Exchanges are verticalizing

Leo Zhang

By Leo Zhang

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Editor's note

Last week we compared the current crypto market environment to the early days of the oil industry in America. Exchanges, the first generation oligarchs in cryptocurrency, are racing to verticalize by transforming billions of dollars of last year's revenues into equity in next year's complementary startups. The ludicrous margin these fiat-crypto highway toll stations are generating have captured regulators' attention. This week, the New York AG launched inquiries into US-based cryptocurrency exchanges; CEO Jesse Powell of Kraken (which doesn't allow NY residents on its platform) publicly refused to respond, saying stringent regulations are not appropriate for a young industry. Silicon Valley VCs seem to share the sentiment. A group of the most active ICO ventire funds held a close-door meeing with SEC to plead for lighter regulatory treatment of these dubious projects. The market, on the other hand, cares not about developments from the legal side. ICOs are sucking in capital more fiercely than ever, despite reeking with fraud (see stories below).

This week's news recap

Monday:Earn.com acquisition signals more Bitcoin-industry consolidation, like the early days of the oil business
Wednesday:NY Attorney General launches inquiry into cryptocurrency exchanges
Thursday:Will regulators make an example of Ethereum?
Friday:Even the most obvious scammers can't curb the ICO craze

Further readings this week

Benedikt Bünz : Bulletproofs

Reddit discussion on Bulletproofs

On radical markets
(Vitalik Buterin)

"There is a limit to how complex economic incentive structures and markets can be because there is a limit to users’ ability to think and re-evaluate and give ongoing precise measurements for their valuations of things, and people value reliability and certainty."

Debate between Vitalik Buterin and Preston Byrne on stablecoins

Cryptokitties isn't as popular as you think it is
(CCN, by Josiah Wilmoth)

"Citing data from DappRadar, Greylock community lead Chris McCann reports that CryptoKitties has fewer than 1,000 daily active users. Granted, interest has sharply declined over the past few months, but he estimates that even at its peak the DApp likely only had about 14,000 daily users. Neopets, a game to which CryptoKitties is often compared, once had as many as 35 million users."

Discussion thread on large miner consolidation

Bitcoin engineer Peter Todd comments on changing PoW

The multi-billion dollar industry that makes its living from your data
(Visual Capitalist, by Nick Routley)

"The goal of data brokers, such as Experian or Acxiom, is to siphon up as much personal data as possible and apply it to profiles. This data comes from a wide variety of sources. Your purchases, financial history, internet activity, and even psychographic attributes are mixed with information from public records to create a robust dossier."

The 2,500-year-old history of adults blaming the younger generation
(History Hustle)

"'Cinemas and motor cars were blamed for a flagging interest among young people in present-day politics by ex-Provost JK Rutherford… [He] said he had been told by people in different political parties that it was almost impossible to get an audience for political meetings. There were, of course, many distractions such as the cinema…'"

2017 Letter to Shareholders
(Jeff Bezos)

"However, as we’ve long said, online bookselling, and online commerce in general, should prove to be a very large market, and it’s likely that a number of companies will see significant benefit. We feel good about what we’ve done, and even more excited about what we want to do."