Electric Capital Newsletter: №12 — October 2019 - Electric Capital


Electric Capital Newsletter: №12 — October 2019 - Electric Capital

Edited by Ken Deeter (@puntium). You can click here to subscribe to our newsletter.

Open Gardens are Reshaping Business and the Internet
Echoing the principles of the Open Source Movement of the last two decades, new applications built on public blockchains are creating “Open Gardens” which eschew the data and functionality lock-ins that are prominent in cloud businesses. Spencer Noon identifies four key attributes of the Open Garden ecosystem: 1) lower barriers to entry due to the permissionless nature of public blockchains 2) increased difficulty in creating business moats because of the commoditization of core business logic, 3) user freedom (in terms of choice, transparency, and ability to easily create alternative services), and 4) support for rapid experimentation and iteration.

How Negative Real Rates Should Impact Gold (and Possibly Bitcoin)
Alternative, nonproductive, store-of-value assets should become increasingly attractive in economic environments where the real returns of a traditional risk-free assets dip into negative territory. Greg Cipolaro observes that even countries such as the United States are seeing negative returns on long term treasuries in inflation-adjusted terms, and presents data that suggests falling real interest rates are correlated with increases in gold prices as investors look to preserve buying power.

Stellar Airdrops Are Mostly Transferred to Exchanges or Unclaimed
Airdrops are a technique used by cryptocurrency projects to subsidize early adoption by distributing tokens into the hands of potential users. CoinMetrics looks at two airdrops on the Stellar network, showing that often these distributed funds are either left unclaimed, or sold immediately by recipients and traded into other tokens, calling into question the effectiveness of airdrops for driving adoption.

Where are we in the mining cycle?
Understanding the relationship between the price of bitcoin and the hashrate (the amount of computational resources being spent to secure the network) is important for both investors and businesses looking to participate in mining activities. Leo Zhang recaps recent developments in the mining ecosystem as rising Bitcoin prices lead to a renewed interest and investment in mining. With prices back above the cost of production, demand for mining hardware has once again outstripped supply, resulting in inventory shortages among hardware suppliers. Future production cost models show that miners in some regions with lower power costs can continue to be profitable (with today’s Bitcoin price levels) even with a doubling in network-wide computational capacity, and a future planned 50% reduction (the “halvening”) in rewards for miners.

Bitcoin in 2017 Versus Bitcoin in 2019
Although Bitcoin prices still have yet to recover past 2017’s all time high levels, the technology powering the network continues to improve. John Lee Quigley compares metrics of today’s Bitcoin network versus that of the 2017 peaks, finding key signs of progress. Hashrate has increased 3–4x, and the distribution of that capacity across mining pools appears more distributed (both indications of stronger network security). While total transacted daily value in USD terms lags, the number of transactions processed daily has matched 2017 levels while maintaining lower fees. Segwit, a technology introduced in 2017 that enables more efficient transactions, is now used in 35% of all transactions, contributing to the observed increase in throughput at lower costs. Protocol enhancements such as Taproot and Schnorr signatures are on the horizon, promising further enhancements to privacy and programmability.

Today I Learned

Aleks Larsen examines trends of wallet sizes between Bitcoin and Ethereum and finds evidence of diverging use cases between the two platforms. Bitcoin sees many more participants with large holdings, consistent with a store-of-value use case, where as Ethereum sees many participants with small holdings, suggesting a more small scale, experimental usage.

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This newsletter is intended solely for informational purposes. The information contained herein does not constitute investment advice, or an offer to sell, or the solicitation of any offer to buy any interests in Electric Capital Partners, LLC (“Electric Capital”) or any of the private funds that it advises, nor is it intended to be used for marketing purposes to any existing or prospective investor in any jurisdiction, and is subject to correction, completion and amendment without notice. A solicitation of any offer to buy such

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Electric Capital Newsletter: №12 — October 2019 - Electric Capital
Electric Capital Newsletter: №12 — October 2019 - Electric Capital
Electric Capital Newsletter: №12 — October 2019 - Electric Capital
Electric Capital Newsletter: №12 — October 2019 - Electric Capital
Electric Capital Newsletter: №12 — October 2019 - Electric Capital

Electric Capital Newsletter: №12 — October 2019 - Electric Capital

Electric Capital Newsletter: №12 — October 2019 - Electric Capital