Crypto fundamentals

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Our good friend Chris Burniske was on Squawk Box this morning. I got up and watched it.  You can see the video here.

Of course there is interest in the crypto market right now, as it is falling hard. I suspect there are many out there who are enjoying the drop, waiting for the bubble to finish popping and for this whole idea to go away.

One takeaway from watching the segment is how much of a learning curve there still is around this whole space.  If you look at the questions Chris fielded this morning, you’ll see a looming gap in understanding of the fundamentals.  The questions range from “why do we even need this” to “what is the rational basis for these prices”

It’s a complicated topic, with complicated mechanics, and to make matters worse, the narrative itself has shifted a bunch over time (digital cash, digital gold, decentralized computing, the new internet, etc).

Here is one way to think about it, that feels native to CNBC and the financial markets industry:

Crypto is a market-based system for providing computing services.  The “miners” and other participants are just like the participants in other commodities markets.  It really is a shift from providing computing services via a corporate/securities/centralized model to an ecosystem/commodities/decentralized model.

If you just hold that idea for a moment, then where Chris was trying to take the conversation (but didn’t exactly manage to — talk TV is tough!) is around the rational pricing of commodities.  A simple way to start is by looking at the marginal cost of production, which is one way of looking at commodities pricing.  While this does not make sense in a highly speculative bull market, it makes a lot of sense in a flat or bear market, as we seek a basis for understanding where the bottom might be.

Another challenge here is that the utility of cryptoassets like bitcoin ethereum is still being understood, so we do not yet have solid anchors for pricing.  In the case of oil, for example, we have industries upon industries using it, establishing consumer value which lets price flow back to the original production.  This is still nascent in the crypto space, but is getting clearer every day.

Thank you Chris for working to advance the dialogue.

Getting hands-on

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One of my favorite things to do is get my hands into something and figure out how it works, whether that’s an app, or a gadget, or a house. For example, over the past few months I have been renovating our basement, turning an unfinished, dank storage area into a playroom for the kids.  Here… Read more »

The dangers of unstoppable code

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With real-time, interconnected, self-executing systems, sometimes when things wrong, they go really wrong.  I wrote about this general idea previously here. Yesterday, while I was writing my post on Trusted Brands, I was doing a little searching through my blog archives, so as to link back to all the posts categorized under “Trust”.  In the… Read more »

Trusted Brands

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Today is election day.  I’m on a plane today, so I voted early, a few days ago.  I cast my vote and it felt good. I marked my paper ballot with a marker (for optical scanning) glued it shut into a sealed envelope, and handed it to a volunteer who placed it in a secure… Read more »

Suffering, self, and service

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The massacre in Pittsburgh is heartbreaking and awful, and another example of the extent to which society seems to be fraying. The Pittsburgh attacker spent a lot of time on social media sites that stoked his fear, isolation and anger.  I think about the internet a lot, and while the internet has the ability to… Read more »

Building a meditation routine

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I wrote recently about the challenge of turning plans into routines.  One of the activities that is the most impactful for me is meditation.  I cannot say that I have a perfect meditation routine, but I can absolutely say that when I do do it, it makes me feel great, immediately. There are a bunch… Read more »

Trauma

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Just about two years ago, my wife’s parents were hit by a truck while crossing the street. The past two years have been both difficult and wonderful.  Wonderful in that two people who were on the brink of death following the accident are still with us (her mother in particular has had a miraculous if… Read more »

Plans vs. routines

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Sunday night over dinner, my son, parents and I were discussing the saving / investing system we set up for our kids in the spring. The idea was/is: set a monthly budget for purchases (in their case, mostly online movies, tv shows and games), and include a really healthy interest rate (20% monthly) to encourage… Read more »

The adjacent possible

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Dani and I have been spending a bunch of time recently thinking about the relationship between applications and infrastructure.  It’s a little bit of a chicken and egg situation.  You need infrastructure to build apps, but often times you don’t really know what kind of infrastructure is needed until you build some apps. For example, we… Read more »

Getting the chills

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One of the greatest things Frannie and I have in common is that we get the chills from music — typically at the exact same time, triggered by the same musical… something. For me it starts  at the back of my neck, and if it’s really good, it spreads all over my back, head, and… Read more »

The utility infielder

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My favorite baseball player is Brock Holt, and has been since his first season with the Red Sox back in 2013.  Here is me last month wearing my Holt jersey that I wear to every game (note the #26 that he started out with, before it was retired for Wade Boggs a few years ago… Read more »

Fear

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I have been helping my son, who is in 4th grade, with his math — specifically, multiplication.  He feels like he is a little bit behind, so we are working on it so he can get more comfortable.  It is going well now — we have gotten into a routine of spending 15 minutes per… Read more »

Form factor

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Over the past few weeks, I have varied up my computing habits a bit.  For a laptop, I have been using a Pixelbook, and I have also been spending more timing using an iPad Pro for work (vs my default of using a Mac laptop for everything). What I have discovered is that the form… Read more »

A little, and then a little more

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Back in May, I had what ended up being a major hand surgery — repairing a torn tendon and in the process reconstructing the end of my pinkie by grafting tendons borrowed from my ring finger.  As a result, I am now recovering from two injuries — the pinkie itself and the ring finger that… Read more »

Layers

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A central concept on the internet is Layering.  Each of the protocols in the internet stack talks to the layer directly above and below it — new protocols can be added as long as they speak the language of their layer.  Protocols at one layer can be upgraded so long as they don’t break compatibility… Read more »

Minimum Viable Economy

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One of my favorite things about the cryptocurrency / blockchain space is that our conception of “what it all means” is still very much in flux. Nic Carter just published a nice analysis of how the functional narrative around bitcoin has changed over time – (roughly) from e-cash, to e-gold, to private currency, to a… Read more »

The path to decentralization: self-destructing companies

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In June, the SEC gave some of its most concrete guidance to date that cryptoassets can start out as centralized projects, possibly initially sold under securities laws, and eventually become “decentralized” and thus no longer sponsor-controlled, and no longer sold or transferred under securities laws. It makes sense that a decentralized protocol does not fit… Read more »

Trust and fairness

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I was at an event last night, where the moderator, Preeti Varathan from QZ observed that there seemed to be a lot of cynicism in the blockchain / crypto space — in other words, that the whole thing was essentially premised on a distrust of existing systems (fiat currencies, large internet companies, etc). It’s an… Read more »

Compound interest goes in both directions

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There is no shortage of writing and punditry about the power of compound interest. As usual Naval has a pithy tweet about it: Play iterated games. All the returns in life, whether in wealth, relationships, or knowledge, come from compound interest. — Naval (@naval) May 31, 2018 I have been thinking about this a lot… Read more »

just_work = true

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One of my former colleagues, Rob Marianski, and I used to have a running joke — we would be building and debugging something, and he’d finally say, “Oh, so you just want me to set just_work = true?”.  That was over 10 years ago, but it still gets me every time for some reason.  (as… Read more »