Tag: ethereum

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AI crypto technology

Web Summit in Rio and senior citizens on Bitcoin, AI and ESG goals

It was a week dominated by elderly gentlemen: the god of investing Warren Buffett (92) and his apostle Charlie Munger (99), President Joe Biden (80) and the youngster Geoffrey Hinton (75, now ex-Google). They were all relevant, for better or worse, in areas I look at with interest: AI, crypto and ESG targets. And reader Maurits Stuyver was at the Web Summit in Rio de Janeiro, with a very different audience.

Created with DALL-E: four elderly men with white hair walk past burning nuclear power plants, as an oil painting

Bitcoin tax is nonsensical

This week President Biden announced that his administration is considering imposing a tax on Bitcoin miners in the amount of 30% of their energy costs. I personally do not own Bitcoin due to energy use, but this is an example of the kind of ill-conceived legislation that makes climate legislation measures generate unnecessary resistance. There needs to be a general overhaul of the tax system so that businesses and citizens pay taxes not only based on sales, profits, wealth and income, but also on pollution and resource consumption.

My former shareholder and mentor Eckart Wintzen advocated a tax on "extracted value from the planet" back in the 1990s. That would make much more sense than just a tax on Bitcoin mining, diesel cars or nitrogen emissions. The thinking is too small and isolated, but I hardly read that anywhere in the responses to this populist proposal by Biden.

When I wanted to start writing about technology and innovation again last March, as I did on my weblog 20 years ago, I ran into the problem, reason why even traditional media rarely report meaningfully on crypto, that there is not enough independent journalism on crypto worldwide. So unless you dive deep into something yourself and research sources, you can cite virtually no other media.

One popular crypto news site is Cointelegraph, which sold a Middle East license to PR firm Luna, which has mostly crypto projects as clients. The best source in crypto is Coindesk, but with FTX trying to recover nearly $4 billion from now-bankrupt Genesis Global, it is embarrassing that Coindesk has to continually emphasize that it is a sister company of Genesis. Imagine if the NRC were to report on the bankruptcy of Imtech and in an interjection reported, "NRC is a sister company of Imtech, both companies are owned by ZBM, Soulless Belgian Media Company.

Even Coinmarketcap, the most widely used source of cryptocurrencies, is owned by crypto exchange Binance, although it would take eight paragraphs to explain that Coinmarketcap operates independently. The list of such strange relationships is endless in crypto.

I come to this because I still want to provide an analysis on the new European crypto legislation and the upcoming crypto regulations in the US. And how lacking then is serious, professional analysis that tests the intended legislation against reality.

Crypto law can be simple

Actually, it's simple: if a party manages money from customers, crypto or not, it has to meet the same strict requirements as regular banks. So a site where you can buy crypto and then hold those tokens for you, whether it's Bitcoin or a stable token, must ensure that your funds are not being tampered with. The custodian function must be sacrosanct. The same goes for security tokens, tokens that are actually a crypto version of a type of asset (e.g. stocks, real estate, bonds etc) and should be treated like other investment products.

But all other types of tokens, from utility tokens (tokens that allow you to buy one type of service or product, similar to a digital book token) to payment tokens (such as Ripple), constitute a whole new class and cannot be lumped together with other tokens just because they are all crypto tokens. Developers of DeFi platforms, where users themselves provide the market in a pool via a smart contract protocol and buy and sell independently in it, can never keep track of who is buying and selling what; because they are merely the authors of a smart contract that enables trading, nothing more.

At the core, I fear lawmakers are making the mistake of looking at appearance and then treating all crypto equally. That would be as silly as legally treating a love letter and a fake bomb threat equally if they are both sent by e-mail.  

The first Web Summit in Rio de Janeiro attracted over fifteen thousand visitors, mostly from Sao Paolo

Web Summit in Rio big success, for Warren Buffett it's wait and see

Reader of this newsletter Maurits Stuyver was one of the few Dutchmen among the fifteen thousand participants at the first Web Summit in Rio de Janeiro last week. Stuyver, who does serious business development for interesting companies, wrote a readable account of his findings in this market, which is often overlooked in Europe. One striking conclusion I found was the new resort to crypto that Stuyver deduced, fueled by the new banking crisis in America that I wrote about last month. It was also news to me that Brazil has a big focus on fintech companies.

Maurice Stuyver also makes it through life in Rio

An estimated thirty thousand visitors descended on the antithesis of Rio de Janeiro this weekend as Warren Buffett held his Berkshire Hathaway's annual shareholder meeting again in Omaha, Nebraska. Free after Susan Sarandon in Thelma & Louise: "it may not be the middle of nowhere, but you can see it from here.

Usually shareholders are as critical of Buffett as the crowd at the Arena is of the Toppers, but this time something is brewing. Big shareholders like Blackrock want Berkshire Hathaway to start contributing more to meeting ESG goals. I doubt Buffett and his associate Charlie Munger (99) care. Together they are 193 years old, it seems to me that makes you happy to still hear the alarm clock go off in the morning. In the wings, squeaky-clean Greg Abel (60) is ready to take over from the seniors.

Nice quote from Warren Buffett yesterday about Apple, of which Berkshire Hathaway owns 6%:

"Apple has a position with consumers where they're paying 1,500 bucks or whatever it may be for a phone. And the same people pay $35,000 for having a second car, and [if] they had to give up a second car or give up their iPhone, they give up their second car. I mean, it's an extraordinary product. We don't have anything like that that we owned 100% of, but we're very, very happy to have 5.6 or whatever-it-may-be percent, and we're delighted every 10th of a percent that goes up."

Warren Buffet on May 6, 2023, at the annual meeting of Berkshire Hathaway shareholders in Omaha, Nebraska
Created with DALL-E: scary robot takes over the world, sci-fi style.

Not the week of AI

It couldn't be missed: 'the Godfather of AI,' Geoffrey Hinton, left Google because he is concerned about the dangers AI has for the world. Or as CNN cosily summed it up, "AI may figure out how to kill people. And they then pulled out 4 minutes and 11 seconds for that at the 24-hour news channel. PBS did better with this report. The annoying thing about the doomsday scenario Hinton outlines is that if it ever turns out that he is right, it will be too late for humanity to do anything about it. Who wasn't thinking about Skynet and The Terminator this week?

The US Federal Trade Commission (FTC) issued a warning this week that AI can manipulate people to the point of making bad decisions. The Republican Party did not let that be said twice and produced this anti-Biden commercial, created entirely with AI.

Notable links:

  • Nearly half of YouTube viewing time in America takes place on TV. Where YouTube once began with muddled amateur videos in a resolution of 3 by 4 pixels, audiences are now watching on 4K televisions. The advertising world is following the viewers, affecting the traditional TV world. Still, YouTube's revenue fell again. Good for advertisers, bad for media operators.
  • Globally, investment in startups is falling dramatically. What unexpectedly turns out to be the most popular sector to invest in? It's not AI or crypto, but good old health care.
  • An interesting trend in venture capital is investment funds run by active CEOs and entrepreneurs. So not by former entrepreneurs, but CEOs who apparently have time to do a lucrative side job on the side. Of course, Americans have coined another wonderful term for this: dual threat CEOs.
  • One of those CEOs with an investment fund is Auren Hoffman of Safegraph, herself the author of an excellent monthly newsletter and one of the few tech CEOs who is openly Republican.
Bitcoin and Ethereum rise again and Apple scores, despite falling sales

Spotlight 9: crypto rises sharply, Apple follows

Apple released its quarterly earnings this week and almost casually announced that revenue will decline this year. Consequence: the stock skyrocketed. A closer look at the stock price shows that Apple shares are already up 39% this year. Granted, it's not yet up to the level Bitcoin (+77%) or Ethereum (+61%) is at this year, but for the investor with a less strong stomach, Apple remains attractive. For those who hear people jubilating about crypto again at birthdays should be aware that compared to a year ago, Bitcoin is up -19% and Ethereum as much as -28%. And Apple? Ten percent in the plus.

Apple has actually gone up $400 billion in value since my comparison with Philips two weeks ago, almost the gross national product of a country like Austria, to once again compare apples to potatoes. Analysts had expected worse numbers and the iPhone is selling better, especially in India.

It remains difficult for Apple to balance on the tenuous tightrope between multiple worlds and especially multiple continents. For example, the Financial Times published this piece arguing that Apple is now a Chinese company. Nonsense of course, easy shouting from the sidelines. Apple is the corporate version of a global citizen trying to develop himself within the norms and values of the countries where he lives and works.

Categories
crypto NFTs technology

Did Keanu Reeves walk through Amsterdam confused?

There are so many posts about AI that it is hard to find the relevant pieces, but they are certainly there. The Washington Post published this excellent article about the challenges in producing Critterz, the first film with 100% AI-generated characters now online. Filmmaker Chad Nelson says it took only a week to create his entire visual world, including all the characters and mystical forests, with Dall-E. When I read that OpenAI, the creator of Dall-E, had co-paid for the film, I did wonder about the honesty of Nelson's praise. It still feels a bit like falling into the trap of a clever content marketer from OpenAI.

Keanu Reeves previously expressed concerns about how movie studios will use AI to replace talent because, "corporations don't give a fuck about paying artists. Reeves has a point. Dall-E took this photo within seconds with the prompt: 'A distraught Keanu Reeves walking along an Amsterdam canal with his hair blowing in the wind, under a cloudy sky.' There is much to be said about this one-eyed Keanu and that green mailbox behind him, but no doubt a new profession will emerge, a hybrid of programmer and visual designer, using AI to its fullest potential to create virtual worlds indistinguishable from the real thing.

Meet the founders of Unveil

One company that focuses precisely on making the distinction between real and fake, or original and fake, is Amsterdam-based Unveil. Photographer Alexander Sporre started this NFT platform with his partners out of dissatisfaction with the way photography is handled in the NFT world. For collectors of NFTs, it is impractical to search among all the junk on OpenSea and other NFT marketplaces for valuable and unique finds. And if you think you have found something nice at all, you don't know if the work is original and how many of them have been made.

Using blockchain technology, Unveil solves this problem of authenticity and edition management for collectors, gallery owners and artists. The artist can choose to offer only a digital work (a DAB, Digital Artwork on the Blockchain) or a physical work of art (PAB, Physical Artwork on the Blockchain), or both. The MoMa in New York and the Centre Pompidou in Paris have now acquired NFTs, and the combination of physical and digital collecting is expected to take off.

I think Unveil is an example of a third generation marketplace, after the uncurated blind offering (think Marketplace) and the curated auction model (like Catawiki). Legendary investment firm Andreessen Horowitz (Facebook, Twitter, LinkedIn, Airbnb, Coinbase etc etc) recently wrote about it in the annual Marketplace 100 Report: 'from your kitchen to your closet, modern marketplaces do the filtering for you.'

Unveil launches publicly at the end of May, featuring exclusive NFT drops by a number of renowned photographers such as Thomas Albdorf, Bastiaan Woudt and Paul Cupido, each of whom have created their own interpretation of classic themes from Dutch art history: Still Life, Landscape and Portrait.

There is now an opportunity for a limited group of investors to invest in Unveil even before its public launch at the end of May. On May 9, the founders are organizing an investor event in Amsterdam to which the readers of this newsletter are invited. You can register here or make a phone appointment with the founders if you are unable to attend the event.

I am also investing in Unveil myself in this round, and my maxim is that you should think of an investment in a startup as money lost now that may come back one day - but hopefully more than you put in. Note that this is not investment advice and you are investing outside AFM supervision, there is no licensing and prospectus requirement. Alexander Sporre of Unveil is a highly respected former colleague of mine and I am a firm believer in the NFT market, so I am far from neutral.

Binance is more important than thought

The news that Binance in the U.S. is being investigated by the CFTC was a footnote in the Dutch media, which are increasingly dominated by visually appealing incidents such as a lighter on an Ajax head or tractors on a highway. That clicks better and is easier to write about than analyses on CFTC, AML, KYC and other boring coolos. I wrote at length last year about why Binance is rightly under fire. Bottom line: Binance is not doing enough to combat money laundering. But Binance, and its former rogue competitor FTX, are important for two reasons.

First of all, the traditional financial world now realizes that digital assets are not disappearing, no matter how much effort is made to keep them far from investors. Pioneers such as Binance, which introduced innovations at an unparalleled pace, are forerunners that hold up a mirror to the traditional big banks and demonstrate how continuous and rapid innovation is indeed possible in the financial world. That attracts a large group of mostly young, active investors worldwide that banks can only dream of. Those banks should look at what Binance does well in terms of products and services and link that clout to their own, stricter regulations.

Second, crypto investors should now realize that those three-letter abbreviations AML and KYC are important to them as well. It is simple: if the source of money, crypto or otherwise, cannot be proven, and if it is not clear who owns these assets, then there will soon be no payment link to traditional finance. Last week, some of Binance' s Australian operations were banned by the government. The Dutch players are much neater, but if the international crypto exchanges where active investors like to trade continue to operate so shady, soon any transfers to or from Binance and its competitors will be denied by banks. It will thus become impossible to buy a house with crypto profits, for example. This will then only be possible in dubious regions, but not everyone wants to live in Montenegro or Dubai.

Paris, Texas?

Although I firmly believe in digital assets and blockchain, until independent data is available that proves the energy source of mining, I will not invest in Bitcoin because of the associated CO2 emissions. Because I work with Bluenote in blockchain but exclusively in the area of sustainability, in terms of event attendance, I often hop on two paths.

The Sustainable Innovation Forum is taking place in Paris in early May. Just when the transition to a sustainable society is under pressure from the faltering global economy, this is an interesting event where, unfortunately, few digital assets will be discussed. Not even in the area of carbon trading. A week earlier in Austin, Texas, Consensus is organized by the leading crypto medium Coindesk. There, of course, there is plenty of focus on digital assets, but little on sustainability. It remains tricky.

Fine links

Zeeland girl Meltem Demirors
  • a special person: too few Dutch people follow Meltem Demirors, one of the most intelligent and original thinkers in the crypto world. She has spoken before the U.S. Congress about crypto, is the authoritative voice of reason about digital assets on CNBC and crazy about leather pants and strange memecoins. The daughter of Turkish parents, Demirors was born in ... Terneuzen, before moving to America at a young age. Become her 257,000th follower on Twitter and you won't regret it.
  • still a handy news source: Hacker News looks like a 1955 Albanian telex, but just checking the headlines always turns up something special. For example, I saw this this week via Hacker News: optimist with lots of spare time turns a Dyson hair dryer into an aircraft engine and cyclist smuggles six thousand SD cards into China *in.*
  • one of my favorite newsletters is that of legendary investor Fred Wilson. In it I read this week that his vc USV has invested in Noya, a startup developing technology the world needs: CO2 removal from the air, American-style called Direct Air Capture Technology. Sounds better anyway.

Geek Sentiment

Finally, a look at the major share prices in tech, where I compare Amazon, Apple, Google, Meta and Microsoft to the S&P 500, the Dow Jones Index, and Bitcoin and Ethereum as the most important gauges in the crypto world. Ethereum (ETH) is the winner of the week with over 10% rise.

It was not Bitcoin's week, although BTC topped $30,000 for the first time since last June. It always stings Bitcoin maximalists when an altcoin, particularly the leading development platform Ethereum, shows better returns as it did this week. But Bitcoin fanatics were especially outraged because the New York Times published a comprehensive study showing that 34 Bitcoin mining companies in the U.S. consume even more energy than 3 million households. Bitcoin fans correctly noted that the article misses the mark by blaming inefficient and vastly outdated energy subsidies on Bitcoin. But Bitcoin's absurd energy consumption is irrefutable. "They are adding hundreds of megawatts of new demand when we are already facing the need to rapidly cut fossil energy," said Jesse Jenkins, a Princeton professor who studies power grid emissions. "If you care about climate change," he added, "that's a problem." There's no pin in that.

I hope to get another newsletter up next week, but we found a sick puppy on the street the day before yesterday that we have taken in to care for and that is proving to be more time consuming than I thought. We are still looking for a name for the puppy, tips and suggestions are welcome! Also about the newsletter of course.

Have a great Sunday.

Sincerely,

Michiel Frackers

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Recent interview at BNR with Ben van der Burg and Herbert Blankesteijn

Categories
crypto

Bitcoin, Ethereum, the stock market and the war

There is a tremendous amount of talk about the value of crypto compared to stock prices and especially since the beginning of the Russian invasion of Ukraine on Feb. 24, three weeks ago today. So I did a comparison of how Bitcoin and Ethereum are doing compared to the S&P 500, and the results are quite surprising.

As the starting date of comparing the two benchmarks of crypto, Bitcoin and Ethereum, with the most widely used gauge of stock markets, the S&P 500, I took the date of Ethereum's IPO on Kraken, Aug. 7, 2015. Completely arbitrary, of course, but I could hardly take a date from before Ethereum existed. To avoid making too long a row, I went on to look at the prices on Jan. 1 of this year, then Feb. 24, which was the day of the invasion three weeks ago, and today's position.

I understand that it is debatable to compare an index of 500 largest stock market funds to two cryptocurrencies. But the S&P 500 constitutes about 70% to 80% of the market value of U.S. exchanges. Bitcoin and Ethereum together represent over 60% of the entire crypto market of nearly $2,000 billion. Hence the choice of Bitcoin, Ethereum and the S&P 500.

First, let's look at Bitcoin:

Bitcoin:

  • August 7, 2015: $276
  • January 1, 2022: $47686
  • February 24, 2022: $35000
  • March 17, 2022: $41000
  • Percent increase between Aug. 7, 2015 and today: 14755%

Anyone who bought Bitcoin for $100 on August 7, 2015, had received 0.36 Bitcoin for it, and those are worth nearly $15,000 today. In short, 150 times your deposit back on every dollar.

Since January 1, Bitcoin has fallen 14%; the day of the humanitarian peace mission, cough, the drop was a whopping 26% compared to the first day of this year, but since then Bitcoin has risen 13% again.  

The second crypto to watch is Ethereum.

Ethereum:

  • Aug. 7, 2015: $2.77
  • January 1, 2022: $3683
  • February 24, 2022: $2336
  • March 17, 2022: $ 2820
  • Percent increase between Aug. 7, 2015 and today: 101705%

Anyone who bought Ethereum for $100 on August 7, 2015 had received over 36 ETH for it, and those are worth over $100,000 today ($101080 to be exact). In short, that's over two thousand times your deposit back on each dollar.

Since Jan. 1, Ethereum has fallen 23%, but has rebounded 13% since the start of the war.  

Finally, we look at the main gauge of stock prices, the Standard & Poor's 500.

S&P 500:

  • Aug 7, 2015: 2000 points
  • Jan. 3, 2022: (because Jan. 1 fell on a Saturday, U.S. stock markets did not open until Monday, Jan. 3, those slackers): 4796 points
  • February 24, 2022: 4225 points
  • March 17, 2022: 4357 points
  • Percent increase between Aug. 7, 2015 and today: 119%

Since Jan. 1, the S&P 500 is down only 9% (compare that to Bitcoin and Ethereum) yet up 3% since the start of the war.  

Conclusions:

  • *opendoor alert* over the long term, think at least 5 years, Bitcoin and Ethereum have proven to be much better investments than traditional stocks - despite all the huge declines in between
  • this calendar year, the S&P 500 remains strong, compared to a 14% decline in Bitcoin and a chilling -23%decline in Ethereum
  • since the start of the war, crypto has risen more than the S&P 500, but 13% rise for cryptos against 3% rise for the S&P 500 is not particularly spectacular
  • the myth that crypto is immune to "normal" economic influences such as interest rate increases, war and rising energy prices has been punctured.

And this despite all the rumors that wealthy Russians have been stepping into crypto en masse in recent weeks, with all the assets they did manage to liquidate.

sources: Coinmarketcap, Google Finance and Yahoo Finance.

Categories
crypto

Those who cannot take their losses very well should stay out of crypto

The most frequently asked question of 2022 is without a doubt: how much money should I invest in crypto? Over the next few months, I will share how I try to build a balanced crypto portfolio with limited active trading. This is NOT advice. It is mainly to prove that it is possible to invest in crypto without reaching for your phone like crazy every second because you are afraid of missing the next hype or crash in Bitcoin.


In 2017, legendary investor Fred Wilson (Twitter, Tumblr, Zynga, Etsy, Coinbase, etc) gave this answer, based on the investor's profile:


- young, aggressive risk taker - 10% of net worth in crypto
- sophisticated investor seeking a high performing portfolio - 5% of net worth in crypto
- average investor, slightly conservative, but with some appetite for risk - 3% of net worth in crypto
- retiree seeking to preserve portfolio value and generate income - 0% of net worth in crypto

A detailed and careful answer. And, in my opinion, completely unnecessary. Some elderly people are incredibly well able to make a substantial dent because their house is already paid off up to and including the geraniums. While many young, aggressive risk takers have to sell their textbooks and become delivery drivers at Gorilla's when they get their memecoins see evaporate. Because I don't know any young aggressive knuckleheads who manage to limit their crypto gambling to 10% of their net worth, as Wilson advises. (I'd like to see more research on the investment decisions women make; are there still fewer women than men in crypto, or are they really just smarter because quieter about it?)

When people ask me how much to invest in crypto, I always answer with a counter-question: can you stand to see everything you put into crypto go up in smoke? Evaporate to nothing? Binance, Binance, alles ist vorbei? And just as important: will you get into a fight with your partner if you lose everything?

The couple lunatics go-getters who then remain always ask the same follow-up question: which crypto should I buy? To that question, too, Fred Wilson was kind enough reply to give:

"A diverse set of crypto assets would include Bitcoin, Ethereum, the other major layer one blockchains (Solana, Flow, Avalanche, Polkadot, Algorand, etc), the major Defi protocols (Uniswap, Aave, Compound, etc), storage protocols (Filecoin, Arweave, etc), telecommunications protocols (like Helium), some layer two protocols (like Stacks, Polygon, etc), some gaming assets (like Axie, Decentraland, etc), a maybe some NFTs."

Wilson sometimes forgets to indicate which of these companies he himself, or his fund Union Square Ventures, has already invested in. But that doesn't make his answer any less relevant. Previously, Wilson stated that he and his spouse have invested 5% of their assets in crypto, both directly and through funds.

In the coming months, I will share here how I try to put together a crypto portfolio using a more conservative methodology than Wilson. No gaming assets or NFTs for me, those are too difficult and time consuming for me to understand properly. I am in crypto for the long term and want to reduce all costs as much as possible, preferably passive HODL-end.

Summary:

1. I am convinced that "something huge" will come out of crypto innovations. Decentralization and transparency bring an intrinsic new value that cannot be achieved in other ways.

2. I believe strongly in the crypto market, but I don't have the guts to assume I can pick the winners. This has proven difficult with every disruptive advance in technology. The challenge is to identify potential winners early.

The plan is to buy layer 1 tokens in proportion to market cap that are as Proof of Stake as possible, i.e. have lower energy consumption than Bitcoin. It has the disadvantages that Ethereum will be over-represented (well over half of my crypto portfolio) and that I will always get fast-growing hypetokens into my portfolio too late.

Of course, everyone dreams of that one stale token that rises 45 million percent in value, like Shiba Inu did in 2021. Whoever bought SHIB for $100 at 1 minute past 12 on Jan. 1, 2021, and sold them again in December, got to credit over $45 million. But I would then fret about the right time to sell, which is why I avoid these tokens.

My goal is to eventually have at least 100 tokens in my portfolio that each have a minimum market cap of $1 billion. The crypto market is not that big yet. Preferably I will automate all trading through a liquidity pool, but more on that in the coming months. In any case, the goal is to make the portfolio transparent for everyone. And it is explicitly not investment advice. It just needs to make clear that it is possible to invest in crypto without reaching for your phone every second like a crazed neurotic for fear of missing the next bitcoin swing.