The past decade witnessed the dominance of Amazon and Alibaba as ecommerce platforms for physical goods. Recently, a new type of ecommerce platform is emerging out of China — that is, the ecommerce platform for services envisioned by Meituan.
As of its IPO in Hong Kong in Sep 2018, Meituan boasted 340 million users and 4.7 million merchants across its platform. With a market cap of USD 45bn, Meituan has established a formidable platform consisting of unified commerce, merchant services solutions, hotel and travel, and ride and bike sharing.
It took Xing Wang 8 years from founding Meituan to taking it public, and the earlier 6 years of successes and failures have also sharpened Xing to be the fearless leader who’s threatening the kingdoms of Alibaba and Tencent.
Who is Xing Wang?
The legend of Xing Wang started in 2004, when he gave up his PhD studies in the US and returned to Beijing to pursue his dream of the social network. Inspired by FriendStar, he founded a series of social network websites and eventually succeeded with Xiaonei, the Facebook of China.
Xiaonei accumulated 30k users within only 3 months of launching. However, unable to afford to scale Xiaonei further, Xing was forced to sell it to Joe Chen in 2006, who was backed by Softbank, and later changed its name to Renren. Upon leaving Renren, Xing quoted Winston Churchill and regarded the Renren episode as the “end of the beginning”. Rightly so, the story of Xing just began to unwind, as he learned his first lesson here — the importance of capital.
In 2007, Xing was again inspired by another successful American tech company — Twitter, and started Fanfou. You have probably heard of Sina’s Weibo which is now deemed as the Twitter of China, but Fanfou was indeed the forerunner of Twitter’s model in China.
By early 2009, Fanfou had attracted millions of users, but it made a fatal mistake by allowing politically sensitive topics to be circulated online. As a result, Fanfou was taken offline by Aug 2009, which has given other tech giants such as Sina, Sohu, and Tencent to make their own Weibo copying from Fanfou. By the time Fanfou was back online, it was already too late to catch up again. This has marked the second important lesson for Xing Wang — the importance of political sensitivity.
Finally, in 2010, Xing found another gold mine — Groupon, but he was not alone. It was reported that there were once hundreds of startups in China copying Groupon’s model, dubbed “Hundred Regiments Offensive” to borrow the name of the famous battle China and Japan during WWII. Sharpened with the lessons of capital (backed by Tencent) and political sensitivity (government certification), Xing survived the war and Meituan became the dominator in the group-purchasing sector. More importantly, Meituan has learned how to efficiently manage and operate a national-scale two-sided platform, an essential foundation for its future success.
How did Meituan evolve into such a platform?
Conquering the delivery market
Since 2013, Meituan started an online food delivery service. This is a natural extension of Meituan’s group-purchasing strategy from goods to services. However, the food delivery sector was already dominated by first-movers like Baidu Delivery in the professionals market and Alibaba-backed Eleme in the students market (back then, residential delivery was not a huge demand), and Meituan did not have many levers as a late-comer.
One of Meituan’s advantage is independence. Tencent’s support was rather financial than strategic and operational; however, Baidu Delivery was fully controlled by Baidu Group while Alibaba had actively interfered with the management of Eleme. Thus, both of the competitors were subject to the master group’s overall strategic focus shift. The advantage of independence was fully realized especially after the Meituan-Dianping merger in 2015.
Dianping, or the Yelp of China, was a great complement to Meituan’s 2-sided platform strategy. Traditionally, all food delivery services focused only on the consumer side. So merging with Dianping gave Meituan an unparalleled advantage with vast data and services to attract and retain restaurants and merchants as the supplier side of the platform.
Following the same strategy, Alibaba followed the same strategy by trying to combine Eleme and Koubei. However, Alibaba failed to see the need of Eleme to pivot from the students market to the professionals market, because of stagnant growth and low margin in the students market. Eleme saw the need but wasn’t able to convince Alibaba since it didn’t know the details around the delivery market. It was Meituan’s independence that gave it an advantage over Eleme with the nimbleness in pivoting to the professionals market earlier and faster.
As for Baidu, since it already lagged behind Alibaba and Tencent in mobile adoption, its strategy push on online-to-offline was rather short-lived. Hence, senior management terminated the sales and marketing push on food delivery. Moreover, Baidu lost key talents to Meituan — in Apr 2015, Puzhong Wang joined Meituan from Baidu, who is now fully in charge of Meituan’s delivery services. By Aug 2017, Baidu has officially given up delivery and sold the business line to Eleme, dba Eleme Star.
As of now, Meituan has conquered the food delivery market in China, taking up over to 60% of market share by 2018 up from 30% in 2015. Meanwhile, Eleme owns about 30% of the market share and the rest 10% is roughly covered by Eleme Star or formerly Baidu.
Deepening merchant services
Beyond Dianping’s core functionality, Meituan has also acquired payment service provider Qiandai in 2016 to roll out the full-scale restaurant and merchant services. It even started to offer supply chain solutions to restaurants for fresh and frozen produce, further enhancing the supply-side stickiness on the platform while enriching platform-wide data dimensions and granularities, which was key in optimizing recommendations and deliveries for consumers.
Expanding to unified commerce
With its dominance in the food delivery market, the next step was to expand into the delivery of other foodstuffs and groceries including fresh produce from supermarkets. It’s very likely that the white-collar professionals want to have some fruits with the lunch ordered, or want to bring home some vegetables to cook dinner, but don’t have time to go to the stores. This is similar to the value proposition of Postmates and Instacart, but the US counterparts don’t have the same synergy Meituan has with its food delivery, more specifically around the delivery route optimization and data and AI used in recommendations.
More interestingly, Meituan started working with HLA, a popular store chain of men’s clothes to provide 1-hr delivery, in case a change of shirt or jacket is needed because of food stains. It remains to be seen how this new product line will play out, but it’s definitely a smart wedge into the broader unified commerce market.
Entering ride and bike sharing
From the data perspective, Meituan has the best data on where the consumers are — their offices and their homes, where the restaurants are, and what are the best routes based on delivery. Understandably, if Meituan were to offer a ride-sharing service, it would be very efficient since they have a lot of data on Point A, Point B, and the fastest way between Point A and Point B. So in early 2017 Meituan launched ride-sharing in a few selected city in China. By 2018 when it launched in Shanghai, it reached 30% of market share within only a few days.
It was only half a year after Uber gave up the China market to Didi and when Didi was just started to relax a bit from the years of competition against Kuaidi and Uber. Meituan’s move brought Didi back on its toes. As Didi was recently entangled with driver-related scandals, it gave Meituan a great opportunity to build its own reputation with a fresh start.
In addition, Meituan achieved what Didi had always wanted to do — that is to complete the transportation closed-loop by integrating ride and bike sharing. Didi invested in Ofo — one of the market leaders in bike-sharing — hoping to eventually acquire it. However, Ofo’s founder and CEO Wei Dai had too big of an ego to be swallowed by Didi. As a result, after months of fighting, Ofo is now left aside and struggling with neither additional investments nor acquisition offers. On the contrary, Ofo’s competitor Mobike realized that it’s hard to sustain and scale further under the current unit economic model, without integrating with a larger platform such as ride-sharing.
In the end, Meituan acquired Mobike and became the only provider of ride and bike sharing services at a large scale. This move gives Meituan even more advantage on data in terms of scale, dimensions and granularity over its competitor Didi and Eleme/Alibaba.
The new frontier in hotel and travel
Another new vertical Meituan recently tapped on is hotel and travel. With strategic investments from Priceline and a vast user base, Meituan launched the product in early 2017 and has attracted more than 340 thousand hotels and 16 thousand tourist attractions all over China to join the platform. Meituan’s advantage in big data and platform stickiness has generated fast-growing numbers and has put Meituan into a head-to-head competition against Ctrip, the OTA market leader in China.
Meituan’s competitive edge?
In summary, Meituan achieved high efficiency in management and operations through the competition in the group-purchasing market, and leveraged it to establish a two-sided platform for consumers and merchants: from food delivery to broader services, from merchant services to supply chain solutions, from ride sharing to bike sharing, and from city lifestyle to travel and tourism. The more horizontal aggregation, the richer data Meituan can obtain, and thus the stickier the platform can become.
However, it also means that Meituan is making more and more enemies: from Eleme and Didi to such giants as Ctrip and Alibaba. Competition in the China tech market has always been dynamic and broad-based, and as Xing Wang quoted Winston Churchill in the above-mentioned, this may still be just the end of the beginning.
The Platform and Data Strategy of Meituan was originally published in Hacker Noon on Medium, where people are continuing the conversation by highlighting and responding to this story.
With the 25th pick in the 2019 National Football League draft, the Baltimore Ravens selected wide receiver Marquise Brown from the University of Oklahoma. As he mounted the podium, Brown could not hold back the tears. He stands some five-foot-ten, weighed in at under 170 pounds, and had suffered injuries. Still, there is no rule against running fast, and Brown can cover 40 yards in 4.3 seconds. So the Ravens made him a first-round pick.
With the 31st pick of the draft, the Atlanta Falcons selected Kaleb McGary of the University of Washington, and the offensive lineman was overjoyed to hear his name called. The family had lost their farm to foreclosure and Kaleb wound up living in an RV. Yet McGary had played on, and the six-foot-seven, 317-pounder impressed the Falcons with his speed and vertical leap of 33.5 inches.
Many other players overcame hardship to gain selection and beyond the lucrative professional contracts, the athletes had another good cause to celebrate. During their college careers they had been playing for zero money, though they earned countless millions for their schools and the NCAA because people will pay to watch them. Under NCAA rules, the athletes cannot even market their own name and image. They are given tuition, which amounts to payment in kind, and hardly on a level with the revenue their raise.
Jerry Tillery of Notre Dame, the 28th pick by the Los Angeles Chargers, earned a degree in economics and before graduation worked for a hedge fund. Tillery is a rare case, and less than 2 percent of college players will be drafted by the NFL. About 50 percent of college football players do not earn a college degree.
“It is the talent of 500,000 unpaid athletes that fuels the NCAA’s billion dollar revenue stream,” explains North Carolina Rep. Mark Walker, a former student athlete. “The current student-athlete model prohibits college athletes from having financial rights to use their name, while allowing an unrestrained, tax-exempt organization to monetize their images to fill stadiums, sell memorabilia and sign multibillion dollar contracts. That gets at the heart of what is wrong with the way we are currently treating our college athletes.” Walker wants the athletes to benefit from a portion of the significant revenue they help generate. For all college athletes, especially those who remain undrafted, that would be a good call.
Symbols are one of the earliest forms of written communication.
From cave walls to hieroglyphics to the printed word as we know it today, symbols are a powerful way to communicate concepts at a glance.
The ability of symbols to convey information, culture, and identity has made them an invaluable part of our shared visual language.
This is true not only in popular culture but also when it comes to business.
We live in a world where people and companies are recognized more for what they represent than who they are. This makes symbols a powerful and effective way of communicating.
As we emphasized in our guide on how to start a business,
A strong brand identity is the most effective way your new business can gain a competitive edge in an increasingly crowded marketplace.
Why use symbols in design?
Symbols can help customers understand your brand. As we wrote,
You can communicate a lot – and do it efficiently and effectively – if you understand your brand and make informed, thoughtful choices regarding fonts, shapes, lines, colors, and composition.
Logos, color, graphics, and text are used throughout our daily life as symbols to communicate deeply held meaning, often at a subconscious level.
Think about this effect when you see a red octagon, or an X on a map. These symbols speak to us on an almost primitive level.
As people interact with a symbol, it becomes filled with meaning.
When you see a person wearing a white coat and stethoscope you probably think that person is a doctor. The white coat and stethoscope are symbols for the medical profession.
It’s this recognition and how quickly they can communicate an idea or concept that makes them so powerful.
How Symbols Influence Branding
Companies use logos as symbols for their brand identity. As we wrote,
Your company’s logo is the visual figurehead of your brand. It’s important to get it right.
Whether every detail of a logo is intentional or not, every detail will influence people who see that logo.
Nothing should be arbitrary.
It’s in your best interest to make sure that every logo design choice is intentional and communicates the message you want to convey.
Thoughtless design choices lead to misleading or confusing logos. Or, even worse, logos that don’t say anything at all.
Symbols are a visual shorthand that businesses can use to imbue their brand identity with a deeper meaning.
While great business names can create a deep meaning too, symbols can be more powerful. You know the saying … a picture is worth 1,000 words.
Symbols create connections between your company and the ideas you want people to associate with your company.
Careful use of a symbol in your brand identity, including your business logo, can have a subtle or powerful effect (or both!).
It all comes down to what you want your brand to stand for and what you want to say.
Symbols are everywhere – you can find them on street signs, food products, sports teams, even on the laundering instructions tag inside your favorite shirt.
Not sure which one to use for your business? We’ve gathered a list of the more common ones (and their possible meanings) here.
Besides love and romance, roses also can represent appreciation, friendship, passion, and much more. Here, the color of the rose is just as important as the flower itself. Roses have experienced a resurgence in popularity; the symbol has emerged at the forefront of many modern designs.
Fire conjures up thoughts of anger, passion, and destruction. It can also signify rebirth (as in the myth of the Phoenix). Fire can also convey a blaze – of energy, speed, and bright, burning passion. Look no further than the iconic Firefox, the Mozilla logo that communicates a brand dedicated to speed and durability.
The “King of the Jungle” carries with it authority, strength, royalty, and steadfastness. The power and force that a lion communicates makes it a go-to choice for any business looking to demonstrate a respectable, strong standing in their marketplace.
The wolf is often used to show independence, freedom, the wild, strength, and guardianship. Logos that use a wolf in their design demonstrate a ferocity, agility, and clever edge that work especially well for sports-related logos.
The triangle is connected to ideas like stability, power, harmony, women’s health, and illumination. A dynamic shape, the triangle conveys focus, balance, and innovation. When shown oriented base-down, stability and strength become clear. However, when shown at an angle, relays an energized, spontaneous feeling instead.
Circles can evoke the concepts of wholeness, completion, infinity, cycles, and also represent the self. The cyclical, inclusive feeling a circle lends a business is an effective symbol for many businesses – Google Chrome notably uses it to great effect.
Dragons are especially revered in Asian culture and are often used to represent strength, wisdom, good luck, and potency. Dragons are commonly used in businesses looking to convey a nearly mystical power, unearthly wisdom and a fierceness that is intuitively understood by every viewer.
Trees are a common symbol for life and the outdoors. They can also signify fertility, good health, and calm. It’s a popular design symbol for a reason and can be found in many businesses seeking to emphasize their nature-oriented products and services.
Arrows can mean direction, speed, progress. They can also point out that something is important. They reinforce the idea of movement and are great for conveying expedient service – like FedEx’s iconic negative space logo (notice the white arrow between the E and x).
The sun is a potent symbol of life, power, glory, and energy. The heat and intensity the image of a sun communicate to a viewer creates a lasting impression of warmth, endurance, and limitless power. Businesses with a focus on stamina, eternity, and prosperity are quick to incorporate the sun in their logo designs.
The moon represents the rhythm of time, peacefulness, femininity eternity, and enlightenment. The moon can be used by a company seeking to demonstrate an ongoing relationship with their customers. P&G notably uses a crescent moon to reflect their steadfast devotion to their customers through all of the phases of their days, weeks, and lives.
Flags can have many different meanings depending on the context and what color they are. White flags can mean surrender or peace, red can mean warning, attention, or caution, and blue often symbolizes freedom. Using a flag in a design can, therefore, represent a number of meanings – be careful that your color choice doesn’t send a potentially conflicting message about your brand.
Owls are synonymous with wisdom, insight, the night, grace, mystery, and learning. Education and literacy institutions are quick to adopt the owl into their organizations. The wise owl is famously used in Wise Foods’ logo – a bold decision to inspire confidence in consumer snacking habits.
Water can represent life, cleaning, creation, and purity. The cleanliness and health water conveys is powerful, and can be used in a variety of forms: water droplets, waves, and rain showers are commonly used in businesses seeking to demonstrate environmental, calming, or cleansing brand values. Method incorporates the water drop shape directly into its packaging for greater impact.
Clouds are commonly used by climate/weather businesses, but recently, have also become a major symbol of online storage. Any business that uses cloud imagery should consider their specific marketplace. Using a less literal representation is effective with technologically oriented businesses. A more on the nose approach would be appropriate for a business that deals in weather, climate, or other traditional associations.
Hearts are a straightforward way to demonstrate love, romance, and enthusiasm – the retail industry, in particular, uses hearts in product packaging, package graphics, and product design to great effect (especially on Valentines Day). Other businesses focused on health, vitality, and emotional welfare also use the symbol to great effect. Hearts are a versatile symbol and are an increasingly popular choice for a wide range of businesses.
Tips on using symbols in logos and brand identities
There are some important considerations if you want to incorporate symbols into your brand identity.
As symbols often come loaded with meaning, their use and how they can be interpreted should be weighed against your branding goals.
Here are some things to keep in mind.
Tell a story
Not all symbols are equal! It’s crucial that you do your research to ensure whatever symbols you choose are clear and concise, and add to the narrative that is your brand.
Don’t choose solely based on visual or aesthetic beauty. Tell a story.
Symbols can mean different things in different cultures and countries.
For example, the bald eagle may be a symbol of the United States of America to most, but to Native Americans, it is a symbol of nature and a messenger from the Creator.
Colors are another good example of a symbol that can have many meanings. As we wrote in our look at what colors say about your small business:
Culture and context can also influence how a color is interpreted. Therefore, do your due diligence and research your audience so you can make the best choices based on their specific backgrounds.
Doing some due diligence before you choose a symbol is especially important if you run an international business.
Choosing multiple symbols for your brand can have its pitfalls. You don’t want to choose symbols that have conflicting or unexpected ideas.
Symbols can be combined in very powerful ways, but research is again your best protection against unfortunate combinations.
Ultimately you want your brand to have a unified message, and whatever symbols you choose should help and not hinder this.
Successful logos have a meaning behind them.
These powerful logos make a lasting impact because they communicate your brand’s message in a compelling, effective way.
A thoughtfully used symbol gives your logo the powerful impact your brand needs to stand out in the marketplace.
Make sure that you choose a symbol or two that form a strong connection to your brand’s values, mission, and personality. If you aren’t careful and considered in choosing a symbol for your logo, you risk sending confusing, mixed, or even negative messages to your customers.
Be intentional with the symbol you choose and that it clearly supports the brand persona you’re presenting.
Symbols are powerful, and they can evoke almost subliminal connections and meanings. For companies eager to join memorable concepts with their businesses, symbols can create brand equity. As David Asker wrote in Managing Brand Equity:
When products and services are difficult to differentiate, a symbol can be the central element of brand equity, the key to differentiating characteristics of the brand. The symbol can by itself create awareness, associations, and a liking or feelings which in turn can affect loyalty and perceived quality.”
If you’re looking for ways to connect your brand message on a deeper level with your consumers, symbols may be just what you’ve been looking for.
The post 16 Design Symbols Your Business Can Use to Improve Its Brand Identity appeared first on bitcoin binary options.
Dropshipping is the most efficient ecommerce model that could be adopted by newbie entrepreneurs. It’s great for testing out new product ideas in a short period of time. You can easily include a new product category for a period to test and see if it proves to be profitable. Subsequently, you can stock up on the products in your warehouse if you find that there is demand for the product.
This method reduces all the risks that are related to stocking inventory which could be a great deal for budding entrepreneurs. With that in mind, here are the ways how you can utilize dropshipping for testing new product ideas.
Pay attention to what your customers demands.
Reacting to customer demand is one of the most significant factors that need to be paid attention to when carrying out any type of business. If you’ve been dealing with customer demand for a while, then you must be aware of its importance. Ask your customers about their needs that fall into your product niche and then try out similar products. In this manner, you’ll easily get to feature fresh products without a hefty investment. This is why dropshipping tools are getting more and more famous for the great opportunities they have introduced to new entrepreneurs.
Lookout for something that you could easily dropship.
After you’ve chosen a dropshipping partner, you must thoroughly go through the products they have in their inventory to offer you. You cannot select a product or a line of products that don’t fall into your niche. This will not only increase financial costs but will also take longer to get settled. Consequently, hunt for products similar to which you offer within your ecommerce business.
Hunt for the highest rated suppliers and products.
Another very crucial step that you must follow is to choose the suppliers that have top rankings and also have an experience of fulfilling a lot of simultaneous orders. This is because if your suppliers are offering a new product that hasn’t been ordered yet, your investment might undergo a considerable risk. As such, don’t allow yourself to be made into a guinea pig and choose wisely while selecting the supplier and its products so as to test out the products at low prices.
Watch for supplier responsiveness.
What if your products get popular and you need an urgent supply of products? What if your supplier isn’t capable of handling heavy orders of supplies? To get rid of this risk and to make situations more clear, reach out to your supplier with a fake emergency of supply to get a basic idea if they’re able to meet your needs or not. Watch for their response time and the manner in which they responded.
Ask for reviews.
Reach out to your customers so as to ask them to share their opinions about the products that you’re thinking about dropshipping. Customers will give you a crystal clear idea regarding what they actually think about the products. This is one of the best tricks that you can try when offering a new product at a substantially low cost. Reviews will help you ascertain the pros and cons of the products you are dropshipping. Thus, dropshipping is altogether an excellent method to source fresh products, and involves a full trial and error process.
So you took one of the best affiliate marketing courses at https://hustlelife.net. And now you think you can get an epic start in affiliate marketing.
On the one hand, you’re right. Completing a recommended affiliate marketing course can put you on the right track. And if you apply the lessons by heart, it won’t be long until you succeed.
But on the other hand, you’ve got another thing coming: your blog’s design. If you want to use your blog to generate affiliate marketing income that you can be proud of, it needs to be in good shape.
If it’s not, don’t worry. Here are a couple of timeless design ideas.
Right Blog Elements + No Sidebar.
The elements your blog should have is based on the kind of functionality you want your blog to have. There’s no right or wrong approach to what and how you add elements to your blog. It’s your blog so you’re the one who gets to call the shots.
If you want something fancy, go for it! If you believe that it will attract more readers, then be as fancy as you want.
But to set the record straight, readers usually prefer something simple. A header, a section of your latest posts, comments, and a search bar.
Especially if these readers are neck-deep into your content, you can’t blame them if they want simplicity to rule. No fuzz means no distractions from what matters the most: your content.
On a related note, you should also get rid of your sidebar. To put it bluntly, sidebars are quite useless.
Look at these famous news sites’ sidebars. It’s like their sole purpose is to dump an overload of off-topic information on you.
Here’s an analogy of it:
You bought a new flat screen and a recliner. And these new purchases are currently being loaded from a delivery truck into your home. Now, there’s this pesky neighbor who keeps watching the delivery guy’s every move.
Well, think of that pesky neighbor’s behavior as your blog’s sidebar. It’s there and it’s annoying.
For a new affiliate marketer who wants to impress your readers, the last thing you should be is to be like that pesky neighbor. If you end up annoying your readers, do you think you can sell a product?
Stick to the Golden Ratio.
This refers to your blog’s mathematical symphony. And it’s one of the secrets that gives immense power to blogs. This Golden Ratio puts emphasis on the importance of the following:
The primary purpose of the Golden Ratio is to be the basis of aesthetically pleasing web design. Its role is to help you create a design for your blog that will attract people subconsciously.
Therefore, the idea here is to make sure you fine-tune your blog accordingly. Simply put, you need to go with the right font and font size, as well as the right content width and height.
If you do, your readers will be more comfortable when checking out every corner of your site. The tricky part in this is that a reader has no idea that you’re engaging them to your blog using this approach. For all he knows, he’s just going through a site – no more, no less.
For example, your font size is rather big for your content and your readers can notice it. As much as you think it doesn’t matter, a bigger font actually irritates your readers.
You must be thinking something obvious:
“Can’t they just ‘zoom out’ or press ‘CTRL+ -‘?”
Yes, they can. But the zoom option doesn’t resolve the issue. If they insist on zooming out, they would end up zooming out the whole blog page. And the size is still the same. It’s still too big for your content.
You should consider making this your priority. After all, you’re going into affiliate marketing. And you can’t exactly earn any commission if your blog readers want to scoot from your site.
The Bottom Line.
You should also consider adding some variety into your blog. Isn’t “variety the spice of life”, as the classic adage goes?
For example, you could feature an animated version of your logo on the header. You could also add another category to your posts.
It works because people tend to pay attention to things that weren’t there before. They might not necessarily like it. But it doesn’t change the fact that you got their attention.
If you do this right, you can confidently venture into affiliate marketing. And you can start focusing on that from here on out!
Credit score is the number assigned to a person that indicates their capacity to repay a loan. Simply, it indicates how creditworthy you are in the eyes of bankers and lenders. Add to that, it is the basis of certain services such as telecommunications, broadband, and even apartment renting.
This affects your financial status in ways you cannot imagine. According to legal moneylender Cash Mart Singapore, typically licensed lenders base their decision in approving your loan thru credit scores. Banks also use a credit score to know how much will be your credit limit or if you are eligible for a high stake loan. Insurance companies and utility companies utilize this as well. Your credit history can even affect your possible job, raise or even promotion especially if you are working in the financial industry.
How you handle your credit now is more important than ever. Here are the factors to consider in building and protecting your credit.
1. Bills payment history.
How you settle and manage your bills on time can impact your credit score. You must have a squeaky clean record of payments. If you have any history of delinquency, you have a slim chance of getting approved for any loan and credit card application. So better mark your calendar to settle your payments on time.
Your payment history constitutes 35% of your overall credit score. This means simply paying your mortgage, credit card bills and loan installments can help your credit score grow. On the other hand, not paying on time can drag it all the way down.
2. Debt utilization ratio.
There are three ways credit amount affect your credit scoring calculations. These are the amount of overall debt you carry, the ratio of your credit card balance to credit limit (known as credit utilization), and the relation of your loan balances to the original loan amount. To maintain a good record, keep your credit card limit up to 30 percent or less while loans must be settled on time.
High balances can affect your credit score but if you can settle it quickly it would help improve your credit score.
While there is a myth that keeping a balance in your credit card can help boost the positive effects of credit utilization, this can bring more harm than good. If you keep on not settling your credit card bill, it will accrue interests that will grow out of hand over time. The best option is to settle your credit card balance and use the card every once in a while for purchases that you can surely pay off even with cash. This is to keep your credit card account active and your credit history longer.
3. Length of credit history.
Just like tenure, the longer you stayed in a company the better chance of promotion. Same goes with a credit score that considers both the oldest account and the average of all your accounts. If you have an older credit card, it shows that you have a good way of handling credit. Avoid closing your oldest credit card as much as you can to keep your old positive credit history.
4. Types of credit.
There are several types of credit accounts such as revolving accounts (e.g. credit cards) and installment loans (e.g. short term personal loans from accredited private moneylenders).
These two can increase your credit score since it indicates how you can manage various types of credit. Having different types of loans shows that you can handle various financial responsibilities. Aside from just using a credit card, you should also get a personal loan, a car loan or a mortgage.
Just be aware that getting approved for high ticket loans such as a mortgage can drag your credit score for a while. Since credit utilization is also a main factor, the higher the loan amount, the lower your credit score gets. Fortunately, having a mortgage is also contributing to the positive effects of having different types of loans.
This means as you pay your mortgage every month, you can quickly regain a good credit score.
5. Number of new credit inquiries.
Every time that there is a credit check from your loan and credit card application, it affects your credit score. Several inquiries within a short period of time can cross out points from your credit score. Remember to keep a minimum application to maintain your credit score. If you want to make multiple loan application, do it within 15 days. This way all credit report inquiries will be considered as one hard inquiry instead of multiple inquiries.
As a reminder, information like income, bank balances, and even employment status are not included in the algorithm calculation of credit score. Age, marital status, and debit or prepaid card usage do not influence your credit history. It may affect your possibility of getting approved but does not directly reflect on your credit score.
Now that you are aware of the factors affecting your credit score, be sure to observe it properly to know how to keep your credit score healthy. A positive credit score can increase your chance of getting your loan approved and can make you land a better loan offer.
Many jokes circulate about how typical sports students are only attending college based on their athletic abilities, or that they pay more attention to sports than school. But athletics have long been included in school settings for good reason. Team sports foster cooperation, teamwork, and a sense of responsibility that can be applied to other aspects of life. Additionally, keeping the physical body in top shape keeps the mind fit, too. Therefore, the Gwinnett County Public School System has always encouraged sports participation among its students.
Sports participation can also generate money and exposure for the rest of the school, which – in part – raises funds for programs like the Gwinnett County Public Schools Fund. In addition, sporting events like the Corky Kell Classic generate money to help support the programs that raise the brightest and best generations.
Athletics in the school setting is integral to the health of the school, and it provides events that excite the community. Without the help of both monetary and structural support from private institutions like the Gwinnett County Public School Foundation, the excellence of this Georgia county’s school system would not be as well-known as it is.
About Gwinnett County Public Schools and the GCPS Foundation.
In Georgia, as well as the rest of the United States, the Gwinnett County Public School system is a prime example of what education can do. Aaron Lupuloff, the executive director of the Gwinnett County Public Schools Foundation, was recently interviewed at the Corky Kell Classic to discuss the impact of the GCPS Foundation. He first looked at the school’s demographics. Possibly one of the most unique student body demographics, Gwinnett County is made up of twenty different cluster schools, and each cluster is made up of approximately 10,000 students. In total, there are a little over 180,000 students in the Gwinnett County Public School district, and of those 180,000 students, nearly 102,000 of them live beneath the poverty line.
The interesting thing about this demographic is that a significant portion of the rest of the students come from very wealthy families. In previous interviews, Aaron Lupuloff talks about how this impacted his own children’s performance at school, and he underlined that the diversity in backgrounds provided a unique learning dynamic in school that, if fostered, had great potential. The problem, however, was how to encourage that potential if so many families attending the schools were below the poverty level.
Research is clear about the impact that systemic poverty has on academic performance. Children with less money are just as bright and hardworking as children from upper and middle-class families, but the pressures they have upon their daily life severely impact their overall performance. 50-70% of behavior caused in humans is environmental, and when a student does not have access to the tools, stable environment, nutrition, and academic assistance they need to do their best, it can negatively impact their ability to thrive in public schooling situations.
Additionally, mixing children from different economic backgrounds without the right support can sometimes have negative impacts. If class sizes are too large, standardization is too fixed, and other factors aren’t right, it can stress students who might be struggling outside the classroom. Students from different backgrounds must also be monitored to ensure that everyone feels safe and comfortable in their environments regardless of their race, gender, economic privilege, and other potentially discriminatory factors.
Based on the drastic differences in backgrounds among the students who attend Gwinnett County public schools and their complex needs, the Gwinnett County Public Schools Fund was established in 2006. Their four main goals include:
Providing the school system with the support it needs for system-wide excellence among students
Providing structure for the world-class standards of the schools within the system
Responding to the current and future needs of Gwinnett County Public school systems
Increasing the support for funding and resource acquisition for the public school system
These goals allowed the GCPS fund to create a framework that helped children in their public schools succeed no matter what they did. Part of the way that the foundation has been able to do this is through sports-related fundraisers.
The Corky Kell Classic and The Impact of School Sports Fundraising.
Football is a favorite at all levels of education. In recent national surveys, football has ranked number one in popularity time and time again, especially among young adult males. The Corky Kell Classic is a Georgia football tradition that started in Atlanta in 1992 — named after Wheeler’s former head football coach. The set of games pairs off the state’s best high school football teams in a collection of games that start at the beginning of the football season and run for three days. The first games played at the Corky Kell Classic only consisted of two different high school football teams, but in the 27 years that the playoffs have been around, they have increasingly added more high school teams to their lineups. The goal of Corky Kell Classic is to raise money for the Corky Kell scholarship fund, which helps Georgia students pursue their goals regardless of their financial status.
The Corky Kell Classic is only one example of how school athletics can effectively build up communities. During his interview at the Corky Kell Classic, Aaron Lupuloff mentioned that, for the 10th year in a row, the community had already met its $200,000 goal for athletic fundraising. The most exciting thing is that the Corky Kell Classic is not specific to Gwinnett County – counties from all around Georgia have participated in the event, making it a potential way for many areas of Georgia to fundraise for their school counties. This fundraising paved the way for more advanced events, travel, updated uniforms, and proper coaching for a variety of sporting events at all schools. This provides safe, accessible, and structured activities for students and offers the building blocks for success in academics and future career goals. However, having well-supported public school sporting events also brings the community together in a way that allows for greater diversity and continued funding for school excellence.
The trouble with maintaining a sports team that gives back to the community is that the teams themselves require funding to sustain their relevancy within the community. Part of the funds raised from sporting events goes into maintaining athletics over the long term – otherwise, uniforms will eventually run themselves ragged, students will be less likely to involve themselves in sports, and the reputation of that team will ultimately decrease. It can be hard to focus on raising money for school athletics when many parents were raised to believe that academics came first. However, academics and school sporting events may be more connected than initially thought, and supporting one might support the other according to science.
The Benefits of Sports in Academic Settings.
While many might argue that sports take away from time that could be spent studying, many studies indicate that team sports might benefit students. At the neuroscience level, researchers believe that having what is called “dual careers” is foundational to the necessary elements of success. Having dual careers does not necessarily point to giving 80 hours a week to a specific task. Instead, it is a theory that speaks to levels of dedication among people. Sports, or mentally strenuous extracurricular activity like speech and debate, rewires the brain toward training and self-instilled success. For sports, the addition of serotonin caused by physical activity provides stress relief and intellectual stimulation, which help students feel more aware of themselves and perform better academically.
As for sports at Gwinnett County Schools, Aaron Lupuloff points out another common benefit to emphasizing school sports – motivation to do well. “Sports and academics go hand in hand,” Lupuloff said in a recent interview at the Corky Kell Classic. He went on to emphasize the academic requirements and attention to grades that are foundational to Gwinnett County public schools’ athletic teams. Gwinnett County students are required to have a B in their classes to participate in extracurricular school-sponsored sports. If your grade drops below a B while you are part of the team, you must sit out until you can raise it back up. This policy, as well as the scientifically-backed benefits of sports, means that Gwinnett County student athletes are some of the top performers in the state both academically and athletically.
Recent Partnership with the Army National Guard.
In addition to working with students on an athletic level, the GCPS Foundation strives to help them be the best they can be on a social level. This is why it recently partnered with the Georgia branch of the Army National Guard to allow students to see how academics, cooperation, and athleticism can all work together. The Georgia branch of the Army National Guard is integral in providing disaster relief to Georgia and surrounding areas, which are especially prone to both hurricane and tornado damage, among other national disasters.
The “Guard Your School” Program, a cooperation between the GCPS Foundation and the Air National Guard, provided students with the opportunity to see what commitment to the army and its history could be like. Participating in these programs also required a certain level of academic excellence. Activities included learning about military vehicles, participating in military exercises like chin-ups, and allowing kids to try and figure out an escape room.
Joining the army national guard takes a lot of commitment, just like the commitment it takes to join and participate in one of Gwinnett County Schools’ athletics teams. If a student joins the Army National Guard on a full-time basis after they graduate from high school, they spend 36 days of the year deployed locally with their unit and 100% of their college or trade school is paid for. Eventually, as some students finish their degrees and return to the area, this boosts the area’s economy. In the future, the influential leaders who are fostered through programs like the ones provided by the ANG are likely to be the ones who give back to their school districts, both financially and voluntarily.
Raising Money for Local Schools and Getting Help from the GCPS Foundation.
The GCPS Foundation is dedicated to helping kids achieve on all academic levels, including providing them with grants to travel for curricular and extracurricular reasons, paying for the SAT, supporting projects for teachers who cannot get funding, and supporting the efforts of school teams. When students and instructors have the tools they need to succeed, they are more likely to achieve their goals. While the foundation does incorporate advertising efforts into their campaigning, as well as committing to public appearances like Aaron Lupuloff’s interview at the Corky Kell Classic, the majority of the support comes from word of mouth.
A common question that executive director Aaron Lupuloff receives about the foundation and its efforts is, “how can I get involved?” The question comes from people from all backgrounds, and the best thing that Mr. Lupuloff can recommend is to call and get involved, especially if you belong to a local group or organization that might be able to provide substantial help. Recent partnerships have included the Army National Guard, the local hospital, and more. Partnerships with larger organizations and local faces help, but so does the involvement of the community. When parents and community members donate their time and money to fundraising efforts, they bolster the community spirit and pave the way for more fundraising opportunities.
Activities and partnerships that raise awareness of fundraising efforts are also important.
“The foundation looks to provide students with opportunities and programs, such as the ‘Guard Your School’ program, to help get the word out about the benefits of the Foundation,” said Aaron Lupuloff. Activities like these not only raise team spirit among locals but also brings in outside interest, which in turn can help the longevity and health of a foundation like this. Finally, when students feel supported, they grow a particular loyalty to the place and people that supported them. Future engineers, shop maintenance specialists, craftsman, athletes, and more who were supported by school activities return to the school and community, which expands the community in the long-run.
Are you a student, teacher, or school who feels like they need assistance from the Gwinnett County Public School Foundation? Help is available by calling your school district or by reaching out to the GCPS Foundation itself. They offer grants for teachers, student scholarships, and more.
Read more about Aaron Lupuloff: https://www.crunchbase.com/person/aaron-lupuloff
The youth are the future. They are the ones who will bring about the transformative changes so desperately needed in society. Inculcating the youth with the right values is a complex undertaking. In Angola, this comprises a paradigm shift from a traditional male-dominated mindset to one which is gender neutral. These ambitious objectives can best be accomplished by way of grassroots initiatives aimed at fostering a new mindset within the collective consciousness. Spearheading this evolutionary shift is Isabel Dos Santos, a self-styled leader, motivator, and force for positive change.
A strong and independent woman, Isabel Dos Santos walks the walk and talks the talk. She has endured the challenges faced by women in the workforce, many of whom have been sidestepped in a largely patriarchal domain. Fortunately, Isabel Dos Santos has a steel spine. Her unswerving determination holds her in good stead. A resident of Angola’s beautiful capital city, Luanda, Isabel understands precisely how much potential her home country has to offer her countrymen and the world at large. Dos Santos is a game changer. A powerful and respected woman in her own right, Isabel has made it her life passion to fight for the underdog and win.
Giving Women and Children the Resources they Need to Succeed.
An engineer by trade, Isabel Dos Santos has worked incredibly hard to build multiple companies operating in Angola and abroad. These organisations include Unitel, CANDANDO, Zap, SODIBA and EFACEC, among others. Isabel perceives herself as a force for relieving inequality by creating opportunity for everyone. To quote Dos Santos, ‘If you do something that’s going to get somebody a job, then they’ll be able to pay for their kids’ school, and then their kid is going to be a doctor and then that doctor is going to probably help who knows how many other people, so it’s very motivating. Much more fun than going to the beach.’ This sums up Isabel’s ideology – she is a force for good, for the young people, and for ‘oppressed’ women all over the world.
Isabel Dos Santos is the poster child of gender empowerment in Angola and a growing force throughout Africa. One of life’s great ironies is that most African women are the hardest working people in society. They are the ones tasked with keeping families together, safe and nourished, as well as all the labor-related activities for day-to-day living. Empowering women is a top priority for her. Education forms the bedrock of her commitment to levelling the playing field for men and women. An electrical engineer herself, Dos Santos has excelled in her field, injecting innovation, imagination, and opportunity into every venture.
She routinely touts the value of skills training, equal opportunity, and education for the youth of Angola. Always under the microscope, Dos Santos remains cool, calm and collected. She is widely considered the perfect role model for women, affording them opportunities for empowerment to elevate their skill sets. As a caring entrepreneur, Dos Santos puts her money where her mouth is. Her companies actively recruit skilled women, provide for their educational growth and development, and engage in community building initiatives throughout Angola. Various examples of this abound with strawberry fields in Hulia, telecommunications network developments, substantial investments in electric vehicle technology and beyond. Her efforts are geared towards the upliftment of individuals, one at a time.
Youth Empowerment Initiatives.
True independence is only possible if people are able to support themselves and their families. In traditional African society, gender-specific vocations have dominated for eons. Dos Santos has broken that mold by becoming a force for change. Gender reforms are but one cog in the wheel that she is personally involved in. Her efforts are already bearing fruit, with many women advancing through the ranks to assume positions of authority in her own companies like ZAP, Unitel and EFACEC. Isabel’s companies have also invested heavily in local children’s hospitals, with the objective of providing for the health and wellness of the community. Her determination to stamp out disease, malnutrition and lack of opportunity is ironclad.
Isabel believes that corporate social responsibility is mandatory. She believes in giving back to the communities; as women prosper so too does the greater economy. This bodes well for community upliftment, technological innovation, and ultimately positive change. She initiated her changes within her own companies a.k.a. a transformative company culture and continues her work with individuals throughout Angola and the world. Multiple examples abound such as the paediatric hospital mentioned earlier, and clean water programs. One of the most exciting community outreach initiatives is the ‘special day’ program where volunteers join forces to assist an estimated 10,000 children across the country.
When quizzed about which charitable causes she participates in, her message is clear: ‘The children are who I care about. There healthcare and education is at the core of everything that I do. One of the causes near and dear to my heart is the fight against malaria and I am fully committed to its eradication on the continent. I would dearly love to see Angola and the entire African continent filled with talented young people who are pursuing their dreams. Change is possible through education. Anyone who dreams of changing Africa must surely realise that education is the key. It begins with educating our girls. This is the challenge I’ve accepted.’
Note: the following is a transcription of my interview with Chris Burniske, a partner at Placeholder. I have reviewed the transcription but if you find any mistakes, please feel free to email me. You can listen to the original recording here.
You can subscribe to the podcast and listen to all episodes here.
In this episode, I talk with Chris Burniske, a partner at Placeholder and the author of Cryptoassets. We discuss why Chris believes in a market for tokens, the ethics value extraction, the evolution of equity deals and the pressure from maximalists.
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Interview Date: Monday 25th March, 2019
“If we are trying to take Bitcoin mainstream, that means the vast majority of users will not be educated about the merits of Bitcoin, they just won’t care, they will actually be turned away if they feel like they have this screaming mob asking why the hell they are using this other asset.”
— Chris Burniske
Peter McCormack: So the interview we’re doing is pretty timely as well because we chatted a bit over email. It’s been a long time coming and I’ve obviously read your book. I’ve read it I think three times now. I’ve got it here with me. Wondering what we were going to talk about and your first point was that you’re bullish on Bitcoin. I’ve had quite the three weeks on Twitter, I don’t know how much you’ve seen of it, but I’ve been at the wrath of the maximalists!
Chris Burniske: Uh-oh. It happens to almost everyone.
Peter McCormack: Yes. My problem is I’m very defensive and I feel like I need to defend each point, which I’m learning not to do, really I should mute and have a break. So I’m going to have a break for a while now, but I switched between sympathizing and almost agreeing entirely with maximalists, but then have this other curiosity. Now because of what’s happened this week, if people know I’m interviewing you, they are aware of your book, your book will be considered as part of the threat model to Bitcoin. You must be aware of that. You’ve had plenty of…
Chris Burniske: I’ve been at the wrath of the maximalists many times. You’ve seen it on Twitter.
Peter McCormack: I’ve seen it. So I’m going to approach this with some healthy scepticism…
Chris Burniske: As you should!
Peter McCormack: As I should, and curiosity. I think, firstly just to set the scene, it would be great if you explained who Placeholder are, what you’re invested in, what your investment strategy is, and then we can go from there.
Chris Burniske: Sure. I do want to come back to Bitcoin and hopefully teasing apart how Bitcoin is not synonymous with the maximalist. There are many flavours of communities that support Bitcoin and believe in Bitcoin and Placeholder is definitely one of those. So a little bit about Placeholder, back half of 2017, myself, Joel Monegro and Brad Burnham raised $150 million venture fund. At the time, there were predominantly hedge funds, but we chose a venture fund model where the capital is committed over a 10 year period. So there are no redemptions and we’re not subject to the whims of the market in the amount of capital that we have to deploy.
So it really creates this cocoon of capital where we can focus on supporting our portfolio teams with a really long time horizon. So a 10-year fund is really the timescale that we’re thinking on. We raised the fund with a focus on the progression of say, value accrual within information technology, going from hardware to software to data to governance, which is something we can circle back to if you’d like. That thesis remains, we continue to layer in things. Definitely had an early focus on developers. Starting early 2018 started to compliment that focus with what has now say blossomed into the decentralized finance community.
Really with the realization that okay, financial services tend to be one of the earliest adopters of new technology. Blockchains are natively financial technologies in that they collapse the cost of asset creation, custody and transfer and that we have to nail those use cases, say within financial verticals to really open up, say more of the technology verticals. So that’s where we’ve made investments in things like 0x or Maker Dao and Erasure which was recently announced.
All of our investments are on our website, placeholder.vc. So just reading them from the top, it would be 0x, Aragon, Bitcoin, CacheCash which is a content delivery network, Decred, Erasure, Filecoin, FOAM, Maker Dao, Open Source Coin which has recently had some buzz around it, it’s a decentralized GitHub, UMA universal market access and financial contracts. Then ZeppelinOS.
Peter McCormack: Okay. Obviously, you wrote the book. What was it two, three years ago?
Chris Burniske: Started writing it the end of 2016 and published it September of 2017.
Peter McCormack: So it was the first thing I read in the sector and the first time I read it under the belief that everything in it was true. Some of it went over my head, but it was a very good intro into the crypto world. I’m less of a crypto investor now. I hold Bitcoin and Monero. I have curiosity elsewhere, but quite a lot of scepticism. But you pretty much put yourself out there into the arena to produce this book and it’s been highly commended but also highly criticized. So we’re a good two to three years on from when you started it. How do you reflect on the book now?
Chris Burniske: I think it’s important to go back to what the period was like when we wrote the book because I met Jack, my co-author, at Consensus 2016. I had recently published a few months prior, a white paper with Coinbase called “Bitcoin: Ringing the bell for a new asset class”, which by and large the maximalists loved.
But I had written that paper really to argue that okay, Bitcoin is extremely important and if you’re not paying attention to Bitcoin, you’re missing the boat. But Bitcoin is also an early indication of what’s to come. That had a strong reception within the financial and tech communities. When I met Jack, I met him randomly, he sat down next to me at lunch at consensus and we were talking. He had been a writer and is a writer for different news outlets. He pitched me on the idea of doing a book and I thought it was a joke at first and then it actually started to materialize and become something real.
At that point in time, you had say books about Bitcoin. One of my favourite books that I read, when I was ramping in the space, was “Understanding Bitcoin” by Pedro Franco. Innocuous title, but very in depth on the economics and cryptography and of course there’s Andreas’ books. But you had books on the technicals or you had books on the history, things like digital gold. But at the time we didn’t have a book that covered the asset class as a whole that said, “hey, Bitcoin is the first of its kind, but they’re going to be many more and what is a potential framework for approaching what’s going on here?”
So this was really an attempt to take us beyond thinking of this new asset class as relegated to currencies alone, but instead recognizing, okay, we have a natively financial technology as we went over, which collapses the cost of asset custody, creation and transfer. So that is going to open up this entire world of programmable value. How do we prepare ourselves for that as investors? So that was really the genesis of the book. Got the book deal late in 2016, wrote it over a period of four months. It was an aggressive timeline and had to submit the rough draft end of March.
But March 10th 2017 is when the Winklevoss ETF was rejected that Friday. That’s when Ether popped like 20%, and then all of the other crypto assets started rallying. That really kicked off and we can circle back to that. But that kicked off the heat of the 2017 bull market and so everything started changing before our eyes as we were writing the book. I actually became horribly insecure about the book before publishing and feeling that it was incomplete. My insecurities are something else entirely! But I think it was, for its time, a good first attempt. We may do a second edition. I may do a totally separate book, but now it feels a little outdated, but I think still relevant.
Peter McCormack: Well it felt to me more like a prediction of the future. What could be, rather than a statement of fact?
Chris Burniske: Yes and I never want to say, this is exactly what the future’s going to look like because anyone who tells you they know exactly what the future’s going to look like is lying. We can’t possibly know.
Peter McCormack: Are there any parts of the book now that you on reflection think are wrong or areas you’ve explored that stand out to you, that you really do want to rewrite?
Chris Burniske: When we wrote the ICO section, there’s one chapter, “The Wild West of ICOs”. I think that could have been a book in itself. Given how fast things were evolving, I think we could’ve done a more robust job with that section. Someone on Twitter has called out that we should have covered the risks more. We did have two chapters on the history of financial bubbles and weaving in examples of crypto bubbles and trying to prepare investors for all the different potential schemes that they may encounter. So really did our best to discuss the risks in the book, but I think could have done more.
There’s just a very specific thing. I got ported in late 2016 where they moved my phone number and then broke into my email and everything waterfalled from there. I wish I had put in a section about protecting proper security hygiene with two-factor authentication. So there’s all kinds of things, but now the debate because I do feel that urge to embark on another book. It’s like writing a book is giving intellectual birth and then there’s a period of exhaustion and I feel like I’m recovering from that.
So a book is pinging around in my mind and I think the question is whether to do a second edition of this or to do something completely new. The thing that pulls me towards doing something completely new is just exploring new things. My Dad used to say all creativity comes at the cost of maintenance and I don’t like the idea of maintaining this book and it becoming this dry exercise. I much prefer the idea of intellectual exploration in writing a new book. It may be less refined, but it’s a journey that the reader takes with me and we all know that we’re figuring out the space together.
Peter McCormack: Okay. So just back to the fund, what is the split between equity and token based investments?
Chris Burniske: Thus far, every single investment we’ve made has been with an eye on the eventual crypto asset, not with an eye on the cashflow extracting equity capitalized business. That said, we have made investments in equities, LLCs or whatever it may be. But we think of those as a Placeholder development company. Where actually pre network launch, it can align investors with the developers most cohesively to raise in an equity structure and then actually dissolve that structure or there are different ways to handle it upon network launch, to get the eventual claim on the tokens.
Peter McCormack: So you are also bullish on Bitcoin?
Chris Burniske: Yes, absolutely. We hold Bitcoin. We have a large amount of Bitcoin in the portfolio.
Peter McCormack: Are you able to say what level investment you’ve made in Bitcoin or do you have to keep those, is that confidential?
Chris Burniske: It is one of our largest investments.
Peter McCormack: So let’s talk about Bitcoin first. Then I want to talk about tokens and I want to talk about the way a fund invests in tokens and the way it extracts value and whether there is value. Because I have got some scepticism. I don’t hold any anymore now because of that. I am curious.
Chris Burniske: Skepticism is healthy.
Peter McCormack: Yeah, for a number of reasons, but we’ll come to that. So let’s go to Bitcoin itself. I like to ask people in almost every interview now this same question. I’m always intrigued by the answer. It changes every time. But what is Bitcoin?
Chris Burniske: I think the easiest way to describe Bitcoin is; money over an Internet protocol. Just as voice over internet protocol, things like Skype and WhatsApp calls have revolutionized our ability to connect with anyone anywhere in the world for zero cost, Bitcoin as a money over Internet protocol, rips out all of the pre-existing sludge of our financial system, the interconnects and all of the things that take up time and cost. It just says, here’s this global network for communicating or transmitting value at low cost.
Peter McCormack: Okay, interesting. So I’ve heard that before actually and people talk about it as Internet money, but I sometimes struggle with that because I would argue that a stable coin is better money over the internet because it’s closer to money. I don’t like stable coins by the way. I’m not a huge fan, but I think they are more realistic money over internet protocol because they peg to money and do a very similar thing to Bitcoin.
Chris Burniske: So this is where I think of money as a store value, means of exchange and unit of account. The crux of that progression first being a good store of value and we see Bitcoin doing just that. I share some of your concerns around the means of exchange and I think it’s TBD. I also read “The Bitcoin Standard” and I’m good friends with Murad. I understand the points and the thinking around their intended progression of Bitcoin. I think that if you follow the line of thinking within “The Bitcoin Standard” where… The argument there is that the world has been infected with inflationary assets and that we actually need to go back to deflationary assets. That sets up all the right spending and saving patterns and so on and so forth. I think it’s a very elegant thesis and enjoyed reading the book. I think something that I haven’t figured out for myself yet is what happens when the majority of the world still operates under an inflationary regime and Bitcoin is a significant store of value, but say not the majority store value. I think it’s very hard psychologically for people to spend something that is deflationary when the world is mostly inflationary. I’m talking about supply schedules here. So does that require us to assume that Bitcoin needs to get to majority value capture of the world’s assets or at least the world’s monetary basis in order to say have this… It’s really a behavioural switch, a psychological switch and that’s asking a lot. That could happen, but I don’t think I have enough information here and now in 2019 to say that that’s the likely outcome.
Peter McCormack: How confident and bullish are you with Bitcoin?
Chris Burniske: Over the next 10 years I’m extremely bullish.
Peter McCormack: Okay. How bullish are you with Bitcoin then compared to your investments in tokens? Because I guess with tokens there’s still a lot more to prove.
Chris Burniske: Yes…
Peter McCormack: is this a calculated bet?
Chris Burniske: Well, everything’s a calculated investment and there’s the expected value being the probability multiplied by the reward. There’s so many things with Bitcoin. I guess where does my fundamental conviction in Bitcoin lie? I think it comes down to being maybe the most perfect instantiation of the commodity theory of money that we’ve seen, in terms of that it was the first crypto asset. Because of that, it priced every subsequent crypto asset and it was the most liquid crypto asset.
So it has become the bloodline of liquidity for the entire ecosystem and because it prices everything else, it is intractable. This isn’t a technology thing, this is a social thing and it’s not something that can be taken away from Bitcoin, but it is something that Bitcoin can lose. So when I approach Bitcoin, say from looking at the many competitors out there, I don’t think of those competitors as being able to take anything away from Bitcoin, because what Bitcoin built happened so organically and it’s so entrenched in the ecosystem. So that gives me a lot of conviction in the context of a retail hodler Bitcoin, it’s an amazing store value.
I think the other thing I’d layer in there is the type of scarcity that Bitcoin has, you could really only create that in a digital world. It is so artificially scarce and with the supply schedule that converges on a 0% rate of inflation, you can’t have that with physical commodity monies. So being set up as the perfectly scarce asset, I think that’s a fascinating psychological experiment that should be directionally positive for the price.
So let’s say that’s retail perspective for myself as a retail huddler and then from Placeholder, the more institutional perspective I gave you the commodity theory of money, but also holding it as a reserve asset of crypto and a potential cash equivalent. We’ve seen with prior cycles that Bitcoin and say some of the other macro assets have this a see-saw effect with the other assets where say Bitcoin will rally, as the unit of account it might suck some of the air out of the room. There’s a liquidity crunch on the other assets and so Bitcoin on a relative basis appreciates.
So you can actually use it at that point to buy some of the underperforming crypto assets. So as we build out this broader portfolio and a significant Bitcoin position, even though we are a venture fund, you may see us taking some of our Bitcoin position and buying other crypto assets, if Bitcoin has rallied strongly and some of the other assets that we have conviction in the underlying fundamentals, haven’t shown that life in the market yet.
Peter McCormack: So I’m like you, I’m bullish on Bitcoin, but as I said, I’ve got a huge amount of scepticism with tokens now. I think it’s going to be very interesting to explore that with you because I guess one of the things for you is your reputation is predicated on the success of tokens.
Chris Burniske: My professional reputation. My personal life is something else entirely.
Peter McCormack: That’s what I mean. Your professional reputation is predicated on the success of tokens. You’ve been ballsy enough to write the book and put yourself out there and say this is what you believe. But at the same time that comes with risk. We know how brutal and savage Twitter can be at times. I mean you can close your laptop off and get away. But so I’m interested to learn about why you’re bullish because my scepticism comes from, more just having a general feeling that a lot of this doesn’t make sense.
Chris Burniske: A lot of it doesn’t make sense. 95%?
Peter McCormack: Potentially more I think to be proven. But also one of the other things that gives me just a little bit of a sour taste is that I think funds can extract value from their investment before the technology is proven, by extracting value when the tokens go on, say public sale. I’ve interviewed Ari Paul, Kyle Samani, here with yourself now. That’s one of the things that I have a slight concern about.
Chris Burniske: I have the same concern.
Peter McCormack: Okay. So let’s unwrap this. So let’s start with… Convince me that there is a model in the future for people to buy and use tokens in these networks.
Chris Burniske: Sure. I actually may not convince you of that, because I don’t know that the model is so much a demand-side focus model as much as the supply side focus model. That would be more the creators of the service as opposed to the consumers of the service. But stepping back for a moment, we just discussed Bitcoin and Bitcoin has proven that a purely digital asset on a decentralized ledger can be a store value. If you go back to 2015, the last bear market, that wasn’t a stronghold, an intellectual stronghold the way it is now. It’s hard to imagine now, the uncertainty that was there then. Even if you take traditional finance in that period, I was at different conferences where it was Blockchain not Bitcoin mania and was dismissed.
So just understanding that there are these psychological shifts that happen. In the early, especially in the first bear market that follows the creation of a new movement, it is natural that there would be a lot of uncertainty. I wrote a post on this called “the best time to build and buy tokens”, that really explains the psychological progression. So that’s the starter of say, okay, Bitcoin has made it through this journey of conviction and the other crypto assets are much earlier in their journey. Why do we think they fundamentally have value?
I would say that the majority of what we’re seeing in the market today is more an evolution and replacement for equity, than a replacement for currencies. Not Bitcoin. Bitcoin as we just discussed and some like it like Monero or Zcash and really hard proof of work based assets and we can come back to value accrual through proof of work in a moment. But those assets are focused on currencies. But a lot of the ones that are stake based or bonding based or whatever it may be, are actually organizing a supply side that is provisioning a service, a supernational service and enforcing the rules and governance and evolution of that service in such a way that, if it works out, the supply side that is holding that asset gets to claim to the value flows of that service.
That is actually very much a discounted value flow model, similar to how equity would be valued. It’s different from an equity in terms of the third party. If you go to the Howey test, the efforts of others and this third party is a very amorphous third party. It’s really this collective, who is the third party in this instance? It’s also very different from inequity in that with inequity you have a passive collection of dividends.
Whereas when you’re organizing the supply side, the crypto assets base is partially productive, partially value flow producing, partially nonproductive, partially a consumable transformable, which is where people kind of get stuck. So the productive base, you have to be an active participant in that network in order to get value flows, which from an egalitarian perspective is very important. Joel my partner has done a lot of great work thinking around how equity has led to some of the inequalities we see in the world today. But the fact that you have to be an active participant to get access to the value flows, is a very important component of any crypto asset.
So if I were to say lay forth a framework and I need to put out a piece on this soon, the framework coming from an evaluation perspective, you can think of broadly there being three superclasses of assets. Stop me if at any point this is unclear, but three superclasses of assets where there are capital assets, which are typically thought of as cashflow producing. So bonds, equities, income-producing real estate, those kinds of things. There are consumable transformable assets, which are more your typical commodities; oil, wheat, natural gas, metals. Then they’re your story value assets, so fine wines, arts, rare automobiles.
If you take something like gold, it can be both a consumable transformable and a store value asset. Bitcoin I would argue is the same. Holding a Bitcoin doesn’t give you a claim on any value flows. You can’t stake a Bitcoin to be a participant in the network. So I actually think the best way to value those assets is still through the equation of exchange, Mv=Pq, which is what I put out in 2017. But interestingly enough, the majority of crypto assets are shaping up to be capital assets.
To be things that organize and are useful predominantly to the supply side. So I think that the majority of value accrual for those assets will be through a discounted value flow model. What’s really interesting is there’s overlap though where let’s say Ethereum goes to proof of stake. It is predominantly a capital asset, but where it’s used to pay for Gas, it’s a consumable transformable. So I think it becomes a sum of the parts valuation where it’s predominantly discounted value flow for the supply-siders.
But there’s a little bit of value capture through Mv=Pq and as I discussed with the original evaluation piece, velocity becomes a problem and all of those considerations taken into account. But I lay the framework to really try again, as I did originally with the book, try to piece apart how different these systems are and therefore the value capture will be so that we can stop bickering over, “your approach is bad because it’s different from my approach”. It’s not that at all. It’s just they’re fundamentally different approaches trying to solve different things.
Peter McCormack: There’ll be a number of people who will listen to this, who won’t understand a lot of what you’ve talked about there, but who have the ability to invest. I think these are quite complicated decisions that people have to make, but they’re making loosely. So I’m still struggling to understand what is so broken in the current equity model that the token is fixing.
You said maybe because it opens up access to investors who don’t normally have access, but it also does change the value model. Its success is predicated on the appreciation of the token and value, but then with most of these networks, it’s not useful to have a volatile price. So that’s where one of my conflicts comes, that I think most, for example, in the utility space, which has a lot to be proven, almost every instance, it would make much more sense if these were stable coins.
Chris Burniske: So two things in there, what’s broken with equity and the utility token model. Let’s start with the utility token model and actually the word utility token I don’t really like because it’s too broad of a bucket. It’s really just saying anything that has utility that’s not a currency or strictly a currency. I guess I don’t even really know what the utility token definition is, but suffice to say, it’s very diverse.
There’s a lot of diversity within say what people consider a utility token. What I was trying to get at with the capital asset component is actually these assets, say Ethereum proof of stake or all these different things and we see it with Livepeer. They organize the supply side, the providers of the service and they are useful to the supply-siders in enforcing the governance and the behaviour of those supply-siders and to ensure consistency of the service. They’re not so useful to the demand side.
I actually very easily see a world where the demand side doesn’t operate with that native asset at all. They pay in whatever stable coin, whatever fiat coin, whatever it may be that they want and it actually doesn’t matter because the value flow that the supply side ends up getting from staking the native asset, is really what will define the value capture of that native asset. So I think people obsess on the utility token side on the demand side, the consumers of the service.
What I’m saying is I think that’s right to say obsess over the problems with that, but you can’t stop there. You have to say, look at the other side of the equation, which is the supply side where I think there’s a lot more say value capture and usefulness in constructing the service. Ultimately these crypto networks are only going to win. They’re only going to sustain themselves and truly provide value if they provide a novel service that people can’t help but use. Or provide an on par service to existing companies, but for an order of magnitude cheaper. That’s just the economic reality of things. That’s a very sort of cut and dry goal.
In terms of say, what’s wrong with equity. I think as we’ve watched the progression of equity, invented in the early 1600s and the kinds of businesses that are capitalized. Early on, those businesses weren’t exponential in the services that they created and the value that they captured. There was always a significant marginal cost to producing an incremental unit.
As we have marched along through the Industrial Revolution and now into information technology, the scale of the services provided has very much become exponential power law based and the marginal cost of producing incremental units is zero. So I would say one of the core fundamental problems with equity in the world we have today is actually the lopsidedness of value capture and a relatively concentrated base of shareholders that unilaterally hold access to value capture and also control of that service and the services.
You take things like Facebook or Amazon or Google, I would argue we as a globe are dependent upon them, but the ownership is extremely concentrated and is one of the contributors to the wealth and income inequality that we see in the world today. So for the digital services where it makes sense, and again, totally realizing and understanding that it won’t make sense for every digital service, but I think for some or many digital services, a crypto networks model to capitalize and incentivize the supply-siders, the investors, potentially the demand-siders as this broader collective that has access to the value and the control of the service that’s provided.
That intuitively to me feels like the right thing and we have a technology which is at a very early stage, but that we know is highly programmable. So for me to constrain myself in thinking it’s only going to be used for this one thing actually feels ludicrous. I couldn’t possibly say all the things that this is going to be used for.
Peter McCormack: So we’ll come to that as well. So just referring back to equity. One of the things that I think about is, I understand when you say the ownership is concentrated on a small group of people. That’s obviously because of the way equity deals are structured from venture capital. But isn’t there an argument also that there’s some benefit to this because companies become incubated, they have support structures in place from the VCs.
They have somebody who joins the board and they incubate them without these companies having to worry about the value or the liquidity of their assets. They just can focus on solving their product market fit. Yet in the crypto world where we’ve seen this kind of change where anyone can invest early on and we’ve kind of had this wild west of ICOs and companies as such been built from it, which don’t seem to have the same level of rigour around what they’re producing.
Chris Burniske: Sure.
Peter McCormack: So there’s essentially there’s a tradeoff?
Chris Burniske: There’s definitely a trade-off.
Peter McCormack: I’m not sure if that’s a good trade off and I’m also not sure if liquidity is useful before product-market fit has been achieved.
Chris Burniske: Right. It can be more about them in the future. I think that we’re very early on in understanding and evolving the governance standards within crypto networks. But that’s not to say that we’ll never figure them out. Again, going back to say the fundamentals of this as a technology that collapses the cost of asset creation, custody and transfer and really the programmability of that and a vote being a very valuable asset.
I again have a hard time seeing a world where we don’t figure out improved ways to coordinate and govern using this technology versus our paper trails of days past. Now in terms of the benefits to a concentrated shareholdership and say centralization allowing a faster pace of execution, I think there’s merit to that argument and it all goes back to, as you said, trade-offs and how these networks are being set up and I think we are taking learnings from the equity world. Particularly Placeholder finance the early development of pre-launch networks. Setting the pre-launch development aside for a moment and looking at say equilibrium operations.
I think that a very important thing is once we have governance figured out and we’ve hit this more stable, steady state, the fact that the supply-siders, the provisioners of the service have an equal voice and access to value flows as the investors in the service is very important. Because investors are important, as you pointed out for getting something off the ground. But does that mean they should have a perpetual claim on cashflows forevermore, with no one else having access?
Should not the supply-siders or the consumers potentially have access to this network that they are all, say take Facebook, they’re all collectively creating? It feels a little lopsided. It feels a little too good to be true for an investor in the value capture that they get under the equity model.
Peter McCormack: But that’s just the reality of life?
Chris Burniske: That’s the reality of the social fabric that we have created over the last 400 years. But it’s not a naturally occurring phenomenon. This is a social structure that only exists between our collective minds and so we have the capability as a society to change that.
Peter McCormack: So as also you said again, a lot of this is predicated on being able to create something that’s faster, cheaper, better or novel. Without that, and being able to access or create a significant number of users, that actively use the system, none of this will matter.
Chris Burniske: Yes.
Peter McCormack: So at the moment, there seems to be a real problem in achieving that. We’ve had, I would say hundreds, potentially thousands of attempts now and there’s nothing that stands out of having cracked any form of product market fit. Other people talk about “killer apps”. We just don’t seem to be seeing it. I’ve got my suspicions of why, but I’ll let you go first before I tell you what I think.
Chris Burniske: Sure. Well, I think we’re still very much in an infrastructure phase and there will be “killer apps” that pop up along the way. The Silk Road was a very early “killer app”, that converted a lot of people.
Peter McCormack: But the infrastructure phase is a myth apparently?
Chris Burniske: We’ll so Danny and Nick from USV put out a good post about the back and forth evolution. I think that is the point. The infrastructure improves to a point where we have a breakout app. It may not be sticky, like AOL for example, was a breakout app for a period that wasn’t say sticky over many decades, at least not on a large scale. So you have this oscillation infrastructure app/infrastructure app. One pushes the other, one pushes and enables the other. I would say that… So there’s a few responses to this. Let’s say taking things that are working.
We recently put out a thesis post on Maker Dao. Maker Dao in its first year originated roughly the same amount in loans as Lending Club originated in its first five years. That is stunning. Granted it’s a different kind of loan. It’s a secured loan for Maker Dao versus an unsecured loan. But I would say that when you see a network provisioning a service and scaling roughly in order of magnitude faster or say at least twice as fast, you know you have something going on there and that it’s really, and I really should say a protocol because a network can be say equity capitalized or crypto asset capitalized.
But when you have a crypto asset capitalized protocol based network, scaling much faster than you’ve seen in the equity world, that is really the openness of the system empowering all participants to use and further the service at a rapidity, which you almost can’t have because of how closed and concentrated an equity shareholdership is. It’s almost like an equity shareholdership and I’ve never thought of it this way before, but it means we’re getting into good places in this conversation. It’s almost like an equity shareholder ship is a proprietary thing. It’s not an open source thing. It’s not an open anyone come and joins and pitches in ecosystem.
We’ve seen how open source software evolves much faster than proprietary software and in the asset model, I think you can make a roughly similar analogy in terms of these crypto assets are an open source asset. Whereas an equity is a proprietary asset that is very hard to get access to unless you’re inside the club. So those by and large won’t be able to scale as fast now. Totally agreed, we are still searching for the right product market fits for these crypto networks.
Peter McCormack: So Maker Dao is an interesting one. As I’ve kind of bumped into and sympathize with the whole maximalist view and Bitcoin being the only need for a Blockchain, Maker Dao is the one that keeps coming back to me and I keep saying, “okay, I can’t ignore this”. But then Maker Dao’s success itself is predicated on the fact that ETH is a store of value, appreciates in value and the people who have ETH historically have made enough money to then use it for Maker Dao.
But it’s not particularly useful for anyone new coming in who doesn’t pre-own ETH because you have to then buy ETH to then get a collateralized loan from Maker Dao. So I don’t see that as a kind of great mass use case example. I see that as just a small use case for people who already have a substantial stack of ETH. Do you see what I mean?
Chris Burniske: Well, so I would say that when you look at Maker Dao’s roadmap, which they’ve very credibly executed on and so we can say with reasonable certainty, they will continue to execute. First I got to move to multi-collateral and so it won’t just be ETH. It will continue for the foreseeable future to be constrained to the Ethereum ecosystem. But that’s not a forever kind of thing.
Peter McCormack: Do you think it’s a risk that it is tied to the ETH ecosystem?
Chris Burniske: I think it’s a risk, but it’s not an intolerable one and I think we’ve seen one iteration of second layer protocols migrating from operating on top of Counterparty which was on top of Bitcoin, to Ethereum. I think that we may see a similar migration in the future depending on what happens with Ethereum. These things are flexible, they’re adaptable, they’re plastic. But with Maker Dao, I think if you’re bullish on the directional growth of crypto assets, then you should be bullish on Maker Dao as an extremely low-cost credit facility.
I think of it as first and foremost a credit facility, that outputs a stable asset that also happens to be widely used. So I agree right now it is predominantly used as a means to gain leverage for investors in ETH, but use cases tend to start off high value, low velocity for a specific user. They originally looked like a toy or niche, but that’s really what hardens the service to the point where it can become more mainstream, accessible.
Peter McCormack: So what other assets, could it be used for? I mean, it could potentially be used for a “wrapped” Bitcoin,
Chris Burniske: Theoretically any ERC-20 but…
Peter McCormack: But therefore, so again its success is predicated on the success of Ethereum or things built on Ethereum.
Chris Burniske: For now.
Peter McCormack: For now unless it becomes its own independent Blockchain…
Chris Burniske: Or we don’t know what the inoperability world’s going to look like. This is where in crypto it’s kind of like we’re driving down a dark road with our high beams on, but we can only see so far. But I would say that it’s a technology problem to create interoperability of state and value between different base layer chains.
When that is figured out, which I have every confidence that it will be, then it will become easier for middleware protocols and I actually wrote a piece on middleware protocols on our website; to get this supra chain scale and be able to pull resources and users from different chains.
We saw one example of this very recently with Loom, which is operating on top of Etherum, to begin with, but has just offered support for EOS and Tron. Yes, there’s controversy around EOS and Tron and I understand that, but it’s interesting even of itself that here we have a middleware protocol already starting to provide interchange support before, say the interoperability that has been a buzz within the ecosystem, has really become a reality.
Peter McCormack: So this is where I then start to worry about maybe the ethical nature of some of this and look, I don’t want people to be restricted from investing. I don’t like investor accreditation, I think their archaic rules are unfair, but at the same time, I do wonder whether really we’re still in such an experimental stage that these systems should be financed and supported by retail investors.
I mean I’ve been there myself, it’s made and lost a lot of money very quickly and by transparently talking about that story I’ve had an incredible amount of people contact me and tell me similar stories. A lot of people have lost a lot of money and I know this happened during the Dotcom boom, but we’ve lowered the threshold for investing by making it very, very easy with services like Binance.
I then worry about how ethical some of these crypto funds are who are promoting a narrative of a future of Blockchains and tokens who are investing early on in projects and protocols, yet are able to extract value and exit before anything has been proven as a success. I think that’s where I prefer the old world of equity investments, as opposed to now because a lot of these funds could make a return without actually any of the projects being a success.
Chris Burniske: Yes and I think the key linchpin there of what’s changed is the pathway to liquidity or the bar to liquidity is much lower. So the concern I hear you’re raising is that an institutional investor can get liquidity and exit an investment much more easily and potentially return a profit even though it was a useless asset.
Whereas in the traditional equity markets, it has been so groomed over time. We’re 400 years in now into the evolution of the equity markets. It has been groomed over time and it’s so commoditized, say in all of the operations and how everything’s understood that it has a much better filter for filtering out the junk and the things that should die, do die before they leave an institutional investors balance sheet and hit retail. So I think it’s an important concern.
Peter McCormack: It’s not always the case though, because obviously, we can look at something like Snapchat or Pinterest, so those themselves are still yet to be proven, especially Snapchat. Snapchat to me as an IPO itself feels very similar to some of the ICOs in that its share price really struggled after it.
Chris Burniske: Well you’re kind of pulling us into a broader conversation around venture capital because there’s a whole other side conversation totally unrelated to crypto around the ballooning size of venture capital funds. I mean Placeholder as a $150 million fund seems big to Crypto. But when we talk with institutional investors we’re a small fund, we’re a small venture capital fund, “boutique”.
So part of the frenzy around venture capital has been because for certain venture capitalists, the returns have been so good and also as an uncorrelated asset class to say traditional public equities and bonds, there’s been a lot of appetite for that. But when there’s a lot of appetite for that, it balloons the fund sizes and therefore the asset prices. Ben Evans from Andreessen Horowitz has a great presentation that shows how private equities, private companies are staying private for longer and raising more money and all of these things. A lot of the value is being captured in the private market before it even goes public.
So it’s actually almost the inverse problem of what Crypto has. The traditional equity market and again, I’m just thinking through this with you on the fly. But the traditional equity market, these companies, you take something like Uber has stayed private for so long, it’s now whatever, $50 billion — $70 billion company by the time it goes public that a 10x from there and it’s a $500 billion — $700 billion company. Whereas say when Microsoft IPO’d the returns I think we’re in the 100x or 1000x, which is insane!
But in the public equity markets, because people were going public early on, there were lower pressures and requirements. So that’s our traditional equity world and you could argue, and I think Fred Wilson put this either in a tweet or a blog post in a way, crypto assets are a backlash against that of early to liquidity as you could possibly imagine. This is I just think another cycle of each generation wants to be new and do something different from the generation before it and society is this constantly swinging pendulum, where we go too far in one direction and so we swing back and we go way too far in the other direction.
We occasionally hit these sweet spots where things run well, but inevitably swing too far in another direction. So it’s going to be a constant evolution. I think for myself as an investor, to be clear, I never thought I would work in finance. My parents were educators, I was raised around the world, they taught at international schools. I was raised to kind of think of finance as the devil and never thought I would be where I am today. So I have a bunch of considerations and say insecurities about what I’m doing and how am I contributing for better or worse to income and wealth inequality in what I do.
So I would never want Placeholder to have a profitable investment that didn’t provide true utility for the world. How we handle that is an ongoing conversation. Do we just let an asset that’s part of our portfolio that is pumping, do we not sell it because we know that it’s an artificial pump or you know, it’s not at all tied to fundamentals. These are very serious ethical questions which we take seriously and we engage with on a regular basis.
Peter McCormack: Have you as a fund exited tokens during a pump.
Chris Burniske: We haven’t.
Peter McCormack: Have you exited any tokens?
Chris Burniske: We have not sold a single thing. Again, this is where we’re very different from a hedge fund. We are not traders. I think of us as buyers in bear markets, sellers in bull markets and you end up being a liquidity provider on both ends of the spectrum. When everyone is selling, you buying, you’re a liquidity provider. When everyone is buying, your selling, you’re a liquidity provider and can actually help dampen the volatility of our constituent portfolio assets through that process.
But I would say that we as a venture fund, we build these large positions over time, work very closely with the teams and we are still discussing internally about how we handle the exit process and do we do it incrementally? Do we do it in one fell swoop? Of course, we communicate with the team. How much should we communicate with the market? Our very name Placeholder really reveals everything you need to know about how we think about ourselves. We are a placeholder helper, placeholder hodler within these networks that yes, must ultimately exit the investment, but hopefully, it is at a point where the thesis has played out.
The network no longer needs an institutional investor and this is kind of going back to our earlier conversation of should we get a claim on value capture forever more? Or should we just serve our most important purpose early on in the life of a network and then leave the vast majority, the vast remainder of the pie for the supply side, the demand side as the core developers, when the network is really starting to inflect in its fundamentals.
Peter McCormack: What happens on year 10 when the fund closes? Do you have to exit every position and close the fund?
Chris Burniske: So we have what’s called a limited partner agreement, so an LPA with our investors who are LPs or limited partners. Basically, it’s a 10-year fund, which means our investors can’t withdraw or claim their capital legally for 10 years. We also have two one year extensions where we could go to our advisory board if we have assets that we think still need a couple more years. So it becomes a more flexible process. I like to think of it as this cocoon of capital to allow us to not be distracted by the markets and to really focus on the task at hand.
Peter McCormack: Do you worry at all about being able to exit because of low liquidity?
Chris Burniske: Absolutely.
Peter McCormack: Because it seems to me there are a lot of funds who hold a lot of tokens, but these markets are highly illiquid.
Chris Burniske: Yes it’s definitely something I think about. Lots of people know we’re highly involved with Decred and one of the things I work a lot on is having conversations with different exchanges and liquidity providers about the merits of Decred and helping to organically build liquidity that way. I think for Decred it’s important to build liquidity. I think that different assets are going to have different required liquidity profiles.
So for example, governance assets, it might actually be okay if they’re slightly more illiquid. That might actually be more of a feature than a bug, in preventing say a hostile takeover very easily, because there’d be so much slippage in the market if someone were trying to amass a large percent of the asset. So that’s one consideration within the liquidity realm.
I think we’re going to start to see much more segmentation in the capital market structure of crypto assets in terms of, we’ve been predominantly exchanges and OTCs have really risen to prominence over the last few years. Now we’re seeing things like [Inaudible] as a prime brokerage, which is aggregating all of these different liquidity pools. So you will start to see different assets having liquidity in different places for different reasons.
Peter McCormack: I assume you’ve discussed Decred with Murad?
Chris Burniske: At length.
Peter McCormack: Yeah, I was with him in Hong Kong and a lot of people seem to know that he’s very bullish on Decred. I don’t know anything about it, to be honest.
Chris Burniske: Well we wrote an investment thesis on it, that’s also on our website. Just very simply, I think of it as Decred has it, it is hyper-secure, adaptable and sustainable and that kind of gives you the framework that you need to dig in more.
Peter McCormack: So I do want to go back to one of your points you said to me about, that you feel that the hardcore Bitcoin maximalists, I call them the hardliners that shout loudly on Twitter, do more harm than good for the mass adoption of the currency. So I think it’s interesting to talk about that because I’ve been really wrestling with this and even this morning, before I came here, I had an hour-long conversation with Shinobi who was on Stephan Livera’s podcast, a hardcore Bitcoin maximalist, because there’s been a lot of questions over my guests recently.
I’ve had people who were considered frauds and scammers and almost certainly this interview will get flack because it’s a Bitcoin show supposedly, and they’re not your biggest fan. They don’t appreciate the work you’re doing because they believe in one Blockchain, which is Bitcoin. They believe everything other use of a Blockchain is a myth. They believe that crypto assets are a myth and they’re not part of the same category.
Chris Burniske: Well Bitcoin doesn’t believe any of that.
Peter McCormack: Let’s say Bitcoin’s community. So I have a lot of sympathy for this because I still struggle to see all the use cases after all this time. I’ve looked at the various tokens you can invest in and every time I go down these I’m like, “nothing now gives me a gut feel that it’s worth the investment”. You obviously have a different thesis because you’re a fund and you look into it more detail.
But I used to think and I’ve gone through times thinking the hardline maximalists are damaging and toxic. I now think very differently. I actually think that they’re absolutely necessity their hardline approach, it’s almost like it doesn’t matter if this delays adoption, the hard-line approach protects Bitcoin and Bitcoin needs protecting because it has so many threats.
Chris Burniske: So I don’t think Bitcoin needs protecting. I think that going back to the commodity theory of money thought trail that I laid out earlier, Bitcoin’s doing amazingly well and it will continue to price and be the bloodline of liquidity for pretty much every crypto asset out there. That actually by berating new people who come to the community or people who have differing ideas, that that actually counteracts the momentum that Bitcoin naturally has.
You mentioned me say as someone that maximalists dislike. What’s interesting is I’ve had a whole arc; the Bitcoin community in 2014 in 2015 in 2016 even. I mean if you look at 2015, I put out two whitepapers, one “Bitcoin, a disruptive currency” where we actually put in that whitepaper that Bitcoin could hit $17,000, that was celebrated by the Bitcoin community or securing the network paper, it was really doing deep research on and just specific to Bitcoin because that’s really all there was of note at the time, Ethereum had just launched, looking at what the transaction fee would have to be when Coinbase rewards phased out. The new asset class whitepaper, really just digging into tons of stats on Bitcoin’s returns, Bitcoin’s volatility, risk-adjusted returns, really contextualizing it for institutional investors. ARK was the first public fund manager to invest in Bitcoin. That again brought a wave of goodwill.
If you go back in Youtube shows in time, I was on with Vortex a couple of times and had different friendly exchanges, for example, with Mr Hodl. I think there’s one memory that comes to mind is, I posted a photo of me with Bitcoin beanie and it was clear I in New York. He said something like, “keep wearing that and we’ll run into each other in New York”. So I started, I think it would be overinflating myself importance to say, cherished by the Bitcoin community, but an embraced member of the Bitcoin community early on.
So I, from my first-person experience, have watched as I started to explore and just ask more questions and I didn’t intend it to be in a threatening way, the backlash that that started having. I think that there are a few scenarios on Twitter that I could have handled differently and I think that it’s never good to fight fire with fire on Twitter. It only amplifies and negativity. You need to be a positive vessel and just absorb negativity, not reciprocate it because then you only amplify it. Twitter has been a meditative tool I would say for me in that regard, but I don’t really have much of a feeling I think anymore regarding maximalists.
I think that intellectually I worry that if we’re trying to take Bitcoin mainstream, that means the vast majority of users will not be educated about the merits of Bitcoin. They won’t care. They just won’t care. They will actually be turned away if they feel like they have the screaming mob asking, “why the hell did you use this other asset?” Because they’re just trying to use things that are faster, better, cheaper, or novel. I think that something very controversial to say. Let’s take Coinbase. Coinbase as an application has done a massive amount of converting of people into Bitcoin hodlers and it’s not through the preferred self-sovereign custody model.
But I’m willing to bet most people don’t want the pressure of our ideologically preferred self-sovereign model. So I think a lot of this ties very deeply into the way I live my life and guided loosely by different eastern philosophies. But the vitriol, the negativity and the hate I find totally unnecessary and not constructive. I don’t think that Bitcoin needs to be defended in such a way and I think it’s counterproductive to defend it in such a way. Bitcoin actually defends itself perfectly well of its own merit.
Peter McCormack: So I guess where I would give an example, I think it was useful was SegWit2x. We had a private New York agreement with companies attending …
Chris Burniske: A fight intro-Bitcoin though interestingly, not tokens against Bitcoin.
Peter McCormack: Of course, but this is entirely focused on Bitcoin. If SegWit2x had activated and the core repo would have gone over to, I think Jeff Garzik’s team, I’m shooting from memory now, I think that was a huge risk. I think it was defended and rightly defended. But because there were people like John Carvalho going into the threads and there were people like the hardcore maximalists who were threatening like the companies, not in a physical way, but just making them really understand what they were doing was wrong and the deal fell apart because there was so much anger and so much hostility towards that.
We have to also thank Luke Dash Jr’s UASF, but there was so much hostility towards it and I think that requires some kind of hard-line approach. I think that requires people who do feel they want to defend it. Because Bitcoin has been under threat its whole life, its whole existence. I don’t think it can be defended unless it has those people who are willing… I heard one guy say, “I would die for it”. No, I don’t think we should die for it. But I understand the sentiment.
Chris Burniske: So you raise a good point and actually want to walk something back. I think that Bitcoin thus far in its life because you’re right that it has been under attack and it’s been under attack from traditional finance and these kinds of things. I think that thus far in Bitcoin’s journey, it has needed to be defended in this way and with say extreme conviction in ideology. Part of my point is Bitcoin is like a tree or like a child, in that it grows, it starts off green and it needs to be protected. But as it unfurls it enters different stages.
If we really are committed to the mainstream and then the rhetoric either needs to change or it will be buried in the wires such that it’s irrelevant. I actually think the latter is probably more likely, which is why I don’t beat the drum on this too much and I just let it be where it is because social media is not a constructive place to have these conversations anyway. It’s too nuanced and social media is just going to want the emotion in the fire.
But I think that we have to encourage the community to be mindful about the progression of what’s necessary and to not alienate people who are just thoughtfully raising questions. Another way to think of it is every community is going to have governance or maybe better put as every community has to make decisions. There’s always going to have to be a choice about the pathway for how those decisions are made and not setting up a framework is a decision in itself.
That is the choice of governance. I understand governance is a loaded word, but just using it as the best example we have now, taking that into account and understanding, okay, so this is Bitcoin’s chosen form of governance. I think also for Bitcoin, it moves faster than people think it moves. But I don’t think it needs to say move as fast as say Ethereum does, just because of the value proposition that it provides to the world. We’ve gone on a bunch of different threads!
Peter McCormack: Yeah we’ve bounced around a lot and covered a lot of things. I’d like to talk about the Coinbase thing at the moment. So one of the arguments that the Bitcoiners have against Coinbase is that whilst Coinbase originally supported Bitcoin, has been good for Bitcoin, it’s onboarded a lot of people. It also has arguably been a threat to Bitcoin. Being VC funded to a valuation of something like $8 billion at some point, it has to deliver return and with that, of course, comes pressures and I assume a16z have a voice in their direction and I assume a16z hold a lot of ETH. I assume Brian Armstrong holds a lot of ETH.
Chris Burniske: But they also probably hold a lot of Bitcoin too.
Peter McCormack: They hold a lot of Bitcoin, but there is a necessity for them to introduce people to unproven crypto assets. By the way, which is interesting because it’s still very difficult for some institutional investors to invest in Bitcoin because we’ve had such a delay in getting an ETF approved. Yet at the same time, it’s very easy for an uneducated retail investor to go on Coinbase and buy 0x; something they probably shouldn’t be buying or arguably shouldn’t be exposed to.
What the bear market has exposed is I think Coinbase’s need to deliver a return for the silicon valley investors and therefore it seems like… It’s almost like their product strategy reflects a big drop in revenue and a need to push and compete with the likes of Binance. That to me does feel very unhealthy and I can then understand from Bitcoiners why they see Coinbase as a threat because Coinbase’s incentive is to make money, not to promote Bitcoin. Bitcoin isn’t meant to be about supporting VCs, growth and investor returns. It’s meant to be about providing hard decentralized money and there’s a conflict there.
Chris Burniske: So I would say this is the newest narrative. But there’s a long history between Coinbase and the Bitcoin community,
Peter McCormack: I guess because Brian Armstrong has supported most of the contentious forks.
Chris Burniske: But if you go back to Coinbase’s founding and even when I was ramping professionally in the space, there were still people who would pick fights with Coinbase, because it’s hosted. Or different security concessions. I think maybe something that repeatedly happens is an inability or an unwillingness to see and accept another entities perspective and it is what it is. They’re going to do, what they’re going to do and they’re going to have a different value system than your value system.
But no amount of yelling, kicking, screaming is going to change it. So we can have rational, thoughtful discourse around it and understand why everyone is doing what they’re doing. But you don’t persuade people with expletives. You persuade people with logic and reason.
You laid out the logic and reason for what they’re doing and I think it’s one of the reasons why they’re doing what they’re doing. I don’t think that… so I know Fred Ehrsam much better than I know Brian and Fred’s no longer with Coinbase. Actually, a lot of the people I know well, are no longer with Coinbase, but I have never felt in conversations with any leadership at Coinbase that there was any malicious or nefarious intent against Bitcoin.
Peter McCormack: No, but the business has pressure. That’s the problem, it’s quite obvious. They used to have a very strict set of rules for releasing tokens. That’s become very relaxed. I think it’s very difficult to argue anything other than revenues have dropped. They have competition from Binance and I think possibly, Bitcoin is in some way this weird gift. It could have not happened. But it has and for some reason, it’s worked. It’s still here after 10 years and it really is genuinely a miracle and a gift to the world.
Then I start to feel like, yeah, maybe we do need to protect this. Maybe we do need to defend it with all we’ve got because most other things out there in this kind of crypto asset world are opportunities for people to make money. There is some kind of pseudo equity model as we’ve discussed today where people have invested early on and they want a return.
Whereas Bitcoin is kind of different from everything else. You talked earlier, I wrote this down, but you said, “we’ve seen a collapse in the cost of asset creation and that’s created this incentive for people to create tokens and issue ICOs for selfish, fraudulent and scammy reasons”.
Chris Burniske: But also for good reasons.
Peter McCormack: Sometimes yes, but both have happened. Bitcoin is like we have this gift and I understand now why people want to defend it because I know now myself in what I do, I’ve talked about my podcast, it’s changed my life. I get to travel the world, meet people. I don’t want to fuck it up. I do not want to fuck this up and I am fully now conscious that I have a podcast with Bitcoin in the title and I owe a lot to Bitcoin. I’m conscious that I do not want the wrath of the maximalists and I’m glad I have that.
Chris Burniske: But I also don’t think you can be afraid of the wrath of the maximalists. If that becomes its own form of censorship, of speech, that makes the community more brittle. We learn from biology that diversity of species leads to the robustness of the ecosystem and so I think that diversity of ideas is always going to be important. think that something I worry about with what we’ve seen with Bitcoin and not just Bitcoin, broadly in crypto, because of the ease of forking and that most of this communication happens online where people are meaner than they are in person.
We have these divisive arguments that are never reconciled and so we just end up forking saying, “fuck you, I’m out of here”. So we have governance by defection, as opposed to recognizing that life is always a compromise. It’s a compromise with yourself and your own priorities and you know how much time you can fit in a day. It’s compromised with others and your interpersonal relations. When you blow it up and expand it to the scale of a crypto network, it gets even messier.
But I think that it’s really important as much as possible to continue to evolve and craft together as opposed to just continuing to splinter, splinter, splinter, splinter, and this is a lot of our thinking behind Decred. Finding if we set the expectations around governance, communication and conflict resolution, then hopefully we as a community can agree to disagree in different periods, but collectively move forward. I think that is the most constructive way to do it. Otherwise, you go back to this community that whittles away in governance by defection and I just don’t think that’s healthy.
Now for me on a personal basis, I hold two things. I hold Bitcoin and I hold Ether. I guess I have Bitcoin Cash from the fork, which I never sold because I learned to not sell Ether from the Ethereum and Ethereum Classic fork. I guess I have all the children forks, which I haven’t bothered to go claim. But I hold those two things as a retail investor and I do that because I don’t want to think about it. I have reasonable conviction in these two assets going forward and I manage a whole portfolio for Placeholder.
But I think it’s perfectly rational for a retail investor and probably advisable to just hold those two assets or you know, you mentioned Monero, totally different code base. I think that’s an interesting addition and I actually used to hold Monero before we started Placeholder. But yeah, keep it simple if you’re investing from a retail perspective and especially in this bear market, there’s a consolidation to safety, a psychological reversion to say the things that we know, Bitcoin has been much more proven. So if you’re only holding Bitcoin, that’s fantastic! At least you’re holding Bitcoin.
Peter McCormack: Do you know what I find really interesting? Is that there are a considerable number of people with a very binary view that Bitcoin is the only valid use of a Blockchain and the only crypto asset that will exist. They have the fundamental belief that everything else is a fraud and a scam and will eventually fade away including Ethereum.
Then there is another group of people who fundamentally believe that there is multiple uses for a Blockchain and there will be multiple crypto assets. I find that so interesting that we’ve got these two groups of people with these opposing views and I honestly, I genuinely don’t know what’s going to happen. I don’t know in 10 years time, all the maximalists are going to go, “yeah look we were right. Ethereum’s dead, Decred’s dead, nothing has survived”.
Or in 10 years time, we’re going to have this vibrant ecosystem of Blockchain based systems. My suspicion is that it will be only Bitcoin.
Chris Burniske: You are entitled to your opinion and your first-person subjective experience. I would say empirically it has only been trending in the other direction over time. I think the first altcoin, Namecoin if that was it, but in the Namecoin, Feathercoin, you know all those things era, which I believe was 2011, a rendition of this conversation was already being had. We’re eight years in. We’ve gathered a lot of empirical evidence. A ton more money has flowed in. A ton more talent has flowed in and the majority of it is not with Bitcoin.
Bitcoin has the largest percentage of any crypto network and I think will continue, will always be the mother and I think has high odds of continuing to be the bedrock for decades to come of the crypto ecosystem. But directionally it’s only going in that direction and so I’m a very data driven person. I will change my mind and try to have very little ego in my ideas because that’s the death of an investor being attached to your ideas for no good reason. I will change my mind and change my ideas if I see it heading another direction.
But empirically I’m just seeing more and more talent and interesting things being built say outside of Bitcoin. That is not to discount what is happening within Bitcoin. I think there are amazing things happening within Bitcoin, but for me, it’s not an either or and it goes back to the world of programmable value. If you look at the world’s assets, monies represent I think roughly 10% of the world’s assets. There’s so much more. So I feel it’s like when you see horses on the road and they’ve got those blinders, I just don’t understand the blinders.
Peter McCormack: Well talent is subjective. I mean somebody could say all the best talent is in Bitcoin because they understand it’s the only use. So I think talent’s subjective I would say.
Chris Burniske: But what about someone like Zooko?
Peter McCormack: I mean I would say Zooko is a very intelligent person, a lot of the skills. But I also think he’s the kind of person who would excel as somebody having a boss, not as a leader or a CEO of a privacy coin. I think zCash has many, many issues and I don’t see a future for it and I don’t see it being adopted. I think the clash between shielded and unshielded is very odd. I think the user experience… And the price has only gone one way. It’s just dropped and dropped.
So a talented guy. But what I’ve noticed is that there’s a lot of people who worked on Bitcoin and then go and work on alt projects for a number and a variety of reasons. But I don’t think it’s right to say there’s more talent in one area or the other, because I think talent is subjective.
Chris Burniske: It is.
Peter McCormack: Some people would say I am a talented podcaster. Some people say I’m a terrible podcaster. It’s subjective. Also directionally it’s definitely on certain metrics going one way. There’s lots of things being built, lots of supposedly interesting things coming out; Polkadot, Cosmos. I struggle to keep an eye on them because I’m starting to pay less interest to most of them because what the maximalists would say is, “we’ve been here for 10 years and we’ve seen these cycles. Money comes in, projects happen and they die. Nothing else has lasted with the strength of Bitcoin”. It’s very hard to kill a Blockchain.
Chris Burniske: Well nothing else could have lasted as long as Bitcoin because Bitcoin is the first.
Peter McCormack: No but with significant usage. There is a real lack of materially significant usage of anything. I mean even Bitcoin at sometimes… Well, I spoke to an OTC desk and he said, “Bitcoin is the only sensible tradable liquid crypto asset”. Nothing else is worth having on their OTC desk. So I’m just saying the direction it’s going because there is this belief by people and there’s money coming in from venture capital to prove that these Blockchains can be used for something else. But that doesn’t mean it will.
Chris Burniske: It doesn’t. It absolutely doesn’t. I think when I look at metrics and I understand the problems with network value, but Bitcoin’s dominance being its network value divided by network value of all crypto assets outstanding is generally trending down. I would love for someone to do, and maybe we’ll do it internally if no one does, but just looking at… As flawed as all of these metrics are, I think there’s an interesting study to be done on say, the network value.
If you take the aggregate capacity of all these different metrics and look at Bitcoin’s share within it, things like network value or number of transactions or transaction value or hash rate or even say percent of networks that have proof of work based versus proof of stake based. All of these other things are taking share, not because they’re better than Bitcoin, but because there’s only so much that can happen within Bitcoin and Bitcoin being the community that we’ve described it as is not necessarily the most welcoming to a new developer coming to the space.
So people are choosing to build on other things and they may be half as talented, they may be a 10th as talented, but the experimentation is happening. I’m willing to accept if it all becomes a failure. But again, I just directionally haven’t seen that and when I look at Ethereum stats, for example, amount of gas used being really the key utility metric, that has held up much better than actually Bitcoin’s core metric of value transacted and that is developers.
Peter McCormack: Why is value transacted a core metric if it’s a store of value?
Chris Burniske: Of the network’s processing capacity. I agree store of value is kind of this latent feature, but if you’re going to use the network for something active, as opposed to passive, I would say that transaction value is the most important active utility metric.
Peter McCormack: Okay. I would struggle with that because it’s a store of value. It’s had its scaling difficulties as everything had. So I personally would struggle with that.
Chris Burniske: But I wrote a piece in December when everything was tanking just called “Bitcoin & Ethereum: prices are down more than fundamentals”. Where actually we went through an exploration of all the different fundamentals, at least as much as I could do in half a day and wrote it up just to show things are still happening.
If you turn away and if you mistake depression for death, then these things will continue to blossom and grow and become unexpected successes. I believe, you may not believe, in the years to come, but I think the important thing is you and I have no animosity for each other. This is a good conversation. This is a rational, level headed, engaging discussion and I just want more of this in the crypto community, as opposed to the toxicity.
Peter McCormack: Yeah, definitely. I’ve really enjoyed this. We could probably do another hour! We would almost certainly do this again in the future. I’ve got a lot out of it. I still stand by thinking the hardliners, I think they’re necessary, I really do.
I feel like I have the freedom to do as I choose and I choose to do this interview and I’ve enacted it in a way… Nothing has changed about the way I would have done this interview because of the hardline maximalists. I don’t feel like I can’t have my curiosity. But at the same time, I’m fully aware. I feel like they’re sat here on my shoulder just watching over me saying, “be careful Pete!”
Chris Burniske: Well from their perspective you’ve just gone and gathered information from the enemy.
Peter McCormack: Yeah. Well, you are part of the threat model! But no, I appreciate what you’ve done. I’d be interested to read your book again now because the last time I read it was about a year ago. I’ve actually got a little stack of them at home.
Chris Burniske: I’ll have to sign that one.
Peter McCormack: Do you know what I’m stupid, I should have brought two.
Chris Burniske: I’ve got an extra. I’ll give you an extra!
Peter McCormack: So I would like one and probably give one out as well. But I appreciated the book at the time. It was very useful for me for a number of reasons, but I’d almost be interested to read it back again and see how I feel about it now because I’ve changed a lot since then.
Chris Burniske: I’d be curious to see how I feel about it.
Peter McCormack: Well that’s why I asked you in the start. I was wondering what you would think because there’s certain things that have had a lot of pressure, like the equation of exchange. A lot of people have challenged that. Velocity has been challenged.
Chris Burniske: Sure.
Peter McCormack: So it would be interesting to see where you went with it again. But I think this feels like a good point to wrap things up. I don’t often record for an hour and a half! Actually what I’ve noticed is the less I look at my laptop and the more I just talk, the longer the interviews are. So for some reason, it seems to work better. Anyway, it would be great to just tell us what’s coming up for you guys. If people are interested in Placeholder, how they can find out about Placeholder and who you want to hear from.
Chris Burniske: Well, we’re always making new investments and open to conversations with engineers working on interesting projects. Placeholder’s website is just very simply placeholder.vc. I’m on Twitter at @cburniske and you can find me other messaging mediums, though I’m more elusive.
Peter McCormack: Thank you so much for having me here finally.
Chris Burniske: Thanks for having me, Peter!
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Chris Burniske on The Ethics of Investing in Tokens was originally published in Hacker Noon on Medium, where people are continuing the conversation by highlighting and responding to this story.
Christian Decker — An Introduction to The Lightning Network
Audio interview transcription — WBD092
Note: the following is a transcription of my interview with Christian Decker, a core tech engineer at Blockstream. I have reviewed the transcription but if you find any mistakes, please feel free to email me. You can listen to the original recording here.
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In this episode for Lightning Month, I talk with Christian Decker from Blockstream. We discuss the competing whitepapers, how the various teams collaborate on Lightning, how payment channels work and upcoming dev projects.
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Interview Date: Sunday 10th March, 2019
“Lightning is a mechanism for us to make Bitcoin more useful, make it available to more people and extend Bitcoin’s reach into more use cases.”
— Christian Decker
Peter McCormack: Morning Chris, how you doing?
Christian Decker: Hey, I’m doing good. Thanks for having me.
Peter McCormack: Thank you for coming on. So I’ve told you that I’ve got a whole month of Lightning shows coming up and this one’s going to be the first one, because when I spoke to Adam about it, he said, “you have to speak to Christian”. You’ve heard some of my interviews and I always start my interviews with, what is Bitcoin, because of the variety of answers I get. But for this, I’m going to be asking obviously something slightly different. So what is Lightning?
Christian Decker: Lightning is a mechanism for us to make Bitcoin more useful, make it available to more people, extend Bitcoin’s reach into more use cases and basically enabling all of the promises that we thought we had solved back in 2009.
Peter McCormack: Okay and just so everyone knows, what is your role at Blockstream?
Christian Decker: So I’m a software engineer and researcher at Blockstream. I’m mainly working on Lightning, the specification and our implementation called C-Lightning.
Peter McCormack: Okay. So Adam said to me, the reason I have to talk to you is that Tadge released his white paper first, but actually you had prepared yours first. But because it wasn’t an academic paper, it was actually hidden away from everybody.
Christian Decker: Yes.
Peter McCormack: Can you talk me through this?
Christian Decker: So this is probably the worst thing that can happen to you as a researcher, is basically that, you’re spending months and months on writing up a paper and coming up with a basic idea of how this should fit together and how it should work. Then you write all of this up in a process that takes several weeks to get it right and then you basically send it to a conference. Sometimes you even have to wait for a conference to be open for submissions before you can actually submit it. Then it takes again, months on end for the conference to actually review what you’ve done and then basically give you the thumbs up or thumbs down.
If you get the thumbs up, you are good to go, you go to the conference, your paper can be published and then basically makes its rounds around the world. That’s the stage where other people might jump in. Before this, basically, only yourself and the reviewers had access to the paper. Once it’s accepted and it’s going to a conference, you can actually share it with the wider world, because at that point you sort of had dibs on the invention
It so happens that I wrote my duplex micropayment channels paper, which is what was under review at that time. I had submitted it and then a few days later somebody pointed me towards this lightning.network address with a pdf on it. I was shocked that there is something that looks very similar to what I did. It turns out, yes, there is a lot of overlap. We have different approaches, but they basically just had scooped me!
I spent a very frantic weekend trying to grok the paper and wrap my head around this competing proposal. I could make out some differences, but the core idea of having a payment network made up of payment channels was the same. Yeah, we then had to sort of emphasize our differences a bit more and try to point out that we are better than Lightning. But at that point, the race was basically lost and the paper got published, had some success. But obviously, everybody now talks about Lightning!
Peter McCormack: Okay. So the community has to what, make a decision about which one it wants to implement?
Christian Decker: Well, it basically is the Lightning paper coming slightly before and honestly having some major advantages over duplex micropayment channels, had more momentum behind it. For me it was basically the decision, do I want to create a competing implementation of a payment channel network?
Or do I want to join this effort surrounding Lightning and basically just help making Lightning a vigorous system that has more utility, than having two different systems that split the community? Because this being a payment network, the basic utility comes from everybody being on the same network. Everybody is able to pay to everybody else.
So I decided to drop my duplex micropayment effort in favour of joining the Lightning effort and sort of trying to get that out the door more quickly and making it better. But we are grabbing some of the nice parts of duplex, micropayment channels back, some of the good features that we had, some of the trade-offs that I liked a bit more about duplex micropayment channels and try to bring them into Lightning. So what we end up with is sort of a synthesis of both protocols that have better tradeoffs overall.
Peter McCormack: So the people working on Lightning took a look at your paper, you debated it together and shared ideas?
Christian Decker: Yeah, we had some really interesting discussions and we saw that there are merits on both sides, but Lightning basically had more momentum and honestly the trade-offs were more in favour off of their side. So I decided to jump ship. In gamer terms, I’m probably WinTeamJoiner! But it turns out that this has helped the effort quite substantially. There is no point in creating two competing networks. If we can create one where everybody can participate in and everybody can interact.
Peter McCormack: So when I spoke with you yesterday, you told me about something which I’d heard of that there is actually a long history of payment channels. So can you explain what a payment channel is, what that actually means?
Christian Decker: So I mentioned this usually when I give lectures on these payment channels or layer two solutions or off chain protocols, but I’ll use them interchangeably because they sort of mean the same. What you basically do in a payment channel is two parties meet somewhere. They put some money on the table and then start discussing about who gets what share of this money.
The reason we put this money on the table in the first place is so that no single party can basically grab the money and run away because it needs the acknowledgement of both parties to split this money up again. Now in Bitcoin terms, this is basically just a multisig address where both parties need to sign off on the payment that originates from this address. That basically means that both of us have to come to an agreement of how we want to split the funds that are on this multisig address
So that’s the basic concept and we can discuss back and forth on how to split this money. So if I put a $10 bill on the table, all $10 belonged to me, and we have one transaction that basically refunds me my $10. Now if I want to transfer $1 to you, then I create a new transaction that would be a settlement on this payment channel and you get $1 out of this and I get the remaining $9 out of it. We can transfer this back and forth multiple times and we always have a transaction in our back pocket that basically reflects the latest state that we agreed upon.
Now, this might seem like a silly trick, but if you look at what the Blockchain sees from all of this is basically, okay, there is a payment that creates this multisig address where we pay in some money. That’s usually called a setup transaction. Then eventually there will be a settlement transaction that sort of subsumes all of the interactions that we had in between where we basically say, “okay, this is the final state on how we want to split it”. So with these two transactions, we’ve just settled however many transactions we have or transfers we had between us two.
This allows us to make far better use of the Blockchain space that we have because two transactions now basically aggregate whatever happened in millions of transfers between us two. The true power of all of this comes from the network part of Lightning network basically. Meaning that if we have a channel open between us, it’s nice to be able to move funds back and forth, but chances are that we will not have millions or billions of interactions between us.
So the networking part is basically that I can extend a payment to you and you can forward it to a third party who might be the intended recipient of my initial payment. By chaining these multiple hops of payments along payment channels, we can actually reach anybody in the network. That’s the true power of the Lightning network, is that by just having this two-party relationship called a channel, we can then extend payments to any participant in the network by just chaining these two-party interactions.
Peter McCormack: You were telling me that Satoshi discussed this quite early on?
Christian Decker: Yes. So, when I give my lecture, I usually start with the question, “what’s the earliest payment channel or off chain protocol that people can think of”. Usually, people will start talking about Lightning. Some people might mention the simple payment channels that were discussed on Bitcointalk quite early on, where you can create incremental payments from one direction to the other, but not the reverse.
But very few people actually, I’ve only heard a core team member discuss this so far, is basically that in the original Satoshi client there was this concept of a sequence number for transactions. That was basically that we can create an initial transaction like our initial settlement transaction giving me back my $10, and we can then amend this transaction by replacing it with a new transaction. The rule would basically be that the new transaction would need to higher a sequence number than the replaced transaction.
We should probably mention that the core difficulty in all of this, is that we have the settlement transactions, but we have no really easy way to invalidate an old settlement transaction. So when we started off with the $10 on a table and we have a refund transaction that gives me back my $10 and you get $0. Then we do an update and now you get $1 and I get $9. Now you might want to use that transaction that has $1 in it for you and I would definitely prefer the one that gives me back my full $10.
So we have a race between these two states. So you have a valid state that gives you $1 and I have a valid state that gives me $10. So we need a mechanism to invalidate the old state where the transaction would give me back my $10. With the end sequence proposal that was basically saying, “hey, if there is a transaction that has a higher sequence number, that is to be preferred to whatever came before.”
Now, this didn’t really work, it was actually broken. First of all, because you can only replace transactions as long as they aren’t confirmed and there is no real way for it to incentivize miners to actually pick only the most recent one. So depending on me as a miner receiving or not the updated transaction, it could happen that the old transaction would confirm and well, we agreed to something newer, but the miner didn’t see whatever we agreed upon in time.
But we can also do it more maliciously, where I can basically go to the miner and say, “hey, these two transactions that are competing, please use mine and I’ll give you some small part of whatever I cheated Peter out of”. So this bribing works. So the end sequence mechanism never really worked and we ended up repurposing these this field for different proposals, the check sequence verified proposal, the BIP68 relative timelock proposal and all of that stuff.
So we grabbed back the wasted space, so to speak, but we had to come up with a new update mechanism. That’s basically what all of the follow up papers did, was basically create a system where we can enforce whatever we agreed upon and basically ensure that only the latest state actually makes it onto the chain and I can’t really use my $10 refund transaction, despite having agreed with you to actually give you $1.
Peter McCormack: So that was Satoshi mentioning it early on. At what point did payment channels start to become a serious discussion, where you guys were really thinking, “this is something we now really need for Bitcoin”.
Christian Decker: So there have been quite a few experiments with payment channels over time. Mostly we’ve been using these simple micropayment channels where you can only send in one direction. That was interesting because you could suddenly create a streaming mechanism or streaming service that you could pay by the second. What one of my students did was basically implement an access point that you could set up a captive portal with. Then you basically log in and pay per byte that you use your Internet for and the second you stop paying, you would lose Internet access again.
But these were inherently limited because if you can only transfer in one direction, then as soon as I have used up my balance, there is no way for it to be re-used again. So while we get a bit of flexibility, when we pay, how much we pay and we can do these really rapidly adjusting increasing payments, there is no way for us to do bi-directional payments. While there may be a way of doing multi-hop payments, they’re very limited, as all the money flows always in one direction.
So in late 2014 after I wrote a paper on Mt. Gox, malleability and all of that fun stuff, it was time for us to go back to look at scalability, which was basically my main PhD topic. I looked at these payment channels and was like, “okay, maybe we can build something out of this”. We came up with a mechanism called duplex micropayment channels that did actually allow us to do by bi-directional payments so that we could actually use the money that is in a channel multiple times and send it back and forth.
As mentioned before, the Lightning efforts started in parallel and then they were able to build a different mechanism. But, it ended up basically being what became the Lightning network in the end.
Peter McCormack: Was there ever a time where you personally wrestled with the block size?
Christian Decker: Very early on. When I pitched my PhD, I wrote up a document that was like 16 pages and it had all the problems I’d like to address on Bitcoin and how to make it work better. Basically, the number one thing coming from a distributed computing background was that, yes we have solved somehow consensus or Byzantine agreement. But it’s really inefficient and we really can’t go to VISA levels of transactions.
The first publication I did was basically just going and measuring this, what happens when broadcasting transactions in a network and seeing what happens if you broadcast blocks and how the size of a block impacts the propagation time of the block ends in the network. Propagation time being the principle problem that miners face because if you can’t get your blocks to be known to the rest of the world in time, there might be competing block.
What we showed was basically that the naturally occurring Bitcoin forks were because of inefficient communication in the network. Later this was actually used by Emin Gun Sirer to then show that selfish mining exists where you keeping the information for yourself might end up helping you compete against other miners. So really the first and foundational piece of research we did was basically show that, yes there is a limit to scalability of how much a block size can grow.
Always with the caveat that if we want to have the network as decentralized as possible, we probably need to put some limit on the block size and not let them grow indefinitely, because then we end up with a system that never converges again to a consistent state. These numbers have been picked up a few times and basically what we showed is that with the network at the time, a 13mb block would basically result in us not creating a chain any more. But would basically just be a sprawling tree where everybody was on a different branch and was sort of not agreeing with anybody else on a different branch anymore.
Peter McCormack: Okay. So let’s get back to the Lightning. So the papers out and discussed, debated back and forth, a final version is agreed upon. How many implementations do people start to work on? Is it two to begin with?
Christian Decker: So it actually is quite interesting because Tadge and Joseph published the paper and suddenly there was a lot of buzz, but nobody really thought about implementing it. So at some point, Rusty, a colleague of mine, he took up the challenge of trying to write a small explainer, a blog post about Lightning. When he was hired at Blockstream, he started working on C-Lightning. In the meantime, Tadge and Joseph had started looking into this more closely and soon afterwards they founded Lightning labs.
At the same time, a small development company in Paris called ACINQ also thought, “hey, this is cool, let’s start this.” So all of a sudden there were these three companies after months of radio silence. Suddenly there were these three companies coming up with an idea or starting to implement these things. At some point we decided, “hey, it doesn’t really make sense that we implement three different incompatible versions.
Maybe we should join efforts and create a more compatible version of this and basically creating a bigger network that will help us all to get more use out of it”. So to begin with the whole effort was started with these three companies and we met in Milan in 2016 at the Scaling Bitcoin conference. We sort of jotted down the scope, what we’d like to do in the first version and that’s what later became the spec version 1.0 and that’s what started all of this basically.
Peter McCormack: So is there a set of standards that you all comply with?
Christian Decker: So we collaboratively write these documents called “BOLTS”, which is the silliest acronym we could think of. It stands for Bases Of Lightning Technology. Obviously, the acronym came after the name, like this should be.
Peter McCormack: Well it’s perfect for Lightning!
Christian Decker: Yeah! I think at this point we’ve used all of the naming jokes related to Lightning and electricity! So we collaboratively write these and sort of discuss back and forth on how we should implement certain things and what the trade-offs are. What I always like to point out is that we come from really different outlooks into this protocol.
There’s Eclair who’s primarily focused on mobile nodes that have spotty network connections and not that powerful of resources. We mostly concentrate on power users running on servers and really good connectivity. And LND basically is running mostly on desktops, which also have rather good connectivity and sort of a more hobbyist user base, so to speak.
Peter McCormack: Are there any risks of incompatibility between them?
Christian Decker: Oh, yes! We’ve found many of them. But we will always come back to the table and then discuss tradeoffs, and who is right and who is wrong. Mostly we agree you right away who should change their implementation and what the right way of it is. It’s mostly that we have under spec something, that we have an implementation detail that turns out to make us incompatible. So we need to add that to the spec and basically clarify where this has gone wrong and how it should be addressed in future.
Peter McCormack: Was there any discussion about just collaboratively working on one implementation?
Christian Decker: I think, no. We always had this idea of having multiple competing implementations, especially because as I mentioned before, coming from different viewpoints, we’re not as blind as if we were just all agreeing right away. But we can actually have this trial by fire of ideas and test them in different scenarios and test them in different implementations before settling on one solution that should be used.
So I usually compare this with a dialectic principle, where you have a thesis that is proposed, it is then discussed, an antithesis is proposed and then by combining the two, you end up with the end result that is stronger than either of the theses that started off with.
Peter McCormack: I guess me as a user will hopefully be at a point where I won’t ever know which implementation I’m using?
Christian Decker: Yes. So that is something that we’ve currently been starting working really strongly on, is basically simplifying the user experience and hiding all of the nasty details of the technology behind some really nice abstractions and requiring less knowledge from the user, because this should be as easy to use as possible.
You shouldn’t have to learn about channels. You shouldn’t have to know about channel capacities and channel exhaustions and on chain closures and HTLCs, what they are, how they can get stuck. There’s just so much to know in the Lightning network and you shouldn’t have to know it to use this at all.
Peter McCormack: Okay. So it’s out in the wild now. People are using it. What would you say is the current state?
Christian Decker: The current state? Whenever I look at these plots of the current network, I’m almost overwhelmed by how quickly this thing grew! It’s something that is very frightening for us. All of the people basically putting their trust in code that we wrote and all of this excitement around Lightning. It’s a really humbling exercise to see how this network grew from a few hackers that were basically just playing around with the tech, to something that is being actively used and that people are actually building stuff on top.
Peter McCormack: I guess what I was asking is, where do you see the current state in? We’re still advised not to put too much money on it, not to risk too much money. How far away do you think we are from having something that you could competently say, “okay, we’re good now”.
Christian Decker: That’s always hard. I mean, it’s like having your baby! It will never grow up. It will always be this small, cuddly thing that you cherish and you don’t want to expose it to the bad world that is out there. But at some point, you have to realize that this has its own life and that it has created its own world. I tend to be a bit overprotective when it comes to Lightning. I think there will not be a point that is where we can say, “okay, this is now open for everybody and everybody should use it and put their life savings in it”.
It will be a gradual process of people, users and developers getting more comfortable with the idea of using it in their day to day life. We can steer this in a way, by making it easier to for new users to be onboarded. But right now we’re mostly focusing on people that actually can give us the technical feedback that we need to fix stuff, that can help us test the implementations and that can later also help us, onboard new people.
Because if we were to open the flood gates right now, we as a developer team would be completely overwhelmed by all the support requests. So it’s more about creating this environment where other people can help users to onboard and to use this in the first place.
Peter McCormack: Do you still code?
Christian Decker: I code loads, yes! I’ve started coding in C when I started to with this project and coming from a more academic background where we mostly use more abstract languages, this was really intimidating. But call it Stockholm Syndrome, I’m starting to really like C and yeah, I spend 70–80% of my time still coding. The rest of the time I basically just try to try to help people on stack exchange or our issue board or whatever.
Peter McCormack: So if you had to be honest about Lightning. What are the bits that worry you and what are its potential limitations right now?
Christian Decker: What worries me is that there might be a bit off a flashover when it comes to hype. If we get too excited and we can’t deliver features quickly enough, then people might get frustrated by the lack of progress being made, despite there being progress. I always try to put things into perspective and show that this is basically being built by small teams that can’t move as quickly as most people would like.
So this also plays into this slow and deliberate rollout, to more people than that might actually help us with this in the first place before it becomes this big thing where everybody is expecting it to work right away and just has these small issues that are around. From a technical point of view, I think we need to improve the network structure, the resilience against failures in a network, the success rate of individual payments and we probably need to sort of be able to bolster the capacities in the network. Before we can actually go to a place where we process billions of transfers a day.
Peter McCormack: It is still kind of cool though now using it because it pretty much works most of the time I’ve used it. I’ve had payments not get through because there hasn’t been enough capacity. But a lot of the time it’s been fine. It’s been an absolutely pleasure. I guess you must be quite proud of that as well?
Christian Decker: Oh, absolutely. Yeah. It’s an amazing feeling to see basically two screens next to each other and they connect over this global network and you press send on one side and the green check mark on the other side appears. It’s what I wanted Bitcoin to always be and we hit against the limits there and now we can finally get where we wanted to be in the first place. The community feeling is huge.
I mean, this feels a lot like back in 2009 when I first joined Bitcoin. It was this buzz, it was this excitement in the air about what we can do and everybody is looking for use cases where we can apply this and everybody’s just pitching in and helping out! Even if you’re not a technical person, try to talk to people and what are cool ideas and what could we do? It’s all of this excitement that got me working on Bitcoin in the first place. Now we’re back at that stage.
Peter McCormack: Are there any external criticisms which are fair?
Christian Decker: I think many criticisms are fair. We should always be honest about the tradeoffs that we’re making with Bitcoin. One of the most prominent ones is probably that Lightning is not well suited for huge payments. But then again, the idea of Lightning is to be a complementary system to Bitcoin. Not a replacement of it.
I mean, we rely on Bitcoin really heavily for our system to work. We will never replace it. I think criticisms are fair as long as they are not exaggerated and we should take them seriously and we can address them as they come up. We always have to remember that Lightning is still a very young project. There’s stuff we haven’t figured out just yet. We will cross those bridges when we come to them.
Peter McCormack: Do you have any fear about the impact of Lightning on the fee network and the worry for miners? I mean, it’s a debate that’s starting to happen a little bit. Any suggestion of maybe alternative ideas? There’s been talks of recycling old coins, there’s been talks of having slight inflation and everybody is shot down immediately. But in the back of my mind, I keep thinking, well, there could be a situation where the fee market in the future does not cover enough for the miners and that’s going to impact the security.
Christian Decker: Yeah, absolutely. I mean that’s definitely a fair point and something that comes up fairly often. I do think that… Look the block space is limited and we need to keep it limited for Bitcoin to stay as decentralized as possible. So what Lightning is doing is basically making better use of the resources we have by aggregating multiple transactions into multiple transfers on the Lightning network, into one or two transactions on the Bitcoin Blockchain.
Peter McCormack: It’s also enabling transactions that wouldn’t have happened normally as well?
Christian Decker: Absolutely. I mean, it basically extends the reach of Bitcoin as a currency to places where we couldn’t have done before. I almost like to call the Lightning network, a fee aggregation network, because what we do is basically we create this second layer of payment channels, where we now perform millions of transfers.
The work that the miners have to do is just confirm those two transactions, the setup and the settlement transaction, instead of having to verify each of these small transactions. But because we have some quite different requirements on the confirmation speed of these transactions, we are actually willing to pay higher fees for these on chain transactions that are left on the on-chain. We are willing to do so because the utility we got from these two on chain transactions is way higher than if we had just these two on chain transactions without the aggregation that we did on the Lightning network.
So I think our willingness to pay higher fees, the fact that we’re a complementary network and not replacing all of the use cases for Bitcoin, will maintain the fee market such that the miners will still be able to make a living by securing the network and have less work to do to get those fees basically.
Peter McCormack: So what are the most important things now coming up for Lightning? The key kind of development milestones?
Christian Decker: Oooh, loads of stuff coming up! So back in Milan in 2016, we scoped out the specification or for 1.0, such that we can basically implement this and have a minimal set of features in there as quickly as possible. Well, it turns out to have taken two years anyway, but okay!
Peter McCormack: Dev timelines always overrun!
Christian Decker: Oh yeah. It’s always two weeks! But now we met in November in Adelaide for our spec 1.1 meeting and scoped out what we’d like to have in there. There’s so many ideas that we basically put on the back burner to get this initial working version out, that we just put back on the table now and that we definitely like to have and there’s just so much! For me, the most exciting ones are splicing and then splicing out.
Those are basically ways for us to create on chain transactions out of payment channels or stocking up at payment channel by adding some funds to an existing channel. What this basically allows us to do is to eliminate differentiation between on-chain funds and off-chain funds. So if we have a channel among ourselves open and I go to a merchant that accepts only on chain payments, then what we do is basically we do a splice out, where I tell you, “hey, I’d like to do a splice out and by the way, splice out $1 to this guy, by providing you with an address”. Then we collaboratively do a close and reopen.
Basically, the funds are spliced out to this merchant. What this allows us to is basically to stop differentiating between on chain funds and off chain funds and you just get one big balance to see. Because it tends to be confusing for users to have to check, “okay, I have X in off chain funds and Y in on chain funds and I’d want to pay Y plus one. Now I have to close the channel before I can do that”. This basically gives you one big balance that you can look at and be happy about.
Peter McCormack: In your wallet? So you just have one balance in your wallet?
Christian Decker: Yes
Peter McCormack: And when you send a payment, it will just use the appropriate…
Christian Decker: Exactly yes.
Peter McCormack: That’s cool. I didn’t even know about this, because I’ve got that with my blue wallet. I’ve got two balances. Ok, that’s very cool!
Christian Decker: The other feature that also goes into that same vein of user experience is multipart payments, which allows us to bundle the capacity of multiple channels. So currently what you have is each user needs to manage a number of channels and decide to whom they are opening it, because they are allocating funds to this peer.
If this peer disappears, then well, this is money is not available anymore or is not available for a certain time. What the multipart payment allows you to do is basically bundle multiple channels in such a way that you can do a larger payment by splitting a payment over multiple channels at the same time. What this allows you to do is forget about the difference between having one $10 channel or 10 $1 channels because you can always bunch them together again.
So a single peer becomes less important, but you can still perform larger payments even if you split your funds over tens of channels. What this allows us to do is basically hide channels from you because you don’t have to care anymore about having a very stable peer and having a huge capacity because, well, this capacity will dictate what the maximum amount you can transfer at once is, but you can basically spray a number of channels to peers that you think are reliable and the in combination, they will still be there when you need them.
You just bundle channel capacities when you need them. So what you end up with this basically a wallet that shows a single balance, no concept of channels if you don’t want to look at them and it’s just balance and transaction lists that you had before. That looks really close to what Bitcoin is right now. So this is basically what I mean by hiding implementation details from users that don’t want to put in the work to learn about these concepts and we will handle all of this in the background.
Peter McCormack: Oh man, that sounds so cool!
Christian Decker: There is so much more to come!
Peter McCormack: We’ll have to talk again!
Christian Decker: We have onion changes that we’d like to do, rendezvous routing, spontaneous payments and all of that fun stuff.
Peter McCormack: So listen, if somebody is listening and they haven’t had a play with Lightning yet, what would you advise them to do?
Christian Decker: So we have a number of implementations. Each of these implementations has very good guidelines, very good introductory guides on how to get started. All of these can be found on GitHub and just go to one of them, try to figure it out. If you’re more of a mobile person or if you want a mobile app, go to Eclair, they have a really good Android wallet.
If you are on a desktop and just want to get started really quickly, go to LND, download their client. It’s a full feature opinionated client that comes in as a full bundle of functionality. If you’re more of a power user, that likes to tinker with stuff and you’d maybe one to create a service, then come to C-Lightning and we will guide you to where you need to be and help you where you need help.
Peter McCormack: Amazing. How do people stay in touch with you?
Christian Decker: I’m @snyke on Twitter. I’m cdecker on GitHub and that’s mainly it.
Peter McCormack: Great! Thank you. This is really exciting. I can’t wait to see these new things.
Christian Decker: It’s an awesome time to be alive!
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Christian Decker — An Introduction to The Lightning Network was originally published in Hacker Noon on Medium, where people are continuing the conversation by highlighting and responding to this story.