Occasional musings on crypto from an early investor, entrepreneur, and two-bit idiot.
TBI's Daily Bit


April 25, 2018
Daily Bit

Moved my longer post to tomorrow, just one more time. (Writer's block / rewriting mania is a bitch + I had to start a presentation that I'm giving tomorrow afternoon in Boston.)

Plus I also got distracted by EOS. 

Re EOS, there was a thorough analysis of the project put forth by the Multicoin Capital team yesterday. Its probably more material for you to read that and some of the report’s smart rebuttals, than my philosophical musings on editors and curators. (Tomorrow.™)

The long form report is here. Cliff notes here.

I’m still not sure I grok the argument for why one must hold the EOS token, and I share other analysts’ skepticism about the potential for EOS to displace ETH as the industry’s dominant smart contract platform.

Multicoin’s primary argument seems to be that dapp developers will shift en masse because they will prioritize EOS’s performance and usability over ETH’s decentralization and censorship resistance.

Should EOS be taken seriously as a competitor, and will ETH will face tough competition in general from a variety of smart contract platforms in the coming years?

Sure, this seems obvious, if for no other reason than we've already seen ETH threatened to usurp BTC as the industry’s largest currency a number of times in the past year. I don’t know why ETH would be immune to similar competition from projects that are explicitly optimizing for features that target Ethereum’s weak spots. 

With EOS in particular, issuer Block.One is sitting on a rumored $4 billion balance sheet, $600+ million of which has already been committed to “ecosystem development funds” in Asia, Europe, and the US. That money will be primarily used to coax developers over to its platform from Ethereum.

Regardless, I always try to separate “what makes the token valuable” from "what makes the tech interesting”, and I still don’t get EOS, perhaps because I’m coming at this from a different angle: I think ETH crossed the chasm from a security to a utility token / commodity, to primarily a currency. And we’re still talking about EOS like it’s a utility token / commodity. I don't understand why it needs to be held at an $11 billion valuation pre-launch.

Call me old-fashioned.

The ETH token got valuable primarily because a group of true believers bought into the myth that ETH was digital money for token sales. Not a commodity used to primarily pay for gas and general purpose computation, but a bona fid reserve in a distributed investment bank, much like how BTC became the reserve currency of an algorithmic central bank.

That "moneyness" is what drove ETH from $8 to $1,000 last year, and that is a difficult thing to fork or siphon off if you’re EOS for a few reasons. 

1) There seems to be a massive chasm between these communities and their ethos, and it stems in part from who invested, when, and why. ETH attracted mostly developers in the early days. Those early tinkerers invested $22mm and built on ethereum because they believed in the mission and the vision and the community working on building a decentralized world computer. EOS was born in the height of ICO mania (Times Square billboards and raging parties), from investors and showmen who now plan to use the year-long fundraise to make it rain on development teams via ecosystem funds. That doesn’t scream organic developer interest. It screams “let’s recruit some mercenaries." EOS started money-first vs. mission-first.

2) Maybe I’m giving them too much credit, but ETH’s focus on ethos first, seems to have attracted a group that is now attached to the project by a sense of duty. Of course, ETH investors believe/believed in their upside too, and were rewarded handsomely for their early development and investment with 2,000x returns from the time of crowdsale, and a dynamic developer ecosystem and ERC-20 application stack. Most of those devs seems to now fall into the let’s “earn our riches" camp, eager to bring this project to fruition. I don't see many of the ETH teams abandoning ship for EOS anytime soon. EOS, as a project that has first enriched whales over developers, has a more top down approach than community groundswell. To make matters worse, if (when?) the market corrects, most of the early EOS teams could be underwater from their initial investments. Depending on the terms they get from ecosystem funds, you could be seeing an ecosystem wide "golden handcuffs" group of prisoner teams. With EOS sitting at a nosebleed pre-launch valuation of $12 billion, 50x from where ETH started, the risk-reward profiles for ecosystem participants skews to the downside. 

3) The mercenary “ecosystem development fund” strategy adopted by Block.One reminds me more of Ripple spraying XRP around, than BTC or ETH, or other early crypto-currencies. Yes, they can pay for a TON of developer interest, but it’s unclear how that flows back to the ecosystem or token holders. This go-to-market strategy, which Multicoin lauds as a competitive strength could lead to insane levels of malinvestment. Kin (see below) shows that some teams will gladly port their project over to a rival stack when the evidence to do so is compelling, but I’m not clear on how this translates to EOS as a token. You wouldn’t hire a startup employee that’s trying to max out his cash comp, but that’s what these ecosystem development funds are essentially going to do. 

4) I’m not convinced EOS is a legendary team from an execution perspective. This isn't a knock on them, but we simply don't have enough data points. The project is pre-launch. If better teams come along, they too, could poach away the same talent pools that were incentivized to come over to EOS. Same playbook, different team, same spray and pray dynamics. A community of mercenaries that gets fractured and pimps out to the highest bidder at every opportunity.

My bet is that culture and community matters if you want to bootstrap a currency or something valued like it. I understand how ETH miraculously accomplished that. I just don't understand EOS. 

*I’ve been wrong so many times in this mania, that I’m probably wrong about EOS, too. Or I’m right, but by the time that’s proven everyone else involved will be a centi-millionaire. C’est la vie.

**You should also read Spencer’s take from Blockchain Capital. I’m sure will come rolling in over the next few days as well. 


I Like Pictures

Another day, another smart contract bug. This one lets you transfer a massive amount of tokens in a transaction - even if they don't actually exist. You can read about batchOverflow here.

There are multiple contracts that have been identified as vulnerable and exchanges have started to suspend trading in some or all ERC20 tokens. Time for another EIP?

Red Pillz

The volunteer army at Messari is building a free, open-source library that anyone can use as a resource, so you can go down the crypto rabbit hole a bit more efficiently.

Today we take a look at Kin, which is being developed for use on the Kik social platform. The team integrated a token to replace their existing rewards system, Kik Points, and plans to run atop both the Stellar and Ethereum blockchains. Check out the report to learn more.

As usual, you can check out our full library here, and stay tuned for another masterpiece tomorrow.


TBI's Compression Algorithm

At least 216 Ether lost as result of an attack on MyEtherWallet. MyEtherWallet was hit by a DNS hack that resulted in a loss of around $152,000 worth of ether. The attack led some users of the service to fake websites, and tricked them into entering private key information, draining their wallet contents. MEW is currently investigating the case, but good reminder to always take a deep breath and triple check the source of warnings before panic-accessing your hot wallets. (Coindesk | Techcrunch)

Activism jumps past censorship and onto the blockchain. The #Metoo movement in China moved past the government’s censorship efforts and onto the ethereum blockchain this week. Activists hashed a memo written by a student who detailed how the prestigious Peking University tried to silence her from speaking out against a sexual harassment issue two decades ago. Any mention of “#metoo” and the images and texts of the memo have been deleted by Chinese authorities, who have been trying to suppress the movement. But the ethereum blockchain now memorializes the memo and has given activists and their supporters another avenue to voice their cause when they face backlash. (Bloomberg)

Nine profiles of badass women in the crypto space. Finally, an article about women in crypto/ blockchain that actually highlights the incredible achievements some women are doing in the space. Hell. Yes. The latest article in Glamour magazine profiles nine women in the space, including Amber Baldet (ex-JPM), Elizabeth Stark (Lightning), Tavonia Evans (Guap), and Galia Benartzi (Bancor), and covers how they got in the space, and their trajectory so far. Read up on these amazing women and get ready to "break some shit" today. (Glamour)

Quick Bits (Don’t read that, I read it for you)

Choke Points 
+ Coinbase shuts off access and service for Wikileak’s Coinbase account, citing regulatory compliance concerns under FinCEN guidance. Wikileaks responds by publicly calling for a Coinbase boycott.
+ Binance faces a lawsuit in Hong Kong’s High Court from Sequoia for engaging in talks with other investors during its negotiations with the firm, in breach of an exclusivity agreement. Sequoia secured a temporary injunction barring Zhao from negotiating with other investors until the hearing.

Startup Signals
+ Etheric, the startup that is building a blockchain-based platform for decentralized insurance applications, has developed a policy specifically for hurricane damage in Puerto Rico. 
+ Binance Labs led a $30 million (denominated in Bitcoin and Ethereum) round of fundraising for MobileCoin. 

The Powers That Be
+ Ever since China and South Korea came down with a full ban on ICOs last fall, the number of token sales in Hong Kong and Singapore have skyrocketed. Neither Hong Kong nor Singapore currently has specific rules for ICOs.
+ In a report to the SEC, Capital Group, the financial service company with $1.7 billion in AUM, bans its associates from investing in ICOs in its updated code of ethics
+ China’s National Audit Office publishes an article on how utilizing blockchain technology across audit offices across the country could speed up inefficiencies in data management and data storage. Though no projects are set in place yet, the article strikes a hopeful note on how the Chinese government can implement the technology in the near future.   

BigCo Noise
+ TD Ameritrade sent 68 bitcoin transactions in order to create a digital flag with its logo on the bitcoin blockchain as an ad. Slightly jarring....
+ MarketWatch will now display market information for bitcoin, ether, XRP, bitcoin cash, litecoin, ether classic, monero, dash and zcash. But no EOS.
+ Salesforce joins the Blockchain Research Institute, a Toronto-based global blockchain think tank. Other members include Microsoft, IBM, the Bank of Canada and PepsiCo.

+ Ripple is hosting a VIP gathering during Blockchain week, and will be featuring Snoop Dogg. To quote Snoop, he is “Putting tha Crip in Crypto”! I am eagerly awaiting my invitation from my very good buddy, Brad.

Did I miss something big?

Send me the link, your twitter handle and your best imitation compression algorithm write up. If I really whiffed, I’ll include your bit tomorrow (with attribution).


Shameless Plugs

Hit me up when I'm in your city!

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