VCs say Silicon Valley isn’t the gold mine it used to be

In the days leading up to TechCrunch Disrupt SF 2018, The Economist published the cover story, ‘Why Startups Are Leaving Silicon Valley.’ The author outlined reasons why the Valley has “peaked.” Venture capital investors are deploying capital outside the Bay Area more than ever before. High-profile entrepreneurs and investors, Peter Thiel, for example, have left. Rising […]

In the days leading up to TechCrunch Disrupt SF 2018, The Economist published the cover story, ‘Why Startups Are Leaving Silicon Valley.’

The author outlined reasons why the Valley has “peaked.” Venture capital investors are deploying capital outside the Bay Area more than ever before. High-profile entrepreneurs and investors, Peter Thiel, for example, have left. Rising rents are making it impossible for new blood to make a living, let alone build businesses. And according to a recent survey, 46 percent of Bay Area residents want to get the hell out, an increase from 34 percent two years ago.

Needless to say, the future of Silicon Valley was top of mind on stage at Disrupt.

“It’s hard to make a difference in San Francisco as a single entrepreneur,” said J.D. Vance, the author of ‘Hillbilly Elegy’ and a managing partner at Revolution’s Rise of the Rest Fund, which backs seed-stage companies based outside Silicon Valley. “It’s not as a hard to make a difference as a successful entrepreneur in Columbus, Ohio.”

In conversation with Vance, Revolution CEO Steve Case said he’s noticed a “mega-trend” emerging. Founders from cities like Pittsburgh, Detroit or Portland are opting to stay in their hometowns instead of moving to U.S. innovation hubs like San Francisco.

“The sense that you have to be here or you can’t play is going to start diminishing.”

“We are seeing the beginnings of a slowing of what has been a brain drain the last 20 years,” Case said. “It’s not just watching where the capital flows, it’s watching where the talent flows. And the sense that you have to be here or you can’t play is going to start diminishing.”

Farewell, San Francisco

“It’s too expensive to live here,” said Aileen Lee, the founder of seed-stage VC firm Cowboy Ventures, amid a conversation with leading venture capitalists Spark Capital general partner Megan Quinn and Benchmark general partner Sarah Tavel .

“I know that there are a lot of people in the Bay Area that are trying to work on that problem and I hope that they are successful,” Lee added. “It’s an amazing place to live and we’ve made it really challenging for people to live here and not worry about making ends meet.”

One of Cowboy’s portfolio companies opted to relocate from Silicon Valley to Colorado when it came time to scale their business. That kind of move would’ve historically been seen as a failure. Today, it may be a sign of strong business acumen.

Quinn said that of all 28 of Spark’s growth-stage portfolio companies, Raleigh, North Carolina-based Pendo has the easiest time recruiting folks locally and from the Bay Area.

She advises her Bay Area-based late-stage companies to open a second office outside of the Valley where lower-cost talent is available.

“We often say go to [flySFO.com], draw a three-hour circle around San Francisco where they have direct flights, find a city that has a university and open up a second office as quickly as possible,” Quinn said.

Still, all three firms invest in a lot of companies based in San Francisco. Of Benchmark’s 10 most recent investments, for example, eight were based in SF, according to Crunchbase.

“I used to believe really strongly if you wanted to build a multi-billion dollar company you had to be based here,” Tavel said. “I’ve stopped giving that soap speech.”

Underestimated talent

A lot of Bay Area VCs have been blind to the droves of tech talent located outside the region. Believe it or not, there are great engineers in America’s small- and medium-sized markets too.

At Disrupt, Backstage Capital founder Arlan Hamilton announced the firm would launch an accelerator to further amplify companies led by underestimated founders. The program will have cohorts based in four cities; San Francisco was noticeably absent from that list.

Instead, the firm, which invests in underrepresented founders and recently raised a $36 million fund, will work with companies in Philadelphia, Los Angeles, London and one more city, which will be determined by a public vote. Aniyia Williams, the founder of Tinsel and Black & Brown Founders, will spearhead the Philadelphia effort.

“For us, it’s about closing that wealth gap to address inequity in tech,” Williams said. “There needs to be more active participation from everyone.”

Hamilton added that for her, the tech talent in LA and London is undeniable.

“There is a lot of money and a lot of investors … it reminds me of three years ago in Silicon Valley,” Hamilton said.

Silicon Valley vs. China

Silicon Valley’s demise may not be just as a result of increased costs of living or investors overlooking talent in other geographies. It may be because of heightened competition abroad.

Doug Leone, an early- and growth-stage investor at Sequoia Capital, said at Disrupt that he’s noticed a very different work ethic in China.

Chinese entrepreneurs, he explained, are more ruthless than their American counterparts and they’re putting in a whole lot more hours.

“I’ve had dinner in China until after 10 p.m. and people go to work after 10 p.m.,” Leone recalled.

“We don’t see that in the U.S. I’m not saying the U.S. founders oughta do that but those are the differences. They are similar in character. They are similar in dreams. They are similar in how they want to change the world. They are ultra-driven … The Chinese founders have a half other gear because I think they are a little more desperate.”

Much of this, however, has been said before and still, somehow, Silicon Valley remained the place to be for investors and startup entrepreneurs.

The reality is, those engaged in tech culture are always anxiously awaiting for the bubble to pop, the market to crash and for “peak Valley” to finally arrive.

Maybe, just maybe, Silicon Valley is forever.

Here’s more of our coverage of Disrupt 2018.

VCs say Silicon Valley isn’t the gold mine it used to be

In the days leading up to TechCrunch Disrupt SF 2018, The Economist published the cover story, ‘Why Startups Are Leaving Silicon Valley.’ The author outlined reasons why the Valley has “peaked.” Venture capital investors are deploying capital outside the Bay Area more than ever before. High-profile entrepreneurs and investors, Peter Thiel, for example, have left. Rising […]

In the days leading up to TechCrunch Disrupt SF 2018, The Economist published the cover story, ‘Why Startups Are Leaving Silicon Valley.’

The author outlined reasons why the Valley has “peaked.” Venture capital investors are deploying capital outside the Bay Area more than ever before. High-profile entrepreneurs and investors, Peter Thiel, for example, have left. Rising rents are making it impossible for new blood to make a living, let alone build businesses. And according to a recent survey, 46 percent of Bay Area residents want to get the hell out, an increase from 34 percent two years ago.

Needless to say, the future of Silicon Valley was top of mind on stage at Disrupt.

“It’s hard to make a difference in San Francisco as a single entrepreneur,” said J.D. Vance, the author of ‘Hillbilly Elegy’ and a managing partner at Revolution’s Rise of the Rest Fund, which backs seed-stage companies based outside Silicon Valley. “It’s not as a hard to make a difference as a successful entrepreneur in Columbus, Ohio.”

In conversation with Vance, Revolution CEO Steve Case said he’s noticed a “mega-trend” emerging. Founders from cities like Pittsburgh, Detroit or Portland are opting to stay in their hometowns instead of moving to U.S. innovation hubs like San Francisco.

“The sense that you have to be here or you can’t play is going to start diminishing.”

“We are seeing the beginnings of a slowing of what has been a brain drain the last 20 years,” Case said. “It’s not just watching where the capital flows, it’s watching where the talent flows. And the sense that you have to be here or you can’t play is going to start diminishing.”

Farewell, San Francisco

“It’s too expensive to live here,” said Aileen Lee, the founder of seed-stage VC firm Cowboy Ventures, amid a conversation with leading venture capitalists Spark Capital general partner Megan Quinn and Benchmark general partner Sarah Tavel .

“I know that there are a lot of people in the Bay Area that are trying to work on that problem and I hope that they are successful,” Lee added. “It’s an amazing place to live and we’ve made it really challenging for people to live here and not worry about making ends meet.”

One of Cowboy’s portfolio companies opted to relocate from Silicon Valley to Colorado when it came time to scale their business. That kind of move would’ve historically been seen as a failure. Today, it may be a sign of strong business acumen.

Quinn said that of all 28 of Spark’s growth-stage portfolio companies, Raleigh, North Carolina-based Pendo has the easiest time recruiting folks locally and from the Bay Area.

She advises her Bay Area-based late-stage companies to open a second office outside of the Valley where lower-cost talent is available.

“We often say go to [flySFO.com], draw a three-hour circle around San Francisco where they have direct flights, find a city that has a university and open up a second office as quickly as possible,” Quinn said.

Still, all three firms invest in a lot of companies based in San Francisco. Of Benchmark’s 10 most recent investments, for example, eight were based in SF, according to Crunchbase.

“I used to believe really strongly if you wanted to build a multi-billion dollar company you had to be based here,” Tavel said. “I’ve stopped giving that soap speech.”

Underestimated talent

A lot of Bay Area VCs have been blind to the droves of tech talent located outside the region. Believe it or not, there are great engineers in America’s small- and medium-sized markets too.

At Disrupt, Backstage Capital founder Arlan Hamilton announced the firm would launch an accelerator to further amplify companies led by underestimated founders. The program will have cohorts based in four cities; San Francisco was noticeably absent from that list.

Instead, the firm, which invests in underrepresented founders and recently raised a $36 million fund, will work with companies in Philadelphia, Los Angeles, London and one more city, which will be determined by a public vote. Aniyia Williams, the founder of Tinsel and Black & Brown Founders, will spearhead the Philadelphia effort.

“For us, it’s about closing that wealth gap to address inequity in tech,” Williams said. “There needs to be more active participation from everyone.”

Hamilton added that for her, the tech talent in LA and London is undeniable.

“There is a lot of money and a lot of investors … it reminds me of three years ago in Silicon Valley,” Hamilton said.

Silicon Valley vs. China

Silicon Valley’s demise may not be just as a result of increased costs of living or investors overlooking talent in other geographies. It may be because of heightened competition abroad.

Doug Leone, an early- and growth-stage investor at Sequoia Capital, said at Disrupt that he’s noticed a very different work ethic in China.

Chinese entrepreneurs, he explained, are more ruthless than their American counterparts and they’re putting in a whole lot more hours.

“I’ve had dinner in China until after 10 p.m. and people go to work after 10 p.m.,” Leone recalled.

“We don’t see that in the U.S. I’m not saying the U.S. founders oughta do that but those are the differences. They are similar in character. They are similar in dreams. They are similar in how they want to change the world. They are ultra-driven … The Chinese founders have a half other gear because I think they are a little more desperate.”

Much of this, however, has been said before and still, somehow, Silicon Valley remained the place to be for investors and startup entrepreneurs.

The reality is, those engaged in tech culture are always anxiously awaiting for the bubble to pop, the market to crash and for “peak Valley” to finally arrive.

Maybe, just maybe, Silicon Valley is forever.

Here’s more of our coverage of Disrupt 2018.

Coinbase plots to become the New York Stock Exchange of crypto securities

The future of Coinbase looks something like the New York Stock Exchange. That’s according a vision laid out by CEO Brian Amstrong who was interviewed on stage at TechCrunch Disrupt in San Francisco today. Coinbase is known for being the most popular exchange for converting fiat currency into crypto — most of the largest traded […]

The future of Coinbase looks something like the New York Stock Exchange. That’s according a vision laid out by CEO Brian Amstrong who was interviewed on stage at TechCrunch Disrupt in San Francisco today.

Coinbase is known for being the most popular exchange for converting fiat currency into crypto — most of the largest traded exchanges are crypto-to-crypto — but he foresees a future in which it plays host to a growing number of cryptocurrencies as it becomes standard for companies to create their own token, which runs alongside equity as an alternative investment system.

“It makes sense that any company out there who has a cap table… should have their own token. Every open source project, every charity, potentially every fund or these new types of decentralized organizations [and] apps, they’re all going to have their own tokens,” Armstrong said.

“We want to be the bridge all over the world where people come and they take fiat currency and they can get it into these different cryptocurrencies,” he added.

That tokenized future could see Coinbase host hundreds of tokens within “years” and even potentially “millions” in the future, according to Armstrong. That’s a big jump on the five cryptocurrencies that it currently supports today, and it would make it way larger than financial institutions like the New York Stock Exchange, which is actually a Coinbase investor and is getting into Bitcoin, or the NASDAQ.

One of the critical pieces of making this vision a reality is, of course, regulation. This week at Disrupt, others in crypto space have argued that a lack of clarity around crypto regulation is costing the U.S. as innovation and startups are being developed in overseas markets. As the founder of a U.S.-based crypto startup that is valued at over $1 billion and is hiring hard, Armstrong doesn’t subscribe to that thesis but he did admit that there is “a big open question” over whether the majority of the new rush of tokens he foresees will be securities or not.

Still, Coinbase has made moves to add security tokens to its portfolio with the acquisition of a securities dealer earlier this year.

“We do feel a substantial subset of these tokens will be securities,” he said. “Our approach has always been to be the most trusted [exchange] and the easiest to use. So we want to be the legal compliant place where you can start to trade these tokens that are classified as securities.”

“Web 1.0 was about publishing information, web 2.0 was about interaction and web 3.0 is going to be about value transfer on the internet because now the web has this native currency and so applications can be built that instantly tap into this global economy on the internet,” Armstrong added.

How international can crypto become? The Coinbase CEO thinks that the total number of people in the crypto ecosystem can reach one billion within the next five years, up from around 40 million today.

You can watch the full video from Armstrong’s interview below.

Note: The author owns a small amount of cryptocurrency. Enough to gain an understanding, not enough to change a life.

Crypto market crashes after Goldman reportedly scraps trading plans

The crypto market is down significantly today, practically across the board of all coins, following a report that claims Goldman Sachs has backed down on plans to start a dedicated cryptocurrency trading desk. Bitcoin is down over five percent in the last 24 hours, but ‘altcoins’ have been hit harder. Ethereum (down 14 percent), XRP […]

The crypto market is down significantly today, practically across the board of all coins, following a report that claims Goldman Sachs has backed down on plans to start a dedicated cryptocurrency trading desk.

Bitcoin is down over five percent in the last 24 hours, but ‘altcoins’ have been hit harder. Ethereum (down 14 percent), XRP (down 13 percent), EOS (down 16 percent) and Litecoin (down 11 percent) are seeing bigger drops, according to data from Coinmarketcap.com.

Business Insider reported this week that Goldman has backed down on its aspiration to enter crypto trading due to continued uncertainty around regulation. That’s according to sources, although it does appear that the bank is holding off making a full-on commitment to crypto.

“At this point, we have not reached a conclusion on the scope of our digital asset offering,” a Goldman spokesperson told Reuters in a statement.

Added to that, there may also be some concern around a Reuters reported that claims the EU is looking into regulating crypto. The organization is said to be preparing a report that proposes regulation of crypto exchanges and ICOs.

95 of the top 100 cryptocurrencies have dropped in valuation over the last 24 hours

Goldman has never gone public with its intention but reports first surfaced of its plans back in December 2017. That period was one of the peaks for crypto. During a bull run in December and January, the value of Bitcoin touched almost $20,000, that’s a record high and significantly higher than today’s price of just under $7,000.

So, in addition to regulatory concerns, the fact is that there is ongoing uncertainty around Bitcoin and the crypto more generally from an investment perspective. While it is worth noting that, counter to that, many in the industry believe price stability has many benefits because it allows a stronger focus on technology and product, it is clearly a problem for banks like Goldman which are ultimately focused on making money.

Note: The author owns a small amount of cryptocurrency. Enough to gain an understanding, not enough to change a life.

The collapse of ETH is inevitable

Jeremy Rubin Contributor Share on Twitter Jeremy Rubin is currently a technical advisor to Stellar, a Bitcoin Core Contributor, investor and advisor to early-stage crypto startups, starting a company for Bitcoin scalability and privacy solutions, and a freelance consultant for cryptocurrency tech fundamentals and due diligence. Previously, Jeremy also co-founded the MIT Digital Currency Initiative, […]

Here’s a prediction. ETH — the asset, not the Ethereum Network itself — will go to zero.

Those who already think that ETH will not see real adoption — thanks to a failure to scale, to adopt more secure contract authoring practices, or to out-compete its competitors — don’t need to be convinced that a price collapse would follow as a consequence.

But, if one believes that Ethereum will succeed beyond anyone’s wildest dreams as a platform then the proposition that ETH (as a currency) will go to zero will take a bit more convincing running a substantial share of the world’s commerce securely.

So here’s how Ethereum ends up succeeding wildly but ETH becomes worthless. Ethereum’s value proposition, as given by ethereum.org, is as follows:

Build unstoppable applications

Ethereum is a decentralized platform that runs smart contracts: applications that run exactly as programmed without any possibility of downtime, censorship, fraud or third-party interference.

These apps run on a custom built blockchain, an enormously powerful shared global infrastructure that can move value around and represent the ownership of property.

This enables developers to create markets, store registries of debts or promises, move funds in accordance with instructions given long in the past (like a will or a futures contract) and many other things that have not been invented yet, all without a middleman or counterparty risk.

If Ethereum succeeds on its value proposition it will therefore mitigate external risk factors for decentralized applications.

İstanbul, Turkey – January 28, 2018: Close up shot of Bitcoin, Litecoin and Ethereum memorial coins and shovels on soil. Bitcoin Litecoin and Ethereum are crypto currencies and a worldwide payment system.

No Future for ‘Gas’

There’s no value proposition for ETH in the official description. Perhaps this omission is because ETH’s value seems so obvious to the Ethereum Foundation that it is hardly worth mentioning: $ETH fees (dubbed ‘Gas’) is how you pay for all this.

If the concept of gas isn’t immediately obvious, let’s expand the metaphor: The Ethereum network is like a shared car. When a contract wants to be driven by the shared car, the car uses up fuel, which you have to pay the driver for. How much gas money you owe depends on how far you had to be driven, and how much trash you left in the car.

Gas is a nice metaphor, but the metaphor is insufficient as an argument to support non-zero $ETH prices. Gasoline actually burns inside an internal combustion engine; an internal combustion engine will not work without a combustible fuel. $ETH as Gas is a metaphor for how gasoline is consumed; there is no hard requirement for Gas in an Ethereum contract.

(Photo by Manuel Romano/NurPhoto via Getty Images)

Buying the “BuzzwordCoin”

Suppose we’re building a new decentralized application, BuzzwordCoin. By default, following a standard ERC-20 Token template, every transaction on BuzzwordCoin will pay gas in $ETH. Requiring every BuzzwordCoin transaction to also depend on ETH for fees creates substantial risk, third party dependency, and artificial downwards pressure on the price of the underlying token (if one must sell BuzzwordCoin for ETH ahead of time to run a BuzzwordCoin transaction, then the sell-pressure will happen before the transaction requires it, and must be a larger sale than necessary to ensure sufficient funds to cover the transaction).

Instead of paying for Gas in ETH, we could make every BuzzwordCoin transaction deposit a small amount of BuzzwordCoin directly to the block’s miner’s address to pay for the contract’s execution. Paying for Gas in a non-ETH asset is sometimes referred  to as economic abstraction in the Ethereum community.

The revised BuzzwordCoin contract has no functional dependence on ETH. We’re able to incentivize miners to mine transactions without paying any fees in ETH whatsoever.

If the BuzzwordCoin contract has non-transactional contractual clauses — that is, a functionality that should be regularly called by any party for tasking like computing and updating cached statistics in the contract — we can specify that the miner performing those clauses receives coins from an inflation or shared gas pool. In the shared pool, all fees for user’s transactions in a specific contract are paid to the contract’s wallet. A fee dispensing contract call performing the non-transactional clauses releases the fee to the miner (this bears some semblance to Child Pays for Parent in the Bitcoin Ecosystem).

Battling the economic abstraction

There are four main counterarguments to economically abstracting Ethereum: the lack of software support for economic abstraction; difficulty in pricing many tokens; the existence of contracts not tied to tokens; and the need for ETH for Proof-of-Stake. While nuanced, all four arguments fall flat.

Software Support: Currently, miners select transactions based on the amount of Gas provided in ETH. As ETH is not a contract (like an ERC-20 token), the code is special-cased for transactions dealing in ETH. However, there are efforts to make Ethereum treat ETH less special-cased and more like other ERC-20 Tokens and vice-versa. Weth, for instance, wraps ETH in a 1:1 pegged ERC-20 compliant token for trading in Decentralized Exchanges.

Detractors of economic abstraction (notably, Vitalik Buterin) argue that the added complexity is not worth the ecosystem gains. This argument is absurd. If the software doesn’t support the needs of rational users, then the software should be amended. Furthermore, the actual wallet software required for any given token is made much more complex, as the wallet must manage balances in both ETH and the application’s token.

Market Pricing: To mine on Ethereum with economic abstraction, miners simply need software which allows them to account for discrepancies in their perceived value of active tokens and include transactions rationally on that basis.  Such software requires dynamically re-ordering pending transactions based on pricing information, gleaned either through the miner’s own outlook or monitoring cryptocurrency exchanges prices.

Vlad Zamfir argues that the potential need to monitor market information on prices makes economic abstraction difficult.

However, miners requiring pricing information is already the status quo — rational actors need a model of future ETH prices before mining (or staking) to maximize profit against electricity costs, hardware costs, and opportunity costs.

Non-Token Contracts: Not all contracts have coins, or if they do, they may not be widely recognized, valuable, and traded on exchanges. Can such contracts pay fees without ETH?

Users of a tokenless contract can pay fees in whichever tokens they want. For example, a user of TokenlessContract can pay their fees in a 50/50 mix of LemonadeCoin and TeaBucks. To ensure liquidity between users and miners with different assets they would pay or accept fees with, a user can simply issue multiple mutually-exclusive transactions paying with fees in different assets.

Specialized wallet contracts could also negotiate fees with miners directly .  A miner could also process transactions paying fee with an asset they do not want if there is an open Decentralized Exchange (DEX) offer to exchange the fee asset for something they prefer —  it is possible to create DEX orders for paying fees which allowing only a block’s miner to fill a user’s offers in proportion to the fees that a user has paid in that block preventing the case where a user’s fee diversifying offers are taken by non-miners.

Proof-of-Stake: Without ETH, a modified version of Proof-of-Stake with a multitude of assets could still decide consensus if each node selects a weight vector for the voting power of all assets (let’s call it HD-PoS, or Heterogeneous Deposit Proof Of Stake). While it is an open research question to

show under which conditions HD-PoS would maintain consensus, consensus may be possible if the weight vectors are similar enough.

Proofs of HD-PoS may be possible by assuming a bound on the pairwise euclidean distance of the weight vectors or the maximum difference between any two prices. If such a consensus algorithm proves impossible, the failure to find such an algorithm points to a more general vulnerability in Ethereum PoS.  

Assuming a future where ETH’s main utility is governance voting, why wouldn’t all the other valuable applications on Ethereum have a say in the consensus process? Rolling back actions in a valuable token contract by burning ETH stake could be a lucrative business; if HD-PoS is used such attacks are impossible.

Vitalik Buterin (Ethereum Foundation) at TechCrunch Disrupt SF 2017

ETH’s ethereal value

If all the applications and their transactions can run without ETH, there’s no reason for ETH to be valuable unless the miners enforce some sort of racket to require users to pay in ETH. But if miners are uncoordinated, mutually disinterested, and rational, they would prefer to be paid in assets of their own choosing rather than in something like ETH. Furthermore, risk-averse users would want to minimize their exposure to volatile assets they don’t have to use. Lastly, token developers benefit because pricing in their native asset should serve to reduce sell-pressure. Thus, in a stateless ecosystem, replacing ETH is a Pareto Improvement (i.e., all parties are better off). The only party disadvantaged is existing ETH holders.

  • The author holds Stellar and Bitcoin,  but has relatively little holdings in other cryptocurrencies. He has previously done a Virtual Lapel Pin Sale (like an ICO) for his cause, “Fuck Nazis”, on top of Ethereum which faced both government censorship and censorship from the Ethereum community. 

Chat app Line hopes its own crypto token can solve its user growth problem

Line, the Japanese messaging app firm that’s best known for its cutesy characters and stickers, is pushing deeper into crypto after it launched its own token to help grow its stagnant user base. Line went public two years ago with 218 million monthly active users, but it hasn’t been able to kick on. The company no longer gives out […]

Line, the Japanese messaging app firm that’s best known for its cutesy characters and stickers, is pushing deeper into crypto after it launched its own token to help grow its stagnant user base.

Line went public two years ago with 218 million monthly active users, but it hasn’t been able to kick on. The company no longer gives out its worldwide user number, but the number of active users in its four biggest markets has fallen from 169 million in Q2 2017 to 164 million in its recent Q2 2018 period.

Link — Line’s token — isn’t being minted through an ICO, instead, it’ll be given out to Line users as an incentive for using certain services. Line hasn’t said exactly how it can be earned yet, although it is likely that it’ll be tied to specific activities to promote engagement.

Line plans to use Link to incentive user activity on its messaging app and other services

The token will be listed on Bitbox — Line’s crypto exchange — and it’ll be used it to buy content like stickers and webcomics, as well as other Line services. It’ll also be possible to use Link to get a lower commission rate on trading in the same way that Binance, the world’s largest exchange, uses its BNB token.

Line currently has a virtual currency for its in-app content and services, and you’d imagine that Link will replace it in the future.

It’s worth noting, however, that Link hasn’t launched in Japan yet. That’s because Line is awaiting regulatory approval for its token and exchange, so, for now, those in Japan — which is Line’s largest market — will earn virtual tokens which can be traded for Link in the future.

Line is struggling to grow its user numbers

Link will launch next month, and it follows the announcement of BitBox in July and the launch of a dedicated crypto fund in early August.

Line has dodged the legal questions around token sales by not holding an ICO, and the fact it is using the currency to incentivize user engagement and activity isn’t a huge surprise. Line went public in a dual U.S-Japan IPO that raised over $1 billion in 2016 but, despite user numbers declining, it has grown its revenue through additional services.

Increased competition from the likes of Facebook Messenger and WhatsApp is likely its biggest threat, so incentivizing users is a logical strategy. Of course, that depends on how useful Link becomes. If users can exchange it for a decent amount of cash or credits inside Line’s platform it may gain appeal, but if they just pick up trivial amounts, it may be less interesting to them. The bigger picture will be when Link replaces Line’s virtual currency for all purchases but that alone isn’t likely to boost user engagement.

Despite declining user numbers, Line has grown revenue by pushing out services that connect to its messaging platform.

Line also plans to use Link — and the blockchain it has developed to power it — to host decentralized applications (dapps) that will connect to its messaging platform. The company already does a lot more than messaging — for example payments, ride-hailing, music and videos — and it plans to tap third-party developers to build dapps. Generally, though, dapps haven’t taken off. The collectibles game Cryptokitties did blow up late last year, but studies have suggested user activity is massively down this year as the fad has slowly worn off.

Crypto enthusiasts will no doubt take positives from Line’s latest move — it is arguably the largest company to embrace crypto, in terms of end-user audience reach — but it remains to be seen whether Link and its dapps platform can help it crack its user growth and retention issues.

“Over the last seven years, Line was able to grow into a global service because of our users, and now with Link, we wanted to build a user-friendly reward system that gives back to our users. With Link, we would like to continue developing as a user participation-based platform, one that rewards and shares added value through the introduction of easy-to-use dapps for people’s daily lives,” said Line CEO Takeshi Idezawa in a statement.

Unlike Bitcoin, which is mined, Line has minted a total of one billion Link tokens which it said will be “gradually issued according to how this ecosystem develops.” The company plans to keep 200 million tokens, with the remaining 800 million made available as user rewards.

Note: The author owns a small amount of cryptocurrency. Enough to gain an understanding, not enough to change a life.

Coinbase now supports buying and selling Ethereum Classic

Coinbase has added a new buying option for its customers after the crypto exchange introduced Ethereum Classic to its collection. The addition was first announced in July but Coinbase took its time to implement its newest addition following criticism over the way it added Bitcoin Cash last year. Allegations of insider trading led the company to […]

Coinbase has added a new buying option for its customers after the crypto exchange introduced Ethereum Classic to its collection.

The addition was first announced in July but Coinbase took its time to implement its newest addition following criticism over the way it added Bitcoin Cash last year. Allegations of insider trading led the company to investigate the incident which saw service outages and wild price fluctuations for Bitcoin Cash right after its addition to the exchange. It later introduced a framework for adding new tokens.

Nonetheless, Ethereum Classic’s value spiked 20 percent on last month’s news. Today, though, it is down two percent over the last 24 hours, according to Coinmarketcap.com.

Coinbase has taken a conservative approach to adding more crypto. Today’s addition takes it to five tokens — Bitcoin, Ethereum, Litecoin and Bitcoin Cash are the others — but that’s likely to change this year. Last month, it announced it is “exploring” the addition of another five tokens while CTO Balaji Srinivasan hinted that the selection would grow further when I interviewed him at the recent TechCrunch blockchain event in Zug.

“We hear your requests, and are working hard to make more assets available to more customers around the world,” Dan Romero, who heads Coinbase’s consumer business, said in a blog post published today.

A note on Ethereum Classic — it was created in June 2016 following a major hack on The DAO, a fundraising vehicle for the project. In short: the Ethereum Foundation created a new version of Ethereum — known today as Ethereum — that rescued the lost funds, while those who opposed continued on with the original chain which was known as Ethereum Classic.

Note: The author owns a small amount of cryptocurrency. Enough to gain an understanding, not enough to change a life.

California may mandate a woman in the boardroom, but businesses are fighting it

Antoinette Siu Contributor Share on Twitter Antoinette Siu is a reporter for CALmatters. California is moving toward becoming the first state to require companies to have women on their boards –assuming the idea could survive a likely court challenge. Sparked by debates around fair pay, sexual harassment and workplace culture, two female state senators are […]

California is moving toward becoming the first state to require companies to have women on their boards –assuming the idea could survive a likely court challenge.

Sparked by debates around fair pay, sexual harassment and workplace culture, two female state senators are spearheading a bill to promote greater gender representation in corporate decision-making. Of the 445 publicly traded companies in California, a quarter of them lack a single woman in their boardrooms.

SB 826, which won Senate approval with only Democratic votes and has until the end of August to clear the Assembly, would require publicly held companies headquartered in California to have at least one woman on their boards of directors by end of next year. By 2021, companies with boards of five directors must have at least two women, and companies with six-member boards must have at least three women. Firms failing to comply would face a fine.

“Gender diversity brings a variety of perspectives to the table that can help foster new and innovative ideas,” said Democratic Sen. Hannah-Beth Jackson of Santa Barbara, who is sponsoring the bill with Senate President Pro Tem Toni Atkins of San Diego.”It’s not only the right thing to do, it’s good for a company’s bottom line.”

Yet critics of the bill say it violates the federal and state constitutions. Business associations say the rule would require companies to discriminate against men wanting to serve on boards, as well as conflict with corporate law that says the internal affairs of a corporation should be governed by the state law in which it is incorporated. This bill would apply to companies headquartered in California.

Jennifer Barrera, senior vice president of policy at the California Chamber of Commerce, argued against the bill and said it only focuses “on one aspect of diversity” by singling out gender.

“This bill basically mandates that we hire the woman above anybody else who we may be fulfilling for purposes of diversity,” she said at a hearing.

Similarly, a legislative analysis of the bill cautioned that it could get challenged on equal protection grounds, and that it would be difficult to defend, requiring the state to prove a compelling government interest in such a quota system for a private corporation.

Five years ago, California was the first state to pass a resolution, authored by Jackson, calling on public companies to increase gender diversity. In response, about 20 percent of the companies headquartered in the state followed through with putting women on their boards, according to the research firm Board Governance Research. But the resolution was non-binding and expired in December 2016.

Other countries have been more proactive. Norway in 2007 was the first country to pass a law requiring 40 percent of corporate board seats be held by women, and Germany set a 30 percent requirement in 2015. Spain, France and Italy have also set quotas for public firms.

In California, smaller companies have fewer female directors. Out of 50 companies with the lowest revenues, 48 percent have no female directors, according to Board Governance Research. Only 8 percent of their board seats are held by women.

The 2017 study said larger companies did a better job of appointing women, with all 50 of the highest-revenue companies having at least one female director and 23 percent of board seats held by women.

“The main issue is still that a lot of companies headquartered here don’t have women on their boards,” said Annalisa Barrett, clinical professor of finance at the University of San Diego’s School of Business. “We quite often like to think of California as progressive and a leader on social issues, so that’s kind of disappointing.”

Barrett publishes an annual report of women on boards in California. Public companies are major employers in the state, and their financial performance has a big impact on public pension funds, mutual funds and investment portfolios. “Financial performance does really impact the broader community,” she said.

The National Association of Women Business Owners, sponsor of the bill, says an economy as big as California’s ought to “set an example globally for enlightened business practice.” In a letter of support, the association cites studies that suggest corporations with female directors perform better than those with no women on their boards.

One University of California, Davis study did find that companies with more women serving on their boards saw a higher return on assets and equity, but the author acknowledges this may not suggest a cause-and-effect.

Crypto exchange Binance buys Trust Wallet in first acquisition deal

Binance, the world’s largest crypto exchange based on volume, has made its first acquisition after it snapped up mobile wallet company Trust Wallet. The deal is undisclosed, but Binance confirmed to TechCrunch that the compensation is a mixture of cash, Binance stock and a portion of its BNB token. U.S.-based Trust Wallet will remain independent following the […]

Binance, the world’s largest crypto exchange based on volume, has made its first acquisition after it snapped up mobile wallet company Trust Wallet.

The deal is undisclosed, but Binance confirmed to TechCrunch that the compensation is a mixture of cash, Binance stock and a portion of its BNB token. U.S.-based Trust Wallet will remain independent following the deal, but Binance, which is headquartered in Malta these days, will assist running the admin side of the business and in non-technical areas like marketing.

“The Trust Wallet team shares the same values as us and the products are very complementary,” Binance CEO Changpeng “CZ” Zhao told TechCrunch in an interview. “For users who like to withdraw funds into a wallet now we have a product they can use.

“We plan to keep the app as independent as possible. There will be more features going into it but not so much from a Binance demand perspective. We are like the addition of a godfather for the baby… there’ll be some cooperation,” he added.

Trust Wallet may not be as well known as wallets such as Imtoken, Delta, or Blockfolio, but Zhao called the company a “diamond in the dirt” with “strong technical skills.”

“They haven’t done much marketing which is where we can help. They are strong technically but don’t like doing marketing, HR etc… now merging with us they don’t have to worry about money,” he added.

Money is, indeed, not a huge issue for Binance these days. The company made a profit in the region of $450-$500 million (dependent on token prices) from its first year of operations. That’s according to figures from the company, which uses 20 percent of its quarterly profits to buy back and ‘burn’ its BNB token.

(Left to right) Binance CEO Changpeng Zhao and Trust Wallet founder Viktor Radchenko

Indeed, Trust Wallet did hold an ICO to raise capital but last month it decided to cancel the sale and return money to its investors.

Trust Wallet founder Viktor Radchenko, who is based in Mountain View, told TechCrunch that the decision was about getting back to developing the app and technology.

“I’m a product person and developer. I spend my time thinking about solving problems for the end-user. I never liked dealing with investors and money people, it is so much hassle,” he said. “Having resources will help us grow quicker and so I can focus on adaption for the users that don’t even have wallets.”

Radchenko said he is now setting his sights on growing the team from five developers right now to 10. The app is currently focused on Ethereum and Ethereum-based tokens, but the plan is to add support for other blockchains including Bitcoin, EOS, NEO.

Trust Wallet will also be one of a number default wallets supported by Binance’s upcoming decentralized exchange, which will remove the shackles of a decentralized exchange and allow users to trade directly with one another. Zhao said the highly-anticipated project is in “active development” although he was hesitant to put a date on when it will be ready.

This Trust Wallet deal is likely the first of many strategic acquisitions for Binance. The company announced plans for a $1 billion fund this summer, and Zhao said that the intention is to make 10-20 investments per year but also augment that with three to four strategic.

“We’re looking for strong tech teams,” he explained. “Acquisition will be a very key component to continuing to grow and contributing to this industry.”

Zhao said that Binance had considered buying companies to accelerate the development of its decentralized exchange, but it wasn’t able to identify the right match.

“Our requirements are very specific, we are looking for speed, there’s no need for fancy smart contracts,” he explained. “We didn’t find the right match for an acquisition [but are] still very open to someone who makes an ultra-fast blockchain.”

Note: The author owns a small amount of cryptocurrency. Enough to gain an understanding, not enough to change a life.

MyEtherWallet’s secure login app is now available in beta for iOS

Popular crypto wallet service MyEtherWallet has just launched a limited beta version of its first companion mobile app, which we wrote about earlier this week. If you’re a big MyEtherWallet user or just curious about crypto, you’ll want to get hold of the app. Since it’s in beta, you’ll need to head here and follow the instructions […]

Popular crypto wallet service MyEtherWallet has just launched a limited beta version of its first companion mobile app, which we wrote about earlier this week.

If you’re a big MyEtherWallet user or just curious about crypto, you’ll want to get hold of the app. Since it’s in beta, you’ll need to head here and follow the instructions to email the company to request access. A full launch for iOS and Android is expected in August.

The MEW Connect app allows users to log into the service without typing their private key, just like hardware solutions such as Ledger or Trezor. That’s important because inputting sensitive information like a private key can lead to an account being compromised in the event of a phishing attack. At least two major incidents have happened this year, so the threat is very real.

Unlike Ledger or Trezor, though, MEW Connect is free which could help encourage more people to adopt better security practices since MyEtherWallet.com is a much-trafficked website. The company says its domain sees upwards of 600,000 visitors each day.

MyEtherWallet founder Kosala Hemachandra told TechCrunch that he hopes beta users will comb through the code and help find issues with the app before its wider release to all, and the arrival of the Android app. Those with bugs can submit them on HackerOne here, where the rewards on offer range from $250 to $2,000.

Beyond enabling a secure connection for MyEtherWallet.com users, the app could offer features including payments in the future, Hemachandra admitted, which could provide a major boost to the crypto industry as it aims to reach more mainstream attention.

MyEtherWallet isn’t the only service supporting a connection app. MyCrypto.com, a service that broke away from MyEtherWallet earlier this year, MyCrypto.com supports the Parity Signer app.

Note: The author owns a small amount of cryptocurrency. Enough to gain an understanding, not enough to change a life.