Tag: crypto

• Buying condos with crypto

  If you happen to have made boatloads of money in crypto (which sadly isn’t me), one sensible thing you could do is put some of that money into luxury residential real estate. You know, to diversify your portfolio.

  According to this recent WSJ article, it is already happening, with some developers and some homeowners now accepting cryptocurrencies in lieu of US dollars and other fiat currencies. This is helpful if you’ve managed to accumulate a bunch of crypto and don’t want to convert it. It can also be easier when it comes to moving the funds around:

  Avi Dabir, vice president of business development at FTX US, said he sees real estate as a growing sector for the company because crypto transactions are faster and more efficient than traditional deals, which rely on an often-cumbersome banking system.“If I want to send a wire transfer today using my traditional bank account, it’s got to be banking hours, I need to make sure I hit that wire cutoff time and I can’t do it on the weekends,” he said. “That’s not a problem with cryptocurrency. It’s open 24/7.”

  But of course it is still early days for crypto. The article suggests that most developers and owners are arranging for any crypto received to be immediately converted into US dollars at closing. This is presumably because of how volatile cryptocurrencies tend to be — at least right now.

  To accept crypto, PMG had to partner with a regulated exchange that could quickly convert crypto to U.S. dollars, then convince an escrow agent to accept down payments from the exchange, rather than directly from the developer. Mr. Shear said most escrow agents looked at him like he was crazy, but “20 lawyers, one year later, and a lot of brain damage, everybody got comfortable.”

  There are also tax considerations (that I am really not an expert on). If you bought $100 worth of Ethereum and it is now worth $10 million, you are responsible for paying tax on this gain if/when you sell, trade, or otherwise dispose of the crypto. And it is my understanding that if you were to use this $10 million in Ethereum to buy something like a condo in Miami, it would also be considered a taxable event.

  Maybe all of this becomes commonplace or maybe it doesn’t. But it sure is interesting to see crypto already starting to flow into hard assets like real estate.

  2022.02.01

• Protection against risk of expropriation

  

  Property rights, whether for real world things or for digital things, are the foundation of developed economies. Because if you don’t feel like your property is going to be safe and secure, why would you bother investing and trying to accumulate assets?

  Above is a chart I found, in this great thought piece by Ryan Goldman, showing the direct relationship between “protection against risk of expropriation” and GDP per capita. The more protection, the higher the GDP.

  This is, of course, fundamental to the way we live our lives offline. But it is also becoming increasingly important in the way we live our lives online. Because we now have digital assets that people actually care about owning and protecting. You know, like pictures of apes.

  This market is only going to continue to grow and the above relationship between rights and economic development will certainly hold true. But I think the big question is whether there will be more distributed and equitable access to opportunities in this emerging world.

  I hope that will be the case.

  2022.01.23

• Ownership and participation — what cities share with Web3

  

  Here’s a cogent argument by Dror Poleg about how urban economics can be used to explain the evolution of Web3, and also why it’s all a bit of a ponzi scheme, but that when it works, it works.

  His argument revolves around ownership and participation. If you own real estate in a city, you could say that you are both a part owner of said city and a participant. You participate by virtue of living and/or doing other things there, but beyond that you also have a vested interest in the city doing well. Because if the city continues to do well and grow, there should be more demand for real estate, including yours, and that likely means your wealth will increase over time.

  This same force could be said to apply when existing property owners oppose new development. It restricts supply and increases the value of people’s existing “ownership” in a city. It’s kind of like being a company and not issuing new shares so as to not dilute your existing shareholders.

  This connection between ownership and participation is similarly a hallmark of Web3. In the world of crypto, users buy tokens (some fungible and some non-fungible) and those tokens provide access and rights to various things.

  For example, owning tokens might allow you to vote on key decisions affecting the overall organization. And if the organization does well and continues to grow, all token holders should, in theory at least, see their wealth increase. More people will want those same tokens. Ownership and participation.

  Web2 companies, on the other hand, do not typically offer this automatic connection between ownership and participation. That is, of course, unless you’re a shareholder. If you’re just a regular user of a platform like Instagram (which I am), but you don’t own any shares in Meta (I do not), then you’re only a participant.

  If you happen to be a widely followed influencer then you can certainly benefit indirectly from the platform, but you do not benefit from any sort of direct ownership in the organization. Pretty much everything accrues to the house.

  In fact, you also don’t own your followers, from which you derive your indirect benefit. Not to pick on Meta, but if Meta decided that your content was suddenly inappropriate for the platform, perhaps too salacious, then it could choose to close you down and your indirect benefits.

  This, of course, is one of the great promises of crypto and Web3. If you’re a part owner and you have some say in the way things are being run, you can maybe avoid this kind of outcome. And if things really aren’t working out, one should have the flexibility to take their followers and be extra salacious somewhere else.

  We shall see if this is ultimately how Web3 plays out, but the connection between ownership and participation is an interesting one and, if things do end up working out as planned, maybe it can be harnessed to improve our cities. Because we know the problems: inequality, housing supply and affordability, and many others. The system is clearly far from perfect.

  Photo by Adrian Schwarz on Unsplash

  2022.01.21

• Twitter just launched NFT profile pictures

  I was reading this morning about how Meta is working on features that will allow users to display their NFTs on their social media profiles, and to possibly even buy and sell them from within Facebook and/or Instagram. I thought this was kind of newsworthy and so, after the reading the article, I opened up Twitter to share the story. This is then what popped up:

  

  It is an invitation to use an NFT as my profile picture. Now, I am already doing this (it’s a CryptoBabyPunk), except that it would take someone a bit of work to determine if I truly owned the NFT or if I was just posing as a proud CryptoBabyPunk owner for the purposes of trying to increase my internet stature.

  So what this new feature is intended to be is a way to easily demonstrate proof of ownership. Once you connect your crypto wallet and select your NFT, your profile picture changes to a “special hexagonal shape.” This is the marker. Though you have to be a paying Twitter customer to do it (currently a few dollars a month).

  Some or many of you may be wondering why this is even worth talking about. Maybe you like your circular Twitter profile picture just the way it is. But these moves and announcements by large companies are both a vote of confidence for the crypto space and greater “utility” for NFTs.

  The value that somebody might derive from an NFT is wide ranging. In some cases it might just be something to look at (which is generally how art works). And in some cases the NFT might grant access to exclusive events or provide other perks, some real and some alleged. It’s all very much evolving as we speak. But in every case, you really need to be able to differentiate real from fake. What Twitter just did is a step in that direction.

  Broadly speaking, the more infrastructure that gets built out around NFTs, the more value they will have. I think bringing NFT collections to our social media profiles is, for example, a perfectly obvious extension. Here are my photos. Here are my videos. Here’s the stuff I’m tagged in. And here’s my beautiful and wonderful NFT art collection.

  You can bet that the NFTs will become just as curated and carefully managed as the rest of the profile.

  2022.01.20

• My predictions for 2022

  

  As promised, below is a list of some of my predictions for this coming year. I have tried to be both punchier and more precise in my prognostications; because, well, obvious predictions are boring and precision will allow me to better evaluate my thinking at the end of the year. So here goes.

  1. 2022 will be the year that COVID-19 becomes endemic and finally fizzles out to a point where it no longer factors into our decision making in the same way that it has for most people over the last two years or so. I think this will happen by as early as the summer.
  2. As a result, I think the majority of people will be back in their offices by this September at the very latest, with many coming back much earlier. The whole hybrid/flexible work thing won’t completely disappear, but the majority of people who used to work in offices will be back.
  3. Recreational/fringe residential real estate will soften in 2022 as a result of 1) its tremendous run-up during this pandemic and 2) the renewed pull of urban/office life. Conversely, urban apartment rents will continue to rise and eventually surpass their pre-COVID levels. The SF Bay Area could be one exception.
  4. The explosion of travel that I thought was going to happen in 2021, will truly happen this year. The summer will mark its official return, with European travel volumes (to give just one example) returning to their pre-COVID levels.
  5. We will see meaningful efforts to further breakdown the hegemony of single-family zoning throughout many North American cities. This has been building for a number of years and I think we will see some tipping point-like moments in 2022. Specifically, expanded permissions for multi-unit housing and greater densities.
  6. I wish I could say that autonomous vehicles are destined to do something truly remarkable this year, but I think we are still a few years out (2024-2025?) before a large chunk of us are ride-hailing AVs. But on a related note, I do think that Uber will come into its own this year and finally become profitable (and not just with adjusted profits).
  7. Public transit ridership will, unfortunately, remain depressed and below its pre-COVID levels for this entire year. The beneficiaries of this will continue to be cars (not good), bikes, and micro-mobility solutions like e-scooters.
  8. 2021 was a huge year for NFTs and other fun stuff like digital fashion. Given these trends, I believe there will be growing demand from people to better integrate their digital and physical lives through technologies like augmented reality. Snap has been at the forefront of this space for many years and 2022 will be an important year for its Spectacles (AR glasses). But Apple and others will also make major announcements.
  9. Miami’s ascent as an important tech hub will get interrupted by questions surrounding the climate crisis and its own resilience. At the time of writing this post, the price of carbon on the EU’s Emissions Trading System (EU ETS) is about €80 per tonne. I think we will see it break €125 per tonne this year, and possibly go even higher.
  10. Ethereum, Bitcoin, and Solana (in this order) will be the top three cryptocurrencies according to market cap by the end of the year. At the time of writing this post, their market caps are $446 billion, $895 billion, and $55 billion, respectively. I am also expecting some breakout web3 consumer applications that will push, maybe, 40% of Canadians and Americans into the crypto space.

  Photo by Dave Xu on Unsplash

  2022.01.01

• Is crypto just snake oil?

  As I understand it, databases are pretty important to technology companies. Here is an excerpt from a recent post by Albert Wenger talking about why he and his company (Union Square Ventures) believe that web3/crypto is going to unlock new value for our society:

  As a first approximation all the big powerful internet companies are really database providers. Facebook is a database of people’s profiles, their friend graphs and their status updates. Paypal is a database of people’s account balances. Amazon is a database of SKUs, payment credentials and purchase histories. Google is a database of web pages and query histories. Of course all of these companies have built a great deal more over time, but operating a database has stayed at the core of why they are powerful. Only they get to decide who has permission to read and write to this database and which parts of it they get access to.

  So how will web3 be any better? Well blockchains, at least right now, are poorer performing databases in almost all dimensions, according to Albert. And this is one of the reasons why they’re being so quickly dismissed by most people. But they do have one key advantage: permissionless data. No single entity controls a blockchain database. More from Albert:

  It is difficult to overstate how big an innovation this is. We went from not being able to do something at all to having a first working version. Again to be clear, I am not saying this will solve all problems. Of course it won’t. And it will even create new problems of its own. Still, permissionless data was a crucial missing piece – its absence resulted in a vast power concentration. As such Web3 can, if properly developed and with the right kind of regulation, provide a meaningful shift in power back to individuals and communities.

  All of this said, I do agree with Fred Wilson and others that the web3/crypto enthusiasts on Twitter these days are getting to be a bit much. For obvious reasons, everyone is trying to pump the crypto stuff that they own. And it can certainly feel like shills trying to sell snake oil. But as Fred pointed out today, this isn’t the first time that we’ve been here:

  It reminds me of the early days of web2 in 2001/2002/2003, when we started USV. That was also a time of great cynicism. We almost did not get our first fund raised. Nobody was buying the story we were telling. But of course, that story turned out to be true. And I am confident this one will too.

  If/when this story does turn out to be true — and I believe it’s a when — I think we will see it permeate through all sectors of the economy, including how we plan, build, and operate our cities. Of course, this will probably take decades and much of what will happen is unknowable right now. But it’s pretty hard to ignore that this was a pivotal year for the crypto space.

  2021.12.29

• Of course, Nike buys digital sneaker company

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  A post shared by RTFKT (@rtfkt)

  This week it was announced that Nike has acquired RTFKT Studios (pronounced “artifact”) for an undisclosed amount. When I read the news (official Nike announcement here), I immediately thought to myself, “Yeah, of course!”

  Some of you may remember that I wrote about RTFKT back in April. They are perhaps best known for their digital sneaker NFTs (on the Ethereum blockchain). And so this is an exceedingly obvious and strategic buy for Nike.

  But more importantly, I think this is great validation for the crypto/NFT space and further evidence that our digital and physical worlds are continuing to collide in some new and very interesting ways.

  What this ultimately means for life in 10 or 20 years is anybody’s guess, but sneakers are the tip of the iceberg. And this doesn’t necessarily mean that we’re all destined to live in some sort of metaverse video game.

  Another way to look at this whole metaverse thing is to consider it not as an actual place or space, but instead as a moment in time (Shaan Puri makes this argument here). Put differently, the metaverse is simply a point in time where we begin to bestow tremendous value on our digital life and our digital assets.

  Instagram is one example of this. Profiles have become integral to people’s identifies. We use them to vet restaurants. We use them to vet travel destinations. And we use them to vet potential dating partners, among many other things.

  So while sneaker NFTs might be a new thing, there’s already lots of evidence that digital goods can have just as much value — and potentially even more value — than physical goods. I am sure that Nike recognizes this and it’s part of why they bought RTFKT.

  2021.12.14

• Three steps to the future

  

  Each year, tech analyst Benedict Evans publishes a “big presentation” on the macro trends in the tech industry. This year’s presentation is now out (link here) and it’s called “Three Steps to the Future.” Not surprisingly, crypto, web3 and the metaverse feature prominently in his exploration of what tech might look like by 2030 (obligatory market cap chart shown above). But there’s also a lot about ecommerce, logistics, TV/content, and a number of other topics and industries. The back half is filled with some great charts and I think that many of you will find it interesting.

  2021.12.08

• Decentralization, centralization, and new frontiers

  In this recent post by Naval Ravikant, he argues that innovation seems to like two things: decentralization and a frontier. He starts by giving the examples of more decentralized states (i.e. smaller federal governments) and the Wild West. The American frontier was, as you know, wild. But it was also a place of great innovation.

  Naval then goes on to talk about the pendulum that tends to swing between centralization and decentralization. And in the world of technology, the last decade has been one of centralization (big companies). But this pendulum is much broader. Cities, as we have talked about before on this blog, are constantly in tension between centralizing and decentralizing forces.

  COVID was a powerful decentralizing force for cities. Everything was closed and we were all supposed to stay home. And so most/all of the benefits of centralizing in a city were suddenly, yet temporarily, turned off. Many people naturally decentralized. But when the dust finally settles, I highly doubt it will be as dramatic as most people initially thought.

  We know that cities and urban density encourage innovation. That’s why “unicorns” tend to overwhelmingly originate in big cities. But here’s the thing: this is a form of centralization. The fact that cities even exist in the first place tells us that their centralizing forces are winning out over the decentralizing ones.

  So how do we reconcile this with Naval’s argument that new frontiers and decentralization are actually what are needed for innovation? I agree wholeheartedly that one of the key innovations with crypto, for example, is that it is decentralized and permissionless. But what does this ultimately mean for cities and our built form?

  Does it encourage a similar sort of decentralization to happen? Or is the irony that decentralized technologies actually still thrive in centralized urban places? We may all be online buying NFTs, but we still want to get together in person to show them off and exchange ideas.

  2021.11.25

• The real smart city is going to be a crypto city

  Vitalik Buterin — who is best known as the cofounder of Ethereum — recently penned this post on his blog where he argues that “crypto cities broadly are an idea whose time has come.” (Credit to Shamez Virani for sending the post to me this morning.) There has been a lot of discussion over the years about the rise of smart cities. I for one am not really sure what that means besides the fact that it sounds good and it likely involves a bunch of tech and data collection. But maybe crypto can help.

  What Vitalik argues in his post is that we are now at a point in time where blockchain technologies have the opportunity to do two things for cities. One, we can take existing systems and processes and use blockchains to make them more “trusted, transparent, and verifiable.” That would be a very good thing. But the more interesting one is number two. We have the opportunity to use blockchains to create radically new forms of asset ownership (land and other scarce assets) and municipal governance.

  One specific example is that of a “city coin”, which cities like Miami are already experimenting with. Supposedly they are one of the first, which of course aligns with Mayor Suarez’s vision to position Miami as a preeminent tech and crypto hub. Though as Vitalik points out in his post, it’s important to maintain some optionality, especially since we are still very much in the early innings of this new frontier. (This recent episode on the Tim Ferriss Show had a great analogy in saying that the anthem at the beginning of the game isn’t even over yet.)

  So how might a “city coin” living on a blockchain work?

  Well let’s imagine that there are incentives in place for all of us who live in Toronto to own the Toronto coin (there’s still time to come up with a better name). You need it to pay your property taxes, you need it to pay for parking, and you need it to vote in the next election, among many other things. So there’s an incentive to buy and hold it if you’re a resident of this great city, but there is far less incentive to hold it if you don’t live here. (Maybe you own a bit of it because you’re a frequent visitor and/or your relatives live here.)

  One of the interesting things about something like this is that it would immediately create economic alignment. Now all of a sudden, everyone who lives in Toronto and owns Toronto coin would have a vested interest in seeing Toronto thrive. At the very least they would want to see the coin hold its value and ideally they would hope to see it appreciate.

  At the same time, the Toronto coin could be used for all sorts of governance matters. Take for example, land use and zoning decisions. What if we set things up such that these decisions weren’t made by the people who show up to community meetings in the basement of their local church but that they were instead made by everyone who holds the Toronto coin? i.e. The entire city, all of whom are, in a way, equity holders.

  In theory we could do this kind of voting today. However, part of the problem is that the economic alignment isn’t there without something like a Toronto coin. Right now a big part of the economic incentive rests with homeownership. If I own a home and a new development is proposed next to me, I am incentivized to do whatever it takes to selfishly maximize my own individual outcomes. And if that means no development and no more homes for people, then so be it.

  But what if we all had part of our net worth tied up in the Toronto coin? And what if when housing supply did not meet housing demand, the value of our coins dropped because it meant fewer residents (less demand for Toronto coin) and more people voting with their feet and moving to other geographies (more demand for some other coin)? This is one of the things about the crypto space. It turns everyone into evangelists because there are now strong economic incentives to be that way.

  Who knows if this is the way that things will actually play out. But it is part of the promise of crypto and it is not some pipe dream. It is already starting to take hold around the world and in the US in places like Wyoming and Colorado. For more on this topic, make sure to check out Vitalik’s full blog post.

  2021.11.01