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A Conversation About Crypto-currencies and ICOs with Andy Bromberg

Y Combinator2018-09-14
YC#Y Combinator#Andy Bromberg#Geoff Ralston#Startup School#Coinlist
9K views|5 years ago
💫 Short Summary

The video features Andy Bromberg, Co-founder of CoinList, discussing his entrepreneurial journey from high school to founding startups. He emphasizes the importance of practical skills, value creation, and engaging conversations. The discussion covers the challenges faced in startup funding, the role of tokens in blockchain technology, and the potential of cryptocurrencies like Filecoin. The video delves into the complexities of token sales, the rise of security token offerings (STOs), and the decentralization of control in the crypto space. It concludes with reflections on the future unpredictability of the ecosystem and the need for adaptability.

✨ Highlights
📊 Transcript
Andy Bromberg's entrepreneurial journey starting from high school.
Bromberg's desire to avoid traditional jobs and make money in a more engaging way led him to venture into entrepreneurship.
Building websites and running online businesses became a passion for Bromberg.
His journey evolved into a love for starting ventures from the ground up.
Speaker's early entrepreneurial ventures during high school.
Built websites related to personal interests rather than focusing on business opportunities.
Enjoyed and profited from projects, covering expenses and exploring passions.
Considered emulating Mark Zuckerberg but ultimately chose to attend prestigious school.
Interest in entrepreneurship reignited by class on startup engineering, emphasizing practical business skills.
Creation of the Stanford Bitcoin group.
The group focused on practical skills like deploying code and using GitHub.
Despite skepticism, the group believed in the potential of Bitcoin and conducted research and evangelism.
The speaker left to start a company called Sidewire, a platform for political experts to discuss news.
Sidewire aimed to provide expert analysis without the noise of social media, emphasizing the importance of separating signal from noise in information dissemination.
Importance of Validation and Angel Investors in Business Start-Up.
The founders stress the need for validation before starting a business venture.
Angel investors played a crucial role in the success of the business.
Supportive and aligned investors were key to the growth and stability of the business.
Understanding the motivations of investors is essential for a successful partnership.
Experience of raising funds from investors and managing challenges.
Importance of having quality investors who are supportive.
Positive overall experience despite variability among investors.
Additional funds raised from Spark Capital, completing institutional seed round, launching product.
Success in engaging experts and key figures in discussions on platform.
Challenges faced by a startup company in scaling their business model.
The company experimented with subscription services and enterprise pitches but none were scalable.
Honest conversations with investors and team members led to the realization that the core business model was not viable.
Despite efforts to address issues, the company struggled with retaining users and providing engaging content.
The difficult decision to shut down the business was made due to these challenges.
Importance of building habits for startups.
Start with small actions and gradually expand to create lasting habits.
Challenge of engaging with long-form content in a world of quick, easily digestible information.
People are drawn to sensational news, but sustainable habits require thoughtful conversations.
Transition back to crypto after initial hesitation.
The speaker was initially hesitant due to uncertainty in the market.
Involvement with Stanford Bitcoin group and decision-making process that led to delay in crypto endeavors.
Belief in the potential of multiple successful cryptocurrencies in 2017.
Creation of CoinList, a platform for token sales, in collaboration with Protocol Labs and Y Combinator.
Importance of tokens in cryptocurrency networks.
Tokens represent ownership and scarcity within networks like Bitcoin.
Launching a token network with decentralized control.
Example of Filecoin's token by Protocol Labs as a network without direct control.
Comparison of tokens in blockchain to the internet in delivering value to consumers.
The complexity of valuing websites and tokens is discussed in the segment.
Tokens, such as Filecoin, facilitate file storage exchange and address file storage and transaction issues.
Valuing tokens presents a unique challenge compared to traditional assets tied to cash flows.
While websites can be valued using economic concepts like net present value, tokens operate differently.
Filecoin is highlighted as an example of tokens serving different purposes in the blockchain ecosystem.
The challenge of storing files with a centralized service like Amazon S3 is discussed.
Issues of censorship and reliance on a single third party are highlighted.
A decentralized approach similar to Airbnb is proposed, where individuals with extra storage space on their computers can rent it out.
Filecoin and IPFS are introduced as solutions to directly connect individuals with storage needs to those with surplus space, eliminating the need for a trusted intermediary.
These solutions offer a token-based payment mechanism.
Overview of Filecoin storage system.
Users are incentivized with tokens to store files securely and are required to stake tokens as collateral.
Verifiers confirm correct file storage by asking specific questions and ensuring accountability.
Users receive tokens back, file owners retrieve their files, and verifiers are rewarded with newly minted tokens.
Filecoin system creates a market where all parties are motivated to fulfill their roles effectively.
Importance of Blockchain and Tokens in Incentive Alignment and Trustless Systems.
Tokens are crucial for startups to raise funds through initial coin offerings (ICOs).
CoinList helps companies with token sales, but not all startups benefit from having a token.
For some startups, tokens can be a valuable asset for fundraising and operations.
Concerns and challenges in the ICO industry.
Lack of diligence and data points for investors is a major issue.
ICOs raised more money than venture capital in 2018, but industry's rapid growth raises worries.
Speaker questions the belief in ICOs and emphasizes the need for better understanding and due diligence in token investments.
Early stage and uncertainty of the industry are highlighted as key factors.
Lack of quantitative data in ICOs compared to YC process for admitting companies.
Aggressive investor mentality in ICOs leading to excessive capital inflow.
Majority of ICOs unlikely to succeed due to insufficient funding for winners.
Explanation of ICOs and token sales for raising funds for network development.
Importance of token distribution for incentivizing user participation and aligning incentives within the network.
Overview of Token Functionality and CoinList Initial Coin Offering
Chrome is the first token supported by the network, with CoinList raising $205 million in their initial coin offering.
CoinList provides assistance to companies in conducting token sales, including compliance work and legal involvement.
Airdrops are used to distribute tokens to users, such as PayPal's initial offering of $10 credits to new users.
Tokens are used to incentivize users to participate in a network and invest more capital.
The value of blockchain technology is in applications where trust is lacking between parties or a central intermediary.
Blockchain is not suitable for products like Airbnb that rely on trust.
Tokens are ideal for systems lacking trust in intermediaries, providing a decentralized solution.
Trust in institutions is decreasing, making specific token use cases more valuable.
The video also explores the advantages and disadvantages of tokens compared to convertibles for startups and investors.
Differences between traditional funding and token investing.
Token investors lack control over token networks once released, impacting company price.
Token investing offers flexibility but results in misaligned incentives between investors and companies.
Investors may lack visibility into company updates and engagement with the project.
Potential drawbacks compared to traditional equity funding.
Rise of token sales in fundraising.
Investors can participate without meeting founders, offering quicker returns compared to traditional startup investments.
Token industry is moving towards venture capital practices with vesting schedules and lockups.
Companies are transitioning to multiple token sales resembling seed, Series A, and Series B rounds.
Despite similarities, key differences exist in what is being bought and the impact on relationships among stakeholders.
Importance of aligning investors with your goals to prevent conflicts in the future.
Positive and friendly interactions with potential investors are essential.
Value-add investors are not necessary as long as they believe in your business and provide capital.
Conducting due diligence and reference checks on investors is crucial for fundraising success.
Investors who can introduce valuable connections and provide feedback are beneficial for your business growth.
Discussion on Security Token Offerings (STOs) versus Initial Coin Offerings (ICOs) in the crypto space.
STOs involve tokenizing real-world assets like equity or real estate, offering more tangible backing than network-based tokens.
The speaker's platform supports STOs but does not consider it a pivot, seeing themselves as infrastructure providers.
The type of token (asset-backed or network-backed) does not impact their support, focusing on the viability and fit of the offering instead.
Overview of running sales in the context of tokens and currencies and the different regulatory considerations.
Tokens can be categorized as exchange or store of value, with Bitcoin being used as an example.
Possibility for companies like Airbnb to participate in ICOs and the challenges of creating token networks.
Development difficulties highlighted, with Augur mentioned as a pioneering ICO.
Emphasis on the complexities and uncertainties in the token and currency space.
The launch of a new project at Airbnb required a significant amount of work, with a focus on building processes and infrastructure.
A faction in the crypto world is promoting the idea of replacing central authority with a trusted network based on narco-libertarian philosophy.
It is important to distinguish between value and information in online transactions, as they involve the transfer of symbolic representations of value.
In a token ecosystem, the value is held within the network itself, removing the necessity for entities like credit card issuers or banks to oversee the value.
Ownership of tokens on a network provides direct access to value and keys.
Transmitting value through tokens enables direct interactions between nodes without third parties.
Decentralization of control in networks prevents unilateral changes by companies.
Users can fork a network to create new versions with different rules if they disagree with changes.
Changing protocols in the crypto world is feasible and can result in new versions of cryptocurrencies.
Importance of aligning users on a network to prevent forking and maintain compatibility.
Anyone proposing changes to a network emphasizes the democratic nature of decision-making within networks.
Influence of companies and creators holding a significant portion of the currency on network governance.
Differentiation between good and bad actors in the crypto space, emphasizing the ideal of tokens and blockchain networks.
Role of miners in network decision-making.
Bitcoin's code can only be changed with the approval of core developers and all miners, who have significant influence.
Miners, not developers, ultimately hold the power over the Bitcoin network.
The success of ICOs is dependent on multiple factors, and not every startup needs to tokenize.
Asset-backed tokens are becoming more popular due to increased liquidity and interoperability.
Venture capital is shifting towards quicker liquidity, with tokens being a key player in this evolution.
Tokenization of equity discussed in the context of blockchain technology.
Tokens should represent equity rather than being speculative ICOs.
Infrastructure needs to be in place for tokenization to be successful.
Future of blockchain predicted to have fewer blockchains but many tokens.
Potential for asset-backed tokens, such as buildings or company ownership, mentioned.
Uncertainty of future outcomes in the ecosystem.
Predictions can be equally positive or negative.
Speaker stresses the unpredictability of future events.
Any forecast made today is just as likely to be incorrect as it is to be correct.
Audience encouraged to stay tuned for future developments and expressed gratitude for their time and attention.