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Month: June 2020

Why Is Grayscale Buying 100% Of The Mined Bitcoins Since Halving

Grayscale is buying 100% of the bitcoins (and more) that have been mined since halving.

Grayscale’s fund is for the investors who want to buy and hold Bitcoins without going through the trouble and technicalities of acquiring and storing Bitcoins safely. Instead the investors simply buy shares in the Grayscale Bitcoin Trust.

But it’s not so difficult to buy and store Bitcoins especially with companies like Coinbase in business that make buying BTCs as simple as using PayPal. Then what is this new kind of increased interest from this certain class of investors who are only willing to buy Bitcoins through Grayscale’s trust? Let me explain.

This new attention seems to be coming from IRA / Roth IRA retirement and pension accounts that are eligible for tax benefits when buying BTC through Grayscale’s trust. In other words, with macro instability and to hedge the COVID-19 related crisis, the retirement and pension money is going into crypto-assets.

There are many out there who view Bitcoin as fake-money or a ponzi-scheme. At the same time the world is exchanging “real cash” for the “fake one” at 30 million dollars per week from their retirement and pension accounts to weather a storm.

Last Mover Advantage

The first mover advantage is talked about a lot. The first mover advantage is often quite great but not necessarily game-changer. First mover advantage is both for businesses and early users of the businesses. For example, Amazon has the first mover advantage in the e-commerce space. The early sellers of Amazon also enjoyed first-mover advantage on the platform by monopolizing competitive niches. All early users of social networks that eventually go big have a huge first-mover advantage in influencer marketing.

But the last mover advantage is not frequently talked about. The last mover advantage is that you look at everyone’s mistakes, let them take risks, and you only launch a product after learning at their expense. This isn’t talked about a lot probably because it’s not fancy to talk about it and that not everyone can enjoy the last mover advantage. Often but not always, you need to be at a place of influence to enjoy the last mover advantage.

On Amazon, as a seller, you often prefer going after products that others have tried and tested for months, you learn from their experience by studying the listings, and launch in the end so you have absolutely no risk of dead or wasted inventory etc.

In a similar manner, as a seller, Amazon enjoys the true last mover advantage. After all sellers are done testing, trying, risking, & iterating, Amazon comes right in the end with their own private label product often under the brand name of Amazon Basics. Because they enjoy a position of having everyone’s data, they truly love having the last mover advantage.

The Chinese Live Streaming E-Commerce Craze

Tech adoption and associated consumer trends in China are a few years ahead of the west. One such trend took a massive boost through the COVID-19 crisis in China and has become a major craze.

It is the live-stream e-commerce which Chinese believe is the closest experience to shopping offline in a retail store.

Many Chinese e-commerce apps, live-streaming apps and super-apps have embraced this trend including TaoBao, WeChat and Douyin (TikTok China) and the shopping experience really is friction-less.

Here are some of the reasons why I think this trend will grow, not just in China, but in the west too.

Firstly, live-stream e-comm is great for product discovery. Amazon in its current form is great for search and buy shopping experience but awful for discovering new products. On the other hand, Instagram is a good platform for discovering new products, but doesn’t have a seamless shopping experience in its present form. Although, with the announcement of “shops”, there’s an obvious plan to change that.

Secondly, all the Chinese apps are offering in-app checkout. So you can tap on the products shown in the live-stream and conduct your purchase right within the app while the live-stream stays uninterrupted. Instagram plans to bring in-app checkout with “shops”.

Thirdly, the Chinese apps have in-app frictionless payment options e.g AliPay and WeChat Pay. Facebook/Instagram do not yet posses the capability to offer in-app payments, but plan to offer with Libra.

Fourthly, in-app streaming & shopping experience enhances consumer trust as the products are shown live instead of the photoshopped 3D photos and professional videos.

Fifthly, apps also offer AR try-ons. So you can try the products e.g glasses, shirts etc to get a feel of how they would look on you.

And lastly, the apps have built-in game mechanics with features to induce scarcity, and get credits/cashback for sharing the stream with your friends etc.

It is unbelievable how far in the future China is with e-commerce in comparison with the western counterparts. But I’m sure that the west will catch up to these trends.

Instagram and TikTok are best positioned in the west to capture this in the future. If you’re an influencer on one of these platforms, the great days will come as the west catches up with the Chinese frenzy.

Riding Along The Wave

Forbes is double-dipping in ad-revenue by publishing about Kylie Jenner. First they made the entire world read the headlines that Kylie is the world’s youngest self-made billionaire.

Months later they published that Kylie and her family lied about her billionaire status and that she is not yet a billionaire. Instead, she’s worth only 900 million.

I don’t know about you, but I see no difference in being a billionaire or being worth 900 million. If she’s worth 900 million, she will be a billionaire in 1 or 2 years.

Instead I thought of something else when I read the news. I thought that an instagram influencer is (nearly) worth a billion dollars. She’s built this empire using Instagram, a Shopify store, and by private labeling products.

I also thought that Facebook only paid a billion dollars for Instagram while today an Instagram influencer is worth a billion dollars.

I also thought about TikTok posting 17 billion dollars in revenue in 2019 and over 3 billion dollars in profits. And the fact that they have over 1.5 billion monthly active users, more than Instagram as well as Snapchat.

I thought about gaming influencers/streamers who are making tens of millions of dollars per month using Twitch, YouTube, etc.

I thought about influencer marketing. I thought about riding along the wave of a powerful platform such as TikTok.

And I thought how being early in riding that wave can make you a millionaire or even a billionaire.

I have known, met or spoken to 100s of influencers till date who were early in riding the wave on Digg, StumbleUpon, Reddit, Facebook, Instagram, Snap, TikTok etc. I know a large majority of them are worth at least hundreds of thousands of dollars.

If you saw a platform taking off, figured it early, and cringed instead of taking advantage, it was your loss and it will continue to be.

Libra Vs Bitcoin

The optimist in me loves Bitcoin despite its many shortcomings. I don’t think Bitcoin will ever be as popularly used as Libra or another stablecoin payment system. Despite that, the optimist in me suggests Bitcoin is a great buy.

The realist in me recognizes how powerful Libra could be. For those of you who don’t know what Libra is, it’s a collateralized crypto-payment project by Facebook. Libra plans to offer basket of stablecoins like USD, EUR & GBP.

Here’s an intro video of the Libra Project.

There are many collateralized stablecoins already out there in the market so Libra isn’t planning to do something that isn’t done before. However the unique thing about Facebook is that whatever they do, they can plug and play that to 2.5 billion users.

Libra’s Advantages

Facebook demos that they will make sending money as simple as sending emojis with features to do so built right within the Facebook’s family of apps. Libra’s unique proposition in comparison to other available options is users and ease of use.

Libra or other stablecoins have several advantages over Bitcoin. The crypto-assets will be fully collateralized and backed by fiat currencies. The crypto-assets will be stable in value and the transactions would be really fast.

.. But Money Is Already Digital?

However, if you think about it, money is already digital. When you pay with your debit and credit cards, or you send money using your bank, or through PayPal, you’re passing value digitally. Money has been digital long before Bitcoin or any crypto-assets.

Digital is generally the opposite of anonymous and censorship-resistant. When you say digital, the information about your money is hosted on someone’s server. Who ever controls the server can see what you do with your money and can intervene, reverse or block actions that you may take with your money.

Cash in comparison is not digital but anonymous and censorship-resistant.

Bitcoin’s Advantages

Bitcoin’s # 1 strength is seldom talked about. It is the finite supply of Bitcoin which makes it deflationary in nature instead of inflationary which USD and all its digital variants including stablecoins & Libra are. The second most important feature is that Bitcoin is censorship-resistant because it is decentralized with no central control. The third one about anonymity could be argued upon. It does an OK job at being anonymous but since the ledger is out in the public, it isn’t fully anonymous.

Conclusion

The feature of stablecoins being stable like USD or EUR is not just a feature, it’s also a bug. One of the biggest disadvantages of money as we know it is that you can’t just hold on to money without losing value. You’re forced to have your money invested in real-estate, stocks & bonds for it to not lose value. Bitcoin as a money is designed to be free forever from the central bank’s control over the money’s supply and its movement. Because of this Bitcoin is designed to grow in value and hence it can not be stable.

The following table could be helpful

AssetDigitalDeflationaryCensorship-resistantStableAnonymous
BitcoinYesYesYesNoYes
CashNoNoYesYesYes
Stablecoins / LibraYesNoNoYesNo

Why You Should Start A Business In Recession

One of the advices that seems to come from everywhere with regards to recession is to lower your customer acquisition cost because the lifetime value of the customer is going to be lower than before. Of course this makes sense. There will be behavioral changes in the purchasing patterns as well as cut in spending. This will make your customers less valuable for you than before.

However, when the customers are spending less, and the businesses are paying less to acquire them, it makes customer acquisition cheaper for all businesses. Sure, they are cheaper to acquire because they are less valuable, but you are being given a one off opportunity when it’s over-all cheaper to start your business.

The cost to start a new business is significantly lower during a recession.

If you’re not VC funded but bootstrapped like me, this means a great deal. We’re already planning some e-commerce stores and hoping to schedule the launch right when the markets are in deep turmoil.

What’s Way More Dangerous Than Most People Think?

I found this interesting reddit post about what’s way more dangerous than most people think?

One of the responses personally got me

Doing nothing for a long period of time.

As I’ve mentioned on this blog earlier, I retired for a bit over 2 years. But the idea of retirement shouldn’t be to prepare yourself to do nothing. Because do nothing gets you, gets you fast, and gets you bad.

Instead, the idea of early retirement should revolve around doing the meaningful. It should revolve around working on things you’re passionate about and working for that passion and not for the associated compensation.

I’ve heard other early retirees say the same.

Why Are Tech Giants Pushing For Cookie Apocalypse

3rd party cookies are going away, forever. If you don’t understand what it means, browsers will no longer allow any third parties to track you. Safari, Mozilla and Brave already block these 3rd party cookies and Chrome has also given a 2022 deadline. By 2022, 90% of web-traffic will be blocked from getting tracked by 3rd party cookies.

As soon as I wrote that, I realized that it sounds like a great thing for privacy proponents. And it probably is. Big tech giants including Apple, Facebook & Google are rooting for it. However, do you think they are doing that for altruistic reasons? Because they care about privacy of the users? Or do you think they are far more likely to root for something for capitalist reasons? Here’s what’s happening.

Why Giants Love It

Facebook, Google and Apple have insane amount of first party data. They have locked-in users that they can directly track using their own platforms. First party cookies can not and are not going anywhere. So they are counting on the fact that all the small guys will be crushed by the apocalypse, giving these tech giants more control and bigger market share than before.

Not only that, Facebook & Google have already worked a work-around to track all outbound traffic generated from their websites by passing on a parameter (FBCLID & GCLID). So they can continue to track users on many websites as long as the user is referred via their platforms, all without 3rd party cookies.

What Happens to Small Guys

If you’re an independent publisher, I have bad news for you. I know you already feel bad about your business with ad blockers killing you for years, reduced affiliate commissions, and a broken subscription model. Making money as an independent content creator is hard. Unless you embrace the platforms.

If you’re a creator on YouTube, you’re good. You publish and monetize the content within the Google eco-system, there’s no problem for you. If you’re a content creator on Facebook and Instagram, your problems are taken care of too. But if you’re an independent creator outside of these platforms, then hell is ready to break loose on you. Your declining ad-performance is going to get worse. Unless of course, your textual content embraces Facebook instant articles or Google’s AMP. Or you have a successful subscription model.

Cost of Advertising on Facebook & Google

As these platforms prepare to take a larger market-share because of better tracking, ease of finding relevant customers because of tracking, and a better conversion attribution, more and more brands and marketers will endorse advertising on these platforms pushing the CPMs through the roof. 3rd party advertising will prepare for death.

Conclusion

While this seems great for privacy of users, I don’t think it presents any significant improvement. It only blocks tracking for small guys and independent creators. Nothing changes for Google, Facebook or other tech giants.

If you’re an independent creator outside of these platforms, you have less than 2 years to make a transition to serve content & find audience on these platforms. If you don’t intend to do that, you should transition to subscription model. If you plan to continue to monetize with advertising, you should create a lock-in with your users for first-party tracking and sell advertising directly.