"Cryptonetworks" can help us build a more competitive, innovative, secure and decentralized Internet. "Tokens" (also known as cryptocurrencies or cryptoassets) are integral to the operation of cryptonetworks. As we design new laws and regulations in this emerging space, we should keep these concepts in mind, beyond the financial aspects that are today's primary focus.
In recent months, there has been untold attention paid to cryptocurrencies, blockchains and the coming of the "decentralized web" or "web3". And, given the rise of the cryptocurrency markets (over 1500 coins, with a total market cap of $370B as of today) and the recent boom in token-based fundraising (including a healthy dose of scams and shenanigans) there is increasing regulatory and legal attention being paid to the sector, and rightly so. This is a profound, and confusing, innovation. As John Oliver so aptly put it last week, it's "everything you don't understand about money combined with everything you don't understand about computers". Basically right. At USV, we've spent the better part of the past five years exploring and investing in this space, and now have roughly a dozen investments touching it in one way or another. As we have watched the technology and market evolve, alongside the public discourse, we feel its important to reiterate why we think this technology is so powerful and important, and contribute to the ongoing collective learning about how it works. While much of the focus, especially in the context of regulations, is on the financial and fundraising applications of cryptocurrencies, our interest continues to be on the potential for cryptonetworks to provide
"Cryptonetworks" can help us build a more competitive, innovative, secure and decentralized Internet. "Tokens" (also known as cryptocurrencies or cryptoassets) are integral to the operation of cryptonetworks. As we design new laws and regulations in this emerging space, we should keep these concepts in mind, beyond the financial aspects that are today's primary focus.
In recent months, there has been untold attention paid to cryptocurrencies, blockchains and the coming of the "decentralized web" or "web3". And, given the rise of the cryptocurrency markets (over 1500 coins, with a total market cap of $370B as of today) and the recent boom in token-based fundraising (including a healthy dose of scams and shenanigans) there is increasing regulatory and legal attention being paid to the sector, and rightly so. This is a profound, and confusing, innovation. As John Oliver so aptly put it last week, it's "everything you don't understand about money combined with everything you don't understand about computers". Basically right. At USV, we've spent the better part of the past five years exploring and investing in this space, and now have roughly a dozen investments touching it in one way or another. As we have watched the technology and market evolve, alongside the public discourse, we feel its important to reiterate why we think this technology is so powerful and important, and contribute to the ongoing collective learning about how it works. While much of the focus, especially in the context of regulations, is on the financial and fundraising applications of cryptocurrencies, our interest continues to be on the potential for cryptonetworks to provide
digital services
, such as computing, file storage, social applications, and more. You might ask, why is it important to have another way to provide digital services? We already have lots of websites and apps that do that today. The reason cryptonetworks are an interesting addition to today's digital services is their core architecture of
decentralization
. Just as the original internet gave us a decentralized layer on top of the telecommuncations network, which resulted in untold innovation, cryptonetworks are a decentralized way to provide digital services.
exploring why this is important, including the historical parallels to the original internet. The decentralized architecture of cryptonetworks has the potential to address many issues in today's tech and business landscape, including
information security
,
market competition
,
product innovation
, and
equitable distribution of gains from technology
. Imagine, for instance, if the owners or users of Amazon/Google/Facebook/Reddit/etc. were able to "fork" the product and launch an identical competing copy, if they didn't agree with the direction of the company? And imagine if all of the users of & contributors to a web platform also had a direct, monetary interest in the success of that platform, that reflected their own contributions as community members? This is how cryptonetworks work, since they are essentially open-source, mutually owned & operated web platforms. Each network's cryptocurrency or "token" acts as the internal currency, incentive mechanism, and "binding agent" for the other processes that help the platform function. And further, the internal data structure of cryptonetworks, the
distributed ledger
or
blockchain
has unique properties that can improve privacy and data security. See also,
exploring these ideas. With that as context, it's important to walk through how cryptonetworks function, and importantly, how tokens function within them -- especially given the growing regulatory scrutiny around how tokens are created and traded. The deck below (
) is meant to help explain this. While it does touch on some public policy goals at the end, it does not attempt to make specific, detailed recommendations. The main takeaways should be (a) cryptonetworks are an important new innovation in how digital services are delivered, (b) tokens are fundamental to their operation, and (c) as we design new laws and regulations in the space, we should keep (a) and (b) in mind as guiding concepts.
Last month, I went to the (most beautiful city in the world) Amsterdam, to speak at The Next Web Conference. I did two talks, one at a sub-event focused on tech & social issues, on the topic of Data & Power, which I will post when it comes online, and a main stage talk on the topic of Purpose, Mission & Strategy -- how to connect the three to align efforts within a company. In the talk, I take examples from throughout our portfolio of how leaders define and communicate their purpose, within their organizations and externally, and then use that to make tough strategic calls. For example, I wrote last week about how Cloudflare is fighting hard against patent trolls, and how deciding to do that is not just a narrow corporate decision, but a tough strategic call that draws from the company's sense of purpose and mission (frankly, I explain that example much better in the post than I did in the talk). For another example, Brian Armstrong from Coinbase just posted their long-term strategy yesterday, and this another example I discuss in the talk. I've been impressed by how Coinbase's efforts are aligned internally, and by the way Brian has connected the company's purpose and the strategy. You can watch the whole video (about 25 min) here: And you can see the slides here: This was my first time giving this talk, so of course there are things I'd tune for take two. I would in particular like to thank the awesome folks at Praytell who hosted me for a dry run of the talk and gave me great feedback and questions. And of course I would like to thank all of the USV leaders who, over the years, have shared their stories, which were the foundation of the talk.
At this year's Personal Democracy Forum, the theme was "the tech we need". One of the areas I've been focused on here is the need for "regulatory tech". In other words, tools & services to help broker the individual / government & corporation / regulator relationship. In a nutshell: we are entering the information age, and as such our fundamental models for accomplishing our goals are changing. In the case of regulation, that means a shift from the industrial, permission-based model to the internet-native, accountability based model. This is an issue I've written about many many times before. In order for this transition to happen, we need some new foundational technologies: specifically, tools and services that broker the data sharing relationship between government and the private sector. These can be vertical services (such as Airmap for drones), or horizontal tools (such as Enigma). You can see the video of the talk (10min) here: And the slides are here: The timing is apropos because here in New York State, the senate & assembly just passed a bill banning advertising for short-term apartment rentals. This is a very very coarse approach, that declines to regulate using an accountability-based model rather than a permission-based model. Now of course, this particular issue has been fraught for a long time, including claims that Airbnb manipulated the data it shared with NYS regulators. But that situation is in fact a perfect example of the need for better tools & techniques for brokering a data-based regulatory relationship.
digital services
, such as computing, file storage, social applications, and more. You might ask, why is it important to have another way to provide digital services? We already have lots of websites and apps that do that today. The reason cryptonetworks are an interesting addition to today's digital services is their core architecture of
decentralization
. Just as the original internet gave us a decentralized layer on top of the telecommuncations network, which resulted in untold innovation, cryptonetworks are a decentralized way to provide digital services.
exploring why this is important, including the historical parallels to the original internet. The decentralized architecture of cryptonetworks has the potential to address many issues in today's tech and business landscape, including
information security
,
market competition
,
product innovation
, and
equitable distribution of gains from technology
. Imagine, for instance, if the owners or users of Amazon/Google/Facebook/Reddit/etc. were able to "fork" the product and launch an identical competing copy, if they didn't agree with the direction of the company? And imagine if all of the users of & contributors to a web platform also had a direct, monetary interest in the success of that platform, that reflected their own contributions as community members? This is how cryptonetworks work, since they are essentially open-source, mutually owned & operated web platforms. Each network's cryptocurrency or "token" acts as the internal currency, incentive mechanism, and "binding agent" for the other processes that help the platform function. And further, the internal data structure of cryptonetworks, the
distributed ledger
or
blockchain
has unique properties that can improve privacy and data security. See also,
exploring these ideas. With that as context, it's important to walk through how cryptonetworks function, and importantly, how tokens function within them -- especially given the growing regulatory scrutiny around how tokens are created and traded. The deck below (
) is meant to help explain this. While it does touch on some public policy goals at the end, it does not attempt to make specific, detailed recommendations. The main takeaways should be (a) cryptonetworks are an important new innovation in how digital services are delivered, (b) tokens are fundamental to their operation, and (c) as we design new laws and regulations in the space, we should keep (a) and (b) in mind as guiding concepts.
Last month, I went to the (most beautiful city in the world) Amsterdam, to speak at The Next Web Conference. I did two talks, one at a sub-event focused on tech & social issues, on the topic of Data & Power, which I will post when it comes online, and a main stage talk on the topic of Purpose, Mission & Strategy -- how to connect the three to align efforts within a company. In the talk, I take examples from throughout our portfolio of how leaders define and communicate their purpose, within their organizations and externally, and then use that to make tough strategic calls. For example, I wrote last week about how Cloudflare is fighting hard against patent trolls, and how deciding to do that is not just a narrow corporate decision, but a tough strategic call that draws from the company's sense of purpose and mission (frankly, I explain that example much better in the post than I did in the talk). For another example, Brian Armstrong from Coinbase just posted their long-term strategy yesterday, and this another example I discuss in the talk. I've been impressed by how Coinbase's efforts are aligned internally, and by the way Brian has connected the company's purpose and the strategy. You can watch the whole video (about 25 min) here: And you can see the slides here: This was my first time giving this talk, so of course there are things I'd tune for take two. I would in particular like to thank the awesome folks at Praytell who hosted me for a dry run of the talk and gave me great feedback and questions. And of course I would like to thank all of the USV leaders who, over the years, have shared their stories, which were the foundation of the talk.
At this year's Personal Democracy Forum, the theme was "the tech we need". One of the areas I've been focused on here is the need for "regulatory tech". In other words, tools & services to help broker the individual / government & corporation / regulator relationship. In a nutshell: we are entering the information age, and as such our fundamental models for accomplishing our goals are changing. In the case of regulation, that means a shift from the industrial, permission-based model to the internet-native, accountability based model. This is an issue I've written about many many times before. In order for this transition to happen, we need some new foundational technologies: specifically, tools and services that broker the data sharing relationship between government and the private sector. These can be vertical services (such as Airmap for drones), or horizontal tools (such as Enigma). You can see the video of the talk (10min) here: And the slides are here: The timing is apropos because here in New York State, the senate & assembly just passed a bill banning advertising for short-term apartment rentals. This is a very very coarse approach, that declines to regulate using an accountability-based model rather than a permission-based model. Now of course, this particular issue has been fraught for a long time, including claims that Airbnb manipulated the data it shared with NYS regulators. But that situation is in fact a perfect example of the need for better tools & techniques for brokering a data-based regulatory relationship.
