Category Archives: finance

Thinking about Crypto in 2018

A year ago, talking about “crypto” was a bit like talking about quantum mechanics. The topic was obscure and not immediately interesting to most people.Worse still,  unlike quantum mechanics, crypto had sort of a bad smell to it.

What a difference a year makes! Crypto is no longer obscure, and it is of immediate importance to lots of people. What happened? Of course, the amazing explosion in bitcoin valuation was part of it.  On the first day of trading in 2017, Bitcoin topped $1,000. That seemed unsustainable at the time. Today, even after a rather severe correction in value, Bitcoin is trading at over $13,000. That is huge.   On January 1, 2017, Ethereum was trading at around $8. It is now over $800.  Other crypto-currencies have exploded in value as well.

The conventional wisdom is that  this is a bubble that will pop at any minute. And looking at the above in historical terms, it is heard to argue with that assessment. At the same time, there is also a sense that no matter what happens, the interest in crypto will not disappear. There is a growing sense that we are seeing something new and valuable, even if the bubble pops.

So what is this new value? We are likely to understand this better in 2018. First, the value in crypto is as much — if not more — about the value of crypto’s underlying technology, blockchain, than the various crypto-currencies that run on blockchain. Why? Blockchain is billed as a tool that will promote decentralization of information flow. It removes the need for “gatekeepers” who charge for securing the integrity of data flow. Gatekeepers? Like banks, government, etc. If this promise is fulfilled, even in part, blockchain will be a big deal. Expect a lot more discussion of this in 2018. At a minimum, this could lead to huge cost reductions in transaction related data flow.

Blockcahin has given us another crypto dimension as well, so called “initial coin offerings” or “ICO’s”. These are launches of crypto-tokens as a way of bringing in participants in new ventures. Think of  the potential of ICO’s as crowdfunding on steroids. Your participation does not just give you a one off reward, it gives you ongoing access to an ecology. First the bad news —  The bulk of ICO’s launched in 2017 will fail. And in 2018, expect a growing chorus of “I told you so” from folks who think all ICO’s are frauds. But in 2018 we may see emerging standards for ICO’s that bring trust to this as a global market. That is a big deal for people who want to participate in value adding ecologies beyond traditional business relationships. In other words, it is worth paying attention to ICO markets this coming year. And again, this is a global rather than jurisdictional phenomenon.

An example of how ICO’s are changing – the crowdfunding platform Indiegogo now allows projects to attract funding through token sales.  This “SEC compliant” type of ICO is likely to become more common in this new year. We may see better standards for “utility tokens” as well (tokens that are not meant to act like securities).

As usual, the new technologies are bringing in new vocabulary. To get a sense of this new talk, listen to Joe Lubin, CEO of an ethereum based software engineering company.



thinking about crypto-tokens

First a disclaimer: I am not an expert on crypto-tokens and this post is not intended to offer advice about their relative merits or lack thereof.

I read from Fred Wilson’s blog today that there will be a “token conference” in New York this May. That of course, leads one to ask “so what the hell are tokens?”  H refers to what are generally called “crypto tokens”. They are a digitized form of token that are based on a  platform like bitcoin or etherium.  They are issued by someone either trying to finance or monetize a business.  Fred points out that the long-term upside is about monetizing a business rather than financing it.

What is the big deal? From TC, we find out that there be no big deal — at least not yet.

Many view ICOs and cryptotoken sales as fraudulent schemes for a quick money grab.

The main problem goes to the lack of enforceable mechanisms to control what happens after you buy the tokens. And that is a big issue. Read the TC article if you want more on that.

It is a big issue except if you have some basis to trust what is going on with those getting the funds from issuing the tokens. Which brings me to my point — stripped of all the rhetoric, we are seeing new platforms that build networks around evolving ideas. These are not easily financed by traditional methods. That is the “pull” that makes investing int his field interesting.

So hold on to your hat. You are going to hear more about this.

Bitcoin is not a coin

A lot of folks have given up on bitcoin as a currency. And perhaps they are right to do so. While the volume of bitcoin based transactions keeps going up, it is nowhere near replacing any major currency.

But what if bitcoin is not really a currency at all? What if it is something else. Something that we have never seen before? It has some properties of a currency, but it also has other properties that enable it to do stuff that currencies do not.

That is the idea that the folks at Polychain are betting on. They are investing only in companies that use digital tokens as the framework for their business. Read on if this idea catches your fancy!

Introducing Numerai

i will be the first to admit that I don’t really get this idea. I do get parts of it. But I will leave it to you to figure out how Numerai will achieve what it sets out to do.

This part I do get

What … components or technologies would be necessary for a global scale community of people making investment decisions?

Things start to get a bit fuzzy fo rme  when they talk about applying machine learning algorithms to anonymous data sets.

But hey, let’s see what it produces.


A Riff on Homomorphic Encryption

After reading this Wired article, I still am not sure what this is all about. here is a peek

Under the banner of a startup called Numerai, (Richard) Craib and his team have built technology that masks the fund’s trading data before sharing it with a vast community of anonymous data scientists. Using a method similar to homomorphic encryption, this tech works to ensure that the scientists can’t see the details of the company’s proprietary trades, but also organizes the data so that these scientists can build machine learning models that analyze it and, in theory, learn better ways of trading financial securities.

See what I mean? It is just a tough nut. Let me know if you can figure it out.

What will 2017 Hold for OPEC?

Oil prices have been historically low now for several years. How long will prices remain at these levels? No one knows. And if they stay at these levels throughout 2017? 2018?

Ouch! That will wreak havoc on the public finances of oil producers. Indeed, OPEC members are already feeling the strain. This story about Kuwait gives a glimpse.

This may be one of the more interesting stories to unfold next year. Stay tuned!