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Venture Capitalist Tim Draper Wins Bitcoin Auction

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Re: Venture Capitalist Tim Draper Wins Bitcoin Auction

#41

Post by _delirium »

cbhl wrote: post #37
jordanmessina wrote: post #28

The Drapers are quite bullish on Bitcoin. Adam Draper's accelerator, Boost VC, is investing in 100 Bitcoin companies over the next 3 years: http://www.coindesk.com/boost-vc-accelerate-100-bitcoin-comp...

I'm confused as to why anyone would invest in Bitcoin companies as opposed to Bitcoins directly. The impression I got was that investing in companies provided added risks (co-founder separation, business failure, legal risks), without providing a significant advantage (risk mitigation, upside multiplication) over just buying Bitcoins directly.

There are scenarios in which the Bitcoin "sector" grows without the value of Bitcoins themselves appreciating significantly (or at least, to the same extent). For example it could become a common medium of exchange but an uncommon medium to hold, if a large portion of the growth is in Bitcoin exchange platforms that convert payments immediately to national currencies, like BitPay. In such a situation there could be a large volume of business going through companies like BitPay, but with only transient demand for the coins themselves.

Re: Venture Capitalist Tim Draper Wins Bitcoin Auction

#42

Post by ghshephard »

cbhl wrote: post #37
jordanmessina wrote: post #28

The Drapers are quite bullish on Bitcoin. Adam Draper's accelerator, Boost VC, is investing in 100 Bitcoin companies over the next 3 years: http://www.coindesk.com/boost-vc-accelerate-100-bitcoin-comp...

I'm confused as to why anyone would invest in Bitcoin companies as opposed to Bitcoins directly. The impression I got was that investing in companies provided added risks (co-founder separation, business failure, legal risks), without providing a significant advantage (risk mitigation, upside multiplication) over just buying Bitcoins directly.

Bitcoin companies may quickly move to focus on properties of the blockchain that are not related (and, perhaps more importantly, more profitable), than the bitcoin currency.

Also, importantly, bitcoins may be extraordinarily profitable for a bitcoin company, but never increase in value, whereas if you purchased a bitcoin today for $700, and 5 years from now, the bitcoin was still $700, you would likely be unhappy.

Re: Venture Capitalist Tim Draper Wins Bitcoin Auction

#43

Post by kolev »

chollida1 wrote: post #10

Wow, looking at the order book of bitstamp [1] through the eyes of someone who lives in the world of market microstructure is eye opening:) There are huge holes everywhere in the order book and the liquidity at each offering level seems to be completely without reason. I just spent 20 minutes applying the sort of algorithms that'd we'd normally run on each stock to make markets in it and it can't detect any real patt…

The main driver behind Bitcoin is amateur speculation. As those guys don't stand any chance on real markets, they find opportunity in Bitcoin.

Re: Venture Capitalist Tim Draper Wins Bitcoin Auction

#44

Post by jonnathanson »

cbhl wrote: post #37
jordanmessina wrote: post #28

The Drapers are quite bullish on Bitcoin. Adam Draper's accelerator, Boost VC, is investing in 100 Bitcoin companies over the next 3 years: http://www.coindesk.com/boost-vc-accelerate-100-bitcoin-comp...

I'm confused as to why anyone would invest in Bitcoin companies as opposed to Bitcoins directly. The impression I got was that investing in companies provided added risks (co-founder separation, business failure, legal risks), without providing a significant advantage (risk mitigation, upside multiplication) over just buying Bitcoins directly.

The distinction is subtle, but important. Let's say, for example, that I have no real idea what the price of bitcoin should be in five years -- but I am confident that enthusiasm for, and interest in, bitcoin buying and trading will grow dramatically all the while. I'd rather own the company processing the transactions than the bitcoin itself. The bitcoin might soar, and it might tank, and it might do both of those things in a mostly unpredictable, haphazard fashion. (As has been happening.) But the companies trading bitcoin don't necessarily need to buy and hold. They can make money off of transaction volume, or off of leverage against their bitcoin assets, or off of any number of things only tangentially affected by the nominal value of bitcoin.

This is sort of like the old saying about how to make money in a gold rush. You don't mine for gold; you sell picks and shovels.

Re: Venture Capitalist Tim Draper Wins Bitcoin Auction

#45

Post by dragonwriter »

roymurdock wrote: post #40
bredren wrote: post #33

Earlier quoted context omitted.

Rob from Gliph here. Gliph is a Bitcoin company from Boost VC Class 2. Tim Draper led our angel round (with Pantera) and is a mentor to Gliph. Tim has been excited about Bitcoin and its potential for some time. Well in advance of other VCs, Tim was talking about its potential, particularly with regard to "competitive governance." Have a look at this youtube video from his presentation at Stanford in February of last…

The developers and miners are, in effect, the government of bitcoin. The developers act like the federal reserve, in that they can change the code to raise the max amount of bitcoin, increase the mining difficulty, etc. just as the Federal reserve would conduct open market operations or set interest rates to target inflation. So it's completely wrong to say that Bitcoin is "under no one's control". [0] The key differ…

I think a problem in your analysis is that the miners are the equivalent of the Fed, not the developers. The developers are technical experts on whom the miners rely for tools, but are not the equivalent of the substantive decision makers.

But the bigger problem, whether you view miners or miners+developers as parallel to the Fed, is that you've failed present any argument or evidence supporting your key point, to wit, that the "few" who form the "government of bitcoin" (by your description) are somehow inherently "limited in their ability to be corrupt".

Re: Venture Capitalist Tim Draper Wins Bitcoin Auction

#46

Post by dclusin »

chollida1 wrote: post #10

Wow, looking at the order book of bitstamp [1] through the eyes of someone who lives in the world of market microstructure is eye opening:) There are huge holes everywhere in the order book and the liquidity at each offering level seems to be completely without reason. I just spent 20 minutes applying the sort of algorithms that'd we'd normally run on each stock to make markets in it and it can't detect any real patt…

https://www.bitfinex.com/ allegedly (or at one point) claims to offer FIX connectivity. And they have swaps for BTC.

Re: Venture Capitalist Tim Draper Wins Bitcoin Auction

#47

Post by roymurdock »

dragonwriter wrote: post #45
roymurdock wrote: post #40

Earlier quoted context omitted.

The developers and miners are, in effect, the government of bitcoin. The developers act like the federal reserve, in that they can change the code to raise the max amount of bitcoin, increase the mining difficulty, etc. just as the Federal reserve would conduct open market operations or set interest rates to target inflation. So it's completely wrong to say that Bitcoin is "under no one's control". [0] The key differ…

I think a problem in your analysis is that the miners are the equivalent of the Fed, not the developers. The developers are technical experts on whom the miners rely for tools, but are not the equivalent of the substantive decision makers. But the bigger problem, whether you view miners or miners+developers as parallel to the Fed, is that you've failed present any argument or evidence supporting your key point, to wi…

The Fed makes the rules. The banks/people perform the actions under those rules that create economic activity in the US.

The Developers make the rules. The miners perform the actions under those rules that create economic activity in the Bitcoin markets.

Say the Fed is corrupt/stupid and enacts a bad policy. The banks/people have no choice but to accept the decision of the Fed. Theoretically you could emigrate, but that is neither desirable nor feasible for the majority of the population.

Say the developers are corrupt/stupid and decide to raise the Bitcoin cap to 30 billion and lower the difficulty, effectively hyperinflating the currency. The mining community has the choice to either a) not accept the changes to the client or b) to vote with their digital feet by moving to another cryptocurrency. They are more likely to choose a) assuming they've been mining for a while/have a reserve of Bitcoin.

The key is that the miners "rely [on the developers] for tools" as you put it. The tools = the client = the rules of the game. So the developers make the rules and the miners decide whether or not to play by them.

Re: Venture Capitalist Tim Draper Wins Bitcoin Auction

#48

Post by adrr »

cbhl wrote: post #37
jordanmessina wrote: post #28

The Drapers are quite bullish on Bitcoin. Adam Draper's accelerator, Boost VC, is investing in 100 Bitcoin companies over the next 3 years: http://www.coindesk.com/boost-vc-accelerate-100-bitcoin-comp...

I'm confused as to why anyone would invest in Bitcoin companies as opposed to Bitcoins directly. The impression I got was that investing in companies provided added risks (co-founder separation, business failure, legal risks), without providing a significant advantage (risk mitigation, upside multiplication) over just buying Bitcoins directly.

Without the infrastructure to support bitcoins, the value bitcoins will remain stagnate or may even go down. Investing in companies to build out infrastructure for this currency is only "sure" bet you can take unless you gamble on someone else to make the investment.

Re: Venture Capitalist Tim Draper Wins Bitcoin Auction

#49

Post by mrb »

test1235 wrote: post #19

Where does the money actually go after the sale is complete?

"Proceeds generated from asset sales are used to operate the AFP, compensate victims, supplement funding for law enforcement initiatives and support community programs." http://www.usmarshals.gov/duties/factsheets/asset_forfeiture...

Re: Venture Capitalist Tim Draper Wins Bitcoin Auction

#50

Post by throwaway283719 »

chollida1 wrote: post #10

Wow, looking at the order book of bitstamp [1] through the eyes of someone who lives in the world of market microstructure is eye opening:) There are huge holes everywhere in the order book and the liquidity at each offering level seems to be completely without reason. I just spent 20 minutes applying the sort of algorithms that'd we'd normally run on each stock to make markets in it and it can't detect any real patt…

Well, a big part of the sparsity of the order book is that the tick size is tiny for a market this immature.

Take the USD/JPY rate for example, which moves in ticks of 0.01 and is currently sitting at 101.83, so the tick size is 0.0098% of the price (or about 1 basis point). This is a mature currency market between two giant countries.

By comparison, BTC/USD also moves in increments of 0.01 but its price is 655, so the tick size is 0.0015% of the price (0.15 basis points) which is absolutely tiny for such a thinly traded market.

I'd suggest that it should be trading in ticks at least 10 times larger. A cursory glance at the order book (top of book is currently 654.03 and the tenth level is 653.00 on the bid) shows that this would result in the first ten levels being filled most of the time. If it traded in increments of $0.20 (20 times the current tick) then the first ten levels would easily be filled.

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