May 31, 2021 • 11M

Ep 25. Red, white and blue

Crypto for military. Computer chips. USDC is a freak.

 
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Some say Crypto is a scam. Others swear it's a breakthrough technology. But which is it? Join us, as we explore Crypto in real life (IRL).
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It’s Memorial Day weekend. This is a time for somber reflection. Thank you to all who gallantly serve in the military. My thoughts are particularly with the families of those who are deployed and those who fell in the line of duty.

One of my buddies is a captain in the US Air Force. He grew up as an army brat. His family frequently relocated to US military bases across the Lower 48 and in different countries. I imagine sending money across countries was an ordeal. The legacy financial system is slow (2-4 days) and costly. I am excited that digital currencies can help these service men and women gain access to faster, better solutions.

News

1. Everyone wants chips

  • There is a global shortage of computer chips. Computer chips are now used in cell phones, smart cars, gaming consoles, and so on. Apple is the biggest buyer of computer chips; the shortage contributed to delays in releasing the iPhone 12.

  • Last year Nvidia, the 3rd largest computer chip manufacturer, introduced chips specially designed for cryptocurrency mining. In Q1 2021, the company earned $155M revenue from these crypto chips and expects about $400M sales in Q2.

  • I expect more chip manufacturers to go down this path. However, concerns about the energy consumption of crypto mining could lead more protocols to shift from proof of work (mining) to proof of stake. Proof of stake does not require mining.

2. China silver lining

  • China recently added bitcoin mining to a list of industries that requires government scrutiny to protect the economy. This move spooked bitcoin miners. Some turned off machines. Others are shipping them abroad. This is a big deal because China hosts about 70% of global bitcoin mining capacity.

  • One consequence is that bitcoin mining difficulty dropped by 16%. Mining difficulty is a measure of how much computation power is required to mint new bitcoin. The difficulty rises and falls based on the number of computers competing on the network.

  • This is good news for folks like me who mine bitcoin in the US. It means our machines don’t have to work as hard and may receive more yield in the short term. However, I don’t think i this is a short-term bleep.

3. USDC is a freak

  • USDC adoption is up an eye-watering 28x in just one year. In that time, this stablecoin has supported over $615B transactions. This mind boggling growth is driven by traders, DeFi, high-interest savings accounts, cross-border payments and more.

  • Circle, the issuer of USDC, just raised $440M. This is the single largest fundraising round by a crypto startup…so far. The funds are going to support growth and strategic investments. Circle has also been on a hiring spree.

  • I am really excited by stablecoins and USDC is in particular. Stablecoins are digital currencies that are pegged to the value of a dollar. Thus, 1 USDC is always equal to $1. Unlike dollars, USDC can be transferred instantly and cheaply. There are big opportunities for stablecoins to disrupt cross-border payments and more.

4. Coinbase takes on crypto FUD

  • One hundred years ago newspapers urged their readers to stick to horses and avoid cars. In 1995, Bill Gates famously called the internet a passing fad.

  • New technology is often met with FUD (fear, uncertainty, doubt). Blockchain and cryptocurrency are too. There is a lot of misinformation and propaganda. Sadly, traditional news sources have repeatedly missed the mark.

  • Coinbase is launching a fact-check blog. I think this is a great idea because there is a lot of FUD in this emerging sector. That being said, one still has to ask questions and test to see if the logic is sound. Coinbase is a profit-seeking company after all :-)

5. Built with Bitcoin

  • UNESCO reports that over 260 million children worldwide do not attend school. About 10% of them are in Nigeria.

  • Built With Bitcoin (BWB) is a non-profit founded by the founders of Paxful, a peer-to-peer crypto exchange. BWB aims to build 100 schools. They recently launched their 4th school in Kaduna, a state in northern Nigeria.

  • Digital currency and decentralized finance aims to democratize access to quality financial tools. However, you can’t take advantage of these opportunities if you can’t read. Education is key. I absolutely love this project. I am also developing an education focused non-profit. More later.

Question

What do you think about dogecoin for payments?

  • Dogecoin was created in 2013 as a joke. Recently, it has surged in popularity as Elon Musk and others touted it.

  • Elon Musk and Mark Cuban are pushing the use of dogecoin for payments. Mark Cuban’s Dallas Mavericks basketball team became the first company set-up to receive dogecoin payments via BitPay. Elon Musk’s SpaceX is now accepting dogecoin payment for a trip to the moon.

  • I am not convinced. Why would you exchange a depreciating asset ex a car or coffee for an appreciating one like bitcoin or dogecoin? I wouldn’t. For payments, I think stablecoins like USDC or Central Bank Digital Currencies are more likely to gather steam. Buyers and sellers would appreciate a currency with stable values.