Ron Palmeri Joins Arrington XRP Capital

Ron Palmeri is a seasoned silicon valley entrepreneur and investor. Today we welcome him to the Arrington XRP Capital team.

I first met Ron shortly after launching TechCrunch nearly 15 years ago. At the time he was a partner and cofounder at Minor Ventures, an early incubator and fund that launched a slew of amazing startups. Companies he helped start include Grand Central (which later became Google Voice) and Open DNS.

Ron later started and invested in more companies, including most recently Layer, a communications infrastructure company that was recently acquired.

That acquisition was lucky for us because it made Ron, an incredible leader and mentor, available to us. He has joined as a strategic advisor and consultant. We’ll keep him as long as we can, either until I convince him to join full time as a partner, or he goes off to start his next operating company.

Follow Ron on Twitter @Ronp.

The Monetary Experiment: Algorand

We explore the monetary experiment of Algorand, a new cryptocurrency invented by Turing Award winner Silvio Micali. Arrington XRP Capital will be participating in the Algorand economy by running a relay node and bidding in the Algorand Foundation’s dutch auctions.

Algorand brings together bleeding edge cryptography with a clever economic model that bootstraps Algo currency markets. This is a novel development that ties the token and technology to economic incentives that encourage efficient market pricing.

The Algorand Foundation will distribute 30% of Algos through downside-protected dutch auctions. In this world, auctions are akin to monetary policy catalysts, not only circulating tokens, but guiding price discovery both today and in the future. The clever part of this story is that any purchaser can refund their Algos one year after purchase, giving them up to 90% downside protection. This has wide implications for Algo market dynamics.

Algorand’s monetary experiment marries Silvio Micali’s solution to a three decade challenge in distributed systems with lessons from Foreign Currency (FX) trading, options pricing theory and traditional asset management. As these markets mature, we predict that Algo will behave unlike any other cryptocurrency today. Not a stablecoin; but a cryptocurrency whose economic model motivates financial markets to form rational expectations and seek out self-fulfilling equilibrium.

The downside-protection clause also opens up a new world for institutional investors such as family offices or endowments who have not yet ventured into cryptocurrency because of its drawdowns. The simple question for these investors as well as others who hold cash in their cryptocurrency portfolios is thus: Why hold cash when you can hold downside-protected Algos, gaining cryptocurrency exposure without significant downside risk?

Algorand’s economic experiment is unprecedented. It is where macroeconomics meets cryptocurrency; and we believe that it will have wide-ranging implications for cryptocurrency portfolio management, hedging and broader market dynamics.

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DefendCrypto.org Launches To Help KIN And Others Fight The SEC

We’ve all watched KIN and others fight the SEC over how the U.S. government classifies their tokens. And while we often (always) bicker amongst ourselves about every detail of every coin and protocol out there, nothing can bring us together as well as a common enemy. The SEC is out of control, and hurting our industry with indecision.

That’s why we stand behind KIN and others fighting the SEC. Today KIN launches DefendCrypto.org to help spread information about their legal challenges, and request financial assistance from the community.

KIN has set aside $5 million for their legal defense fund and Coinbase will host the fund. You can contribute directly at defendcrypto.com. Anything left over after their case will be used to help other companies fighting the SEC.

Arrington XRP Capital will be donating to the KIN fund. We urge you to help them as much as you are able, and to spread the word.

Thank you.

Additional links about this:

Fred Wilson

The Block

CoinDesk

Our Investment In Dekrypt Capital

Our investment thesis at Arrington XRP Capital is to invest in great people and great projects. It really is that simple, and sometimes that means we invest in our “competitors” – other funds making investments into crypto-focused companies and projects.

We’ve made three investments in other funds to date – Ausum Ventures last year, one confidential investment (per the request of the fund), and most recently, Dekrypt Capital. More investments into other crypto-focused funds will come in time.

Why Dekrypt Capital? It’s all about the people. Jon Allen, Howard Wu, Ronen Kirsh and Jack Baumruk are the Dekrypt partners. They are among the most respected people investing in crypto projects today.

In 2011 they were mining Bitcoin.

In 2014 they invested in the Ethereum ICO.

In 2015 they helped develop Zcash, the first untraceable token with zero-knowledge proofs.

In 2016 they created Blockchain at Berkeley.

In 2017 the SEC spoke for the first time at a blockchain conference hosted by Dekrypt.

And in 2018 they hosted the first San Francisco Blockchain Week, with over 4,000 attendees.

Howard’s background in cryptography and various papers he has written such as DIZK and ZEXE have positioned him as one of the leaders in the zero knowledge proof domain.

They were co-investors in about half our deals last year, so we already knew they made some great investments. Like us, they aren’t shy about traveling and have made investments in fifteen companies in five countries.

They don’t publicize themselves much (a refreshing change in this industry), they have spectacular credentials, and bend over backwards to assist the companies they invest in. Actually, they help anyone that asks, even if they haven’t invested. When someone reaches out to them, they say yes, and help all they can.

Here’s an example of how helpful they are. Earlier this year we were expanding our team (eventually merging with another firm). We reached out to many people in the industry for assistance in finding good people. Ronen and Jon quickly came back to us with two amazing candidates out of Berkeley. Their deep ties to Blockchain at Berkeley helped us immensely.

Dekrypt has been in the blockchain space for a long time and will continue to be in the blockchain space for a long time. They have a builder’s mentality and the companies we have co-invested with them say that they are very engaged. Being helpful to your companies is perhaps the best way to advertise yourself – people talk, and being a force for good is a good reputation to have.

Their focus is on early stage projects. They have deep technical backgrounds and close ties with the developer communities which allows them to help their companies solve technical challenges as well as build out their team as they scale.

Dekrypt focuses on privacy preserving technologies and believe there are massive potential applications ranging from scalability, interoperability and obviously privacy. Like us, they believe this thesis is being validated and will continue to grow in importance.

They raised $20 million last year to start the fund, and they are now raising additional capital, as we did in late 2018. We made the investment last month and are proud to be doing business with them.

Why We Are Joining Terra Mainnet as a Genesis Validator

On the dawn of the Terra Genesis Block, the Arrington XRP Capital team is in the final stages of preparing a Genesis Validator for MainNet launch.

After many months of technical and business development, the countdown finally comes to a close.

Terra will launch tonight–April 23rd–at 23:00 PST.

From the moment Michael met the team last year, he knew there was something special about this project, likening Terra to his early investments in Uber and Pinterest. And for myself, as a new partner to the fund, there is no better way to be part of the network than to work closely with the Terra team and launch a Genesis Validator.

Terra represents the first real deployment of a non-collateralised, algorithmic stablecoin at scale. It is not a stablecoin science experiment. Rather, Terra is the first project of its kind to come to market with an existing and sizeable network of e-commerce merchants. More importantly, it is the first consumer-focused stablecoin, targeting non-crypto online shoppers who care more about discounts than they do about blockchains.

Alongside Cosmos & Binance Chain, Terra is one of the few public chains built on Tendermint Core. Tendermint Core is a Byzantine Fault Tolerant (BFT) mechanism designed to achieve agreement if no more than 33% of the network is malicious or faulty.

Deploying Tendermint Core publically needs another mechanism: sybil deterrence. This is where Terra’s Delegated Proof of Stake (dPoS) mechanism comes into play. By allowing LUNA holders to delegate to MainNet validators, Terra empowers token owners with real skin-in-the-game, as they ultimately decide who will secure the network.

There are plenty of challenges in deploying validators in adversarial environments, especially on high value networks like Terra (all we need to do is look to the history of chains victim to 51% attacks). Without proper node design, key management & security auditing, validators are sitting ducks, honey-pots, prey to malicious hackers & DDoS attacks.

After many months of defining availability demands & security requirements with the Terra team, we are very excited to launch our Genesis Validator.

It is not everyday that you have the opportunity to be a foundational part of what is potentially a multi-billion dollar e-commerce economy.

Contact us on terra@arringtonxrpcapital.com if you are interested in delegating your LUNA tokens with us.

Arrington XRP Capital Goes To Korea Next Week

We are on our way back to Asia to attend the Deconomy conference in Seoul next week.

I’ll be on stage in the afternoon of the first day for a panel called
Silicon Valley VC’s Crypto Investment Strategies. Joining me are Alex Pack (Founding Partner at Dragonfly Capital), Bryan Chang (Principle at Collaborative Fund) and Alex Shin (Partner at Hashed).

I was last in Korea last summer and that trip, hosted by Hashed, led to at least two deals that worked out really well for us (Contents Protocol and Terra). Korea is a wonderful country full of wonderful people, and I’m looking forward to this trip.

Joining me are Ninor and Ninos Mansor, our new partners. See you there.

Arrington XRP Capital Merges with ByteSize Capital

See CoinDesk: TechCrunch Founder’s Crypto Fund Tops $100 Million, Completes First Acquisition and CoinTelegraph: TechCrunch Founder’s Digital Asset Firm Acquires Crypto-Focused Private Fund

Arrington XRP Capital is very pleased to announce a merger with ByteSize Capital, another crypto fund. ByteSize Capital partners Ninor Mansor and Ninos Mansor have joined Arrington XRP Capital as partners, alongside founding partners Heather Harde and Michael Arrington (see the Team Page for more information). In addition, Geoffrey Arone will be stepping down from Arrington XRP Capital and moving to an advisory role.

ByteSize Capital is a private fund and research house focused exclusively on cryptocurrency. They have made investments into projects including Algorand, CertiK and Arweave. ByteSize Capital combines a wealth of technical expertise with data-driven frameworks for the crypto markets.

As part of the merger, Arrington XRP Capital will onboard ByteSize’s proprietary investing suite. The partners at ByteSize have developed a set of tools for navigating the crypto markets, including systems for data ingestion and quantitative backtesting. These systems will be incorporated into Arrington XRP Capital’s existing investment framework.

The merger strengthens Arrington XRP Capital’s barbell approach, combining early stage venture with a multi-strategy outlook toward the liquid markets.

Arrington XRP Capital also took a new $30 million commitment in December 2018 and continues to fund token and equity rounds for crypto projects worldwide. Investments are at http://arringtonxrpcapital.com/companies/.

Terra To Launch With Ecommerce Giant TicketMonster

Terra is a Korean startup that is preparing to launch its first price-stable cryptocurrency, or stablecoin. It is one of our largest investments at Arrington XRP Capital, and I am excited to see this move from theory to product and, hopefully, mass adoption.

You can read a recent interview with Terra at Global Coin Research here for additional information about the company and the upcoming launch.

Terra will first launch its payment network in Korea, with direct integration into a multibillion dollar Korean e-commerce company called TicketMonster from day one. The payment network presents an innovative stablecoin design that brings together algorithmic price stabilization and Tendermint’s proof-of-stake. While unveiling the payment network and a dApp designed for use in Korea, the company plans to expand aggressively into the rest of Asia.

As I described in my first post about Terra last year, relies on stabilizing mechanisms common to a new class of stablecoins. In addition, however, they rely much more heavily on something no one else is doing, a network of large ecommerce companies, in a variety of countries. This integration into some of Asia’s e-commerce giants makes it the first stablecoin to launch with an existing network of potential users.

Up until now, collateralized stablecoins like USDT and USDC have focused on speculators within the cryptocurrency ecosystem, while non-collateralized stablecoins have remained economic thought experiments (e.g. Basis). In some sense, Terra is the first stablecoin to actually come to market with a large potential user-base which isn’t focused on crypto.

In Q2 Terra says they are aiming to launch a payment service with TicketMonster, a large ecommerce platform in Korea with about US$3.5 billion in yearly gross merchandise sales. People will be able to purchase items at TicketMonster as usual, but if they use the Terra dApp they can pay with Terra, which is locked to the value of the Korean Won. As an incentive, the ecommerce partners will give Terra users a discount of ~5%.

That means a lot of people will want to use Terra right away to get that discount. Retailers will be reimbursed the discount through seigniorage issuances of new currency as the Terra economy expands.

From the retailers perspective, Terra is only charging ~1% transaction fees instead of the normal 2-3% (or more) charged by legacy payment companies.

The launch with TicketMonster will be the first time cryptocurrencies become easily accessible to mainstream consumers. The dApp is designed in a way very similar to PayPal. You select Terra at checkout as your payment method, you link your bank account, and then the dApp automatically exchanges fiat for Terra and finalizes the transaction. You don’t need to keep track of your private key or go to a dex to buy Terra, and most users probably won’t even notice that blockchain technology is running in the background.

So it’s a win/win for consumers and retailers, as payment friction declines significantly, and non-crypto enthusiasts are introduced en masse to a new type of crypto payment product, some of whom won’t even know they are using a crypto currency.

So How Does This All Work?

Terra employs a two token seignorage shares model for price stability first conceptualized in 2014 by Robert Sams. This model incentivizes holders of the mining token Luna to absorb price volatility in reward for seignorage – profit generally restricted to governments issuing national currency. In practice, this means investors – like us – join the network as miners & stake our coins to enable the expansion / contraction of the money supply, earning our keep of transaction fees from the Terra economy along the way.

As one of the first non-collateralised stablecoin experiments with significant real world traction, performance of the underlying consensus layer is critical to its success. This is why Terra opted for Tendermint, a battle hardened protocol (see Game of Stakes) inspired by traditional distributed computer science, and soon to be deployed on MainNet by the likes of Binance DEX & interoperability giant Cosmos Network.

The company tells me that both the Terra and Luna coins will be listed on exchanges soon, before the product launches.

I’m hoping that the dApp is released and live by the next time I visit Korea. I can’t wait to try it out.

A Hell Of A Year

2018 was a hell of a year. Yes, getting crushed in the market sucks. And yes, many were left shell shocked. But as someone who’s lived through a few big market downturns, I can tell you this. If you’re still standing, you are stronger for it.

You are a veteran of the 2018 crypto disaster. The next time the markets get shaky, you’ll handle it like a pro. And you’ll tell those around you, “This is nothing. I was in crypto in 2018.”

Perhaps your story is more heart wrenching than most. Maybe you lost your job, or more money than you could afford. That sucks, certainly. But greatness will be molded from the ashes. As I wrote nearly a decade ago (when we were just getting out of a different financial disaster), entrepreneurs live for this craziness. It’s supposed to be hard to be successful, that’s why the journey is so valuable.

Those of us that remain are stronger, forged in fire, and less likely to break down the road when new and even greater challenges approach. Be thankful for 2018, because to truly appreciate the good times, you have to suffer occasionally, too.

We are excited at Arrington XRP Capital. We are still aggressively investing in new projects, and our investors are doubling down in this market. Great fortunes will be won or lost in the coming years, and new technologies will emerge that we can’t even imagine today. Don’t let 2018 get you down. 2019 is here, and full of possibility.