoin millionaires happened to mine a few coins in 2011 before most people knew about it and then just did nothing as you said. Zero contribution to society from making that paper (or bit) fortune.
Why on earth would everyone else not on the right internet forum in the early 2010s make the few that were fabulously rich?
Investing in stocks is a similar passive income, but at least in that case the investors money is going towards some business that pays a wage to workers or provides some net benefit to society (hopefully).
Bitcoin as a "passive investment" is such a lame comparison because it does, literally, nothing, just like hanging onto some beanie babies. Beanie babies, but much more wasteful.
[note] Anyone who's an employee or an accredited investor.
It's not a lame comparison at all. If you bought Bitcoin in 2010, you've seen a 8,900,000% ROI. The asset may go up another 10-1000x from here. Bitcoin will outlast Uber. And if you're still comparing it to Beanie Babies 11 years later, it's likely you don't understand finance or blockchain, and you haven't been paying attention to what's happening in the past few years.
Or it may go down to 0. Your assertion is as likely as mine, and you’re not basing it on anything it all. Past performance != future performance.
> Bitcoin will outlast Uber.
Ok, that doesn’t mean it’ll be worth anything. Or if it does that doesn’t mean anyone will have their keys haha. Every random walk down the timeline results in 100% of keys lost haha.
> And if you're still comparing it to Beanie Babies 11 years later, it's likely you don't understand finance or blockchain, and you haven't been paying attention to what's happening in the past few years.
It’s because I’ve paid attention. Citing the divine scriptures of satoshi isn’t sufficient dismissal.
When analyzing an asset class you have to look at probabilities. Probability of Bitcoin going to zero during a financial crisis, where people are losing faith in local currencies around the world:
https://www.houstonchronicle.com/news/article/Lebanon-PM-bla...
https://cointelegraph.com/news/demand-for-bitcoin-surges-in-...
...is near zero. It's much more likely that adoption continues and Bitcoin matures as a financial asset class, not just in the developing world, but here in the U.S.:
https://www.cryptopolitan.com/caitlin-long-to-build-a-crypto...
https://decrypt.co/resources/bakkt
https://bankless.substack.com/p/9-going-bankless-w-maker-and...
As for the random walk and 100% of keys being lost...maybe if you march out the timeline long enough, the whole human species isn't going to exist any longer...so there's that. But I would argue strongly that Bitcoin (and Ethereum) has better prospects than any other digital infrastructure.
In the mean time, the next few decades look very bright indeed.
BTC has dropped 50% in value over the last three years, while the currency has inflated 5%. I know which I'd rather hold. Actually I'd rather hold neither, I'd rather be invested.
> It's much more likely that adoption continues and Bitcoin matures as a financial asset class, not just in the developing world, but here in the U.S.:
Fewer people care about it than practically ever:
https://trends.google.com/trends/explore?date=all&q=bitcoin
> As for the random walk and 100% of keys being lost...maybe if you march out the timeline long enough, the whole human species isn't going to exist any longer...so there's that. But I would argue strongly that Bitcoin (and Ethereum) has better prospects than any other digital infrastructure.
20% of BTC has already been lost.
Probably more if you count Satoshi's wallet, which likely belongs to Paul Calder Le Roux, currently working with the DEA as penance for his many, many crimes. [1]
The price is largely propped up through a massive fraud perpetrated by Tether and Bitfinex. All the folks with those heavy, heavy bags have no interest in surfacing it, as it has become too big to fail within the crypto community.
[1] https://www.wired.com/story/was-bitcoin-created-by-this-inte...
Seems like you just have an axe to grind.
It's like a16z launching a fund to invest in retail video game sales (due to the overwhelming success of $GME) in shopping malls but also run by criminals and utilizing more power than your average country. It's stupid technology.
And for the record, I've no axe to grind, I made a bunch of money in the run-up, and sold all my crypto at BTC$17000. That doesn't mean I think it's at all valuable, or would recommend literally anyone buy any, ever.
By the end of the stock market downturn of 2002, stocks had lost $5 trillion in market capitalization since the peak.[39] At its trough on October 9, 2002, the NASDAQ-100 had dropped to 1,114, down 78% from its peak.[40][41] Many online shopping companies, such as Pets.com, Webvan, and Boo.com, as well as communication companies, such as Worldcom, NorthPoint Communications and Global Crossing, failed and shut down.[42][43] Others, such as Cisco, whose stock declined by 86%,[43] and Qualcomm, lost a large portion of their market capitalization but survived, and some companies, such as eBay and Amazon.com, lost value but recovered quickly.
finally, a sane solution for micropayments for content.
you can see a sort of proof of concept (pre-lsat, but using lightning) on yalls.org and a few other similar toe in the water type sites.
but I think if LSAT gets traction it has the potential to turn the content industry upside down.
it is still very very early days.
one whole thesis here is "Modern Store of Value". is Crypto Fund II just gonna put 25% in bitcoin?
"New Ways for Creators to Monetize". i feel this is the weakest thesis of the lot. i dont see how decentralization helps here.
alright im done being crabby hn commenter. good luck to cdixon and katie haun, and the people actually trying to invent the future.