Week in Ethereum News




Week in Ethereum News
September 4, 2016

Quick Hits
Dates of note
  • 9/7 – RexMLS crowdsale closes
  • 9/7 – Next bonus tier of Iconomi ends.
  • 9/9 (probably later) – SingularDTV crowdsale opens
  • 9/19 – 9/21 – DevCon2  (!!!)
  • 9/26 – eSports First Blood crowdsale begins
  • 9/28 – Hong (similar to The DAO) closes.
  • September TBA – Golem crowdsale begins
  • 9/29 – Iconomi closes
ICO Investing Strategies
  1. Spray and Pray. Invest in every ICO crowdsale that passes a minimum screening of “Are these founders outright scammers?” or some similar low-effort screen.   The goal is essentially to create your own “index fund” of ICOs.  The downside is that you’ll have lots of relatively small amounts of tokens to keep track of.
  2. Scratch Your Own Itch.  Put differently, this is Peter Lynch’s recommendation to invest in the products and service you love.  Unless you’re investing passively (or semi-passively like Spray and Pray), investing in something you don’t understand is probably the most fundamental investing mistake.  When you scratch your own itch, you know there’s at least one person who really wants the product/service.
  3. FOMO.   Put your money in the biggest and most visible crowd sales.  While this sounds risible after The DAO, the advantage is that (A) you know the team is decent at marketing and (B) you could think of it as outsourcing your investment decisions to people with skin in the game.  If you trust crowds, at least. After intro to sociology in college, I don’t.
  4. Pick The Winners. If you can do it, then this is the one you should do.  Keep in mind that in venture capital, historically just a few firms produce the vast majority of returns, so very few people even within VC are actually good at this.  I don’t have a cite handy, but it was a fundamental lesson from passing the CFA and CAIA exams.

In my opinion, most people are probably best off doing Spray and Pray or Scratch Your Own Itch, depending on how bullish you are overall about early Ethereum projects.

So what am I doing?  Well … Pick The Winners, of course!  Most people are overconfident in their investing skill, but (A) I pay more attention to this space than most, (B) have done well as well as anyone so far, although it’s a tiny sample size, © I enjoy it, and (D) I’m < cough > capital constrained < cough > so I’d rather deploy my limited capital in the most concentrated amounts I can muster rather than in small amounts for Spray and Pray and then have to keep up with tracking all those tokens.

Disclaimer: This is not investing advice. Nothing I write in this newsletter is investing advice. Make your own decisions and be responsible for them. I don’t know your portfolio, tax considerations, goals, tolerance for risk, etc so I can’t possibly even be close to giving you investing advice.

Bonus Content – My Current Framework Analyzing ICOs

I wrote a longer framework of how I analyze Ethereum ICOs, including a checklist of questions I ask myself.  It’s two pages, so too long to put in this email.  

Share this issue on Facebook, Twitter, Reddit, or any other social site and email me at WeekInEthereum@gmail.com and mention where you shared it.  You’ll get an email with the framework within the next few days.

If you prefer to donate Ether (any amount) instead of sharing, 0x96d4F0E75ae86e4c46cD8e9D4AE2F2309bD6Ec45

Preliminary ICO Thoughts: One By One

Hong.   Site

I skipped The DAO because I thought it was DOA in a dozen ways, including code risk.  I have no interest in outsourcing investment decisions to big crowds.

RexMLS.   White Paper

AMA

Epicenter Bitcoin interview

The idea of disrupting real estate MLS is attractive to me.  Over a decade ago, I started a company attempting to do that in the residential market.  My co-founder and I got little traction, yet somehow managed to find someone to buy our site for a profit.  

Disrupting the network effects of any local MLS is very difficult.  The Rex team has some experience in the industry, and has a feasible short-term and long-term plan.   With that said, my experience tells me that executing those plans is going to be quite a challenge and it’s too risky for me.  While they’re aiming at commercial in one of the founder’s local markets so he can presumably use his connections to get some immediate listings, I’m skeptical that they can get enough real estate agents to embrace new technology.  Even if they don’t like the MLS, the value proposition will have to be undeniable to even get scale in one local market.

Also, I’m not clear on why this project needs a blockchain.  It seems like they could just set up a normal company and compete with the MLS.   Perhaps I’ve missed that.

SingularDTV.   Prospectus

Four projects in one: (1) sci-fi TV series, (2) Ethereum/blockchain documentary, (3) video-on-demand platform, (4) entertainment IP rights/royalty management platform

Entertainment is a hits business, where the range of outcomes is polarized: you lose a ton of money or you make a ton.  Perhaps the Ethereum documentary comes with a built-in audience that reduces the risk, but I have little interest in that gamble.

I don’t believe that organizations are likely to be successful doing four big things at once. The latter two projects I would consider on their own, but I’m not interested in all four at once.

First Blood.  Site

Play video games on the internet for money.  I’m not a video gamer, so I have to research the field more, but the idea generally fits with my work-in-progress investing thesis.

Iconomi.   White Paper

Further links

Their goal is to create a crypto investment fund platform.  If they successfully create an index fund, then I do believe that there is a market for that.  Studies of commodities indexes have shown that a decent amount of their return was due to rebalancing, so a re-balancing index of crypto currencies and tokens is appealing.

What bothers me about this is that this seems really complicated (and the product isn’t done yet), and they’ll have assets under management.   If the assets under management get hacked, investment likely goes to zero.  In that sense, they are very much like an exchange and my view is that the risk/reward ratio is not great.

Furthermore, I can very much see a world in which Coinbase competes with them if they get traction, in which case I am skeptical that their first mover advantage will be substantial enough.

Golem. Decentralized AWS is very interesting. I have a feeling that their ICO is going to get delayed, so I haven’t done more research and remain where I was in issue 1.

Gnosis. Longer writeup forthcoming, probably next issue.  It most cleanly fits my investing thesis. They are not as decentralized as Augur. The central question is will customers care?

Disclaimer: none of this is intended as investment advice, merely my preliminary thoughts on ICOs for things being built on Ethereum.

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