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.

Geoffrey Arone Heads To Boston For Neo Global Capital Event

Our busy travel schedule continues.  Mike is in Singapore this week and next. On Saturday, September 15, I’ll be at Neo Global Capital’s (NGC) Frontiers of Blockchain Investment at The W in Boston.

I’ve been invited to participate as a speaker and am really looking forward to sharing my experiences, as well as hearing about how others are navigating the current market conditions. Specifically, I’m excited about the opportunity to speak at an event hosted by NGC. With > $400 million in assets, NGC holds one of the largest and most diverse crypto portfolios in the world. Given that, it will be a treat to hear first-hand about their perspectives on distributed identity and security tokens. It will also be fun to spend more time with the folks at NGC since we’ve co-invested in seven deals with them in the last six months including: NKNOasisMainframeCertikOrigoUltrain and Multivac.

I hope to see you there.

Where Arrington XRP Capital Partners Are This Week

Arrington XRP Capital Partners are traveling this week and will be spread around the world. Mike will be at TechCrunch Disrupt tomorrow (Wednesday) speaking at 3:10 PM California time with Ripple CEO Brad Garlinghouse.

Heather is traveling to Israel for a special debut of new startup SpaceMesh. We’ll have more details on both of those events afterwards.

On Thursday, 9/6/18, I’ll (Geoffrey) be attending RepubliCon, a one-day summit is hosted in NYC by Republic Crypto . Like most events we’ve attended this year, the event aims to “connect blockchain founders, investors, and other innovators”. However, what caught my particular interest about this event is the opportunity to participate in a panel that will address one of the biggest challenges facing crypto investors, “Hype-Checking Crypto Investments”.

Some of the specific issues we will try to delve into include the basics such as, “What do you look for?” or “Thoughts on valuations?”, etc. These kinds of questions are table stakes for these kinds of discussions, but the real fun (or not) will happen when we start addressing the following questions:

– Have you made any investment mistakes?
– If you had one wish to help step up your investment game, what would it be?
– How are current market conditions affecting your investment strategy?

For me, that’s where I hope to see if the group will be able to get past canned responses (“Great Team! Great Vision!”, “We look at fundamentals” and “Truly disruptive, next-gen, trillion transactions/second”), and actually discuss how to find the real signals in the cacophony that is crypto investing.

The panel will be moderated by my friend and Republic Crypto Managing Director, Bryan Myint.

Also joining will be Gayatri Khot of MStateJohn Wu of Sharespost, Peter Wisniewski of Galaxy Digital and Ryan Mundy of Techlete Ventures.

Silicon Valley’s Harmony Ready to Debut

It’s no secret to anyone following the crypto space that most of the innovation is happening outside of the United States. There are many reasons for this, but one of the main ones is the complete lack of regulatory guidance by the SEC.

Companies here are largely in limbo as their lawyers freeze most token issuances. Entrepreneurs that used to move to the U.S. to start their companies are looking at the huge tax burden, visa bureaucracy and regulatory black hole and just staying home instead. 

As a result, we’ve focused most of our investment energy towards Asia, Europe and the Middle East.

None of this has stopped Silicon Valley based Harmony, however. They are one of the hot new infrastructure startups tackling the next generation of blockchain.

They have an amazing team and are growing quickly. I met with the company earlier in the summer before my world tour. Pictured here is me on the left, then Rongjian Lan, Nicolas Burtey and CEO Stephen Tse.

The company was run out of Stephen’s home until they recently moved to dedicated offices (another house, I’m told) in Cupertino.

This is probably the hottest pre-funded crypto startup in the valley right now, and investors are clamoring for introductions. They are also hiring. 

You can contact Harmony on their website or on Twitter @HarmonyProtocol, and you can read about their product and history in their own words here – Introducing Harmony: An Open, Scalable Marketplace for the Decentralized Economy.

Terra’s Ambitious Ecommerce Backed Stablecoin

I visited Korea in July and while I was there I had the very fortunate opportunity to meet Terra founders Daniel Shin and Do Kwon. This was one of those rare meetings where it might have appeared that the company was pitching me, but I already knew I wanted to invest and in reality I was pitching them to get the largest allocation I could.

Terra is our third investment in a Korean company and our second largest single investment by size. I’m VERY excited about this company. This is only the second stablecoin we have backed (the other is U.S. based Reserve).

Most stablecoins have a mechanism for keeping the price stable to another (usually fiat) currency that involves an algorithm and reserves. While Terra is also using these same tools, they are mostly focused on keeping their coin price stable via a network of the largest ecommerce companies in the world who are going to agree to use the currency and peg its value. That means the heavy lifting will be done via partners who will simply use the coin, and it’s a compelling argument.

We join an incredible list of co-investors (Binance Labs, Polychain Capital, OKEx, Huobi Capital, FBG Capital, Arrington XRP Capital, TransLink Capital and many others). You can read lots more about the company at the links from their press debut below.

TechCrunchFortune, VentureBeat, Tech In Asia, CoinDesk, CoinTelegraphDeal Street AsiaBitcoin Exchange GuideCryptoNinjas, newsBTC and Finextra.

Press Release:

Terra Raises $32M in Seed Funding to Build the Future of Digital Money

Terra has created an unprecedented global alliance of major eCommerce businesses and secured investment from an all-star lineup of prominent global funds, including Binance Labs, Polychain Capital, OKEx, Huobi Capital, FBG Capital, Arrington XRP Capital, TransLink Capital and many others

SINGAPORE ​- Terra has successfully closed its seed funding round with an initial USD $32M raised to kickstart its vision of creating the next generation of digital money. In a rare event, the capital investment arms of four of the six largest cryptocurrency exchanges globally have signed on as lead investors, including Binance Labs, OKEx, Huobi Capital, and Dunamu & Partners (the investment firm of Upbit operator Dunamu). An impressive list of leading global blockchain-focused funds, including Polychain Capital, FBG Capital, Hashed, 1kx, Kenetic Capital, Arrington XRP Capital and many others, have also joined as investors alongside major mainstream funds like TransLink Capital.

Terra will invest the initial seed capital in building the modern financial system on the blockchain. The team aims to solve key barriers to the mass adoption of digital currencies by creating a price-stable cryptocurrency (“stablecoin”) that can be readily used on Terra’s blockchain payment solution. The company’s unique go-to-market strategy leverages the large and ever-growing transaction volumes of eCommerce platforms. Terra is using a proven model that has worked tremendously well for payment platforms like AliPay and PayPal, which grew by capturing the rising transaction volumes of TaoBao and
eBay respectively. To drive the same kind of rapid adoption, Terra is integrating its payment system into the Terra Alliance, a formidable alliance of global eCommerce partners on an unprecedented scale.

“We are pleased to support Terra, which sets itself apart from most other blockchain projects with its established and immediate eCommerce go-to-market strategy” said Karthik Raju, partner at Polychain
Capital. “Its existing technology and compelling business model provide an ideal launching pad for Terra to fundamentally disrupt how everyday digital commerce is conducted across global consumer markets.”

The Terra team is already deeply connected to the eCommerce industry, where co-founder Daniel Shin is founder and Chairman of TMON, a leading eCommerce platform in South Korea with a total Gross Merchandise Volume (GMV) of nearly $4 billion and 9 million annual customers. To date, a total of
fifteen companies along with TMON have joined the Terra Alliance, including Woowa Brothers, Qoo10, Carousell, Pomelo, and TIKI – some of the fastest growing eCommerce companies in Asia-Pacific servicing Southeast Asia, Taiwan, Hong Kong, Australia, and other major markets. With a total of USD $25 billion in annual transaction volume and 40 million customers, the Terra Alliance sets the stage for Terra to become a medium of exchange at massive scale. More partners will be joining the alliance as Terra
expands its global footprint.

“From experience, I know that faster, more secure transactions at a fraction of today’s fees could be a game-changer for many eCommerce platforms. We are excited to be working with great partners and look forward to beta-testing Terra’s payment system in Q4 of this year,” explained Daniel Shin, Co-founder of Terra. “However, our vision goes beyond positioning Terra as a trusted and secure medium of exchange for eCommerce. The potential application of Terra is immense, and we foresee it being used for all types and forms of financial products like loans and insurance.”

Terra was conceived in response to the need for a stable digital currency that is immune to the price volatility that comes with speculation and manipulation. However, creating a widely accepted digital currency is only part of its mission. Beyond being a currency, Terra hopes to evolve into an open platform where innovative financial dApps can build upon Terra’s stability. In finally bridging the gap between digital currencies and real-world application, Terra will help unleash the vast and yet-to-be-realized potential of blockchain to revolutionize the very nature and form of money.

“While we see many stablecoins coming out, Terra’s journey is especially meaningful as they are designing one of the few price-stable protocols with existing, working, and strong go-to-market strategy and usage. We are constantly impressed by the founders’ leadership and earnest commitment to the business, and excited to support the team,” said Ella Zhang, Head of Binance Labs.

To learn more about Terra visit: https://terra.money/

___________________________________

ABOUT TERRA

Terra is designing a price-stable digital currency that will power the next-generation payment network on the blockchain. Terra partners with an ever-growing alliance of global eCommerce platforms to bring blockchain’s benefits such as low transaction costs to merchants and everyday consumers. By bridging the gap between digital currencies and real-world application, Terra aims to evolve into an open platform for innovative financial dApps and grow the real GDP of the blockchain economy. Founded by a team of business, finance and blockchain experts, Terra has offices in Singapore and Korea.  For more information, go to https://terra.money/ ​

Follow us on Telegram: @terramoney
Visit the Terra blog for regular updates: https://medium.com/terra-money
Join the Terra community on Discord: https://discord.gg/bYfyhUT

Binance CEO Changpeng Zhao Is The Real Deal

Earlier this month I visited the tiny European country of Lichtenstein (population: ~40,000). I was there to celebrate the announcement of a new crypto exchange called LCX. LCX is entering into a joint venture with Binance to create a new fiat to crypto exchange, to be called Binance LCX.

Binance, of course, is the worlds largest crypto exchange to date, and it’s just a little more than a year old. They facilitate the exchange of crypto assets for other crypto assets. They don’t exchange assets into fiat yet, and this partnership is a step towards meeting that demand. As a disclosure, our fund is involved in this new joint venture, although the details haven’t been announced yet.

This post isn’t really about LCX, I’ll write more about that project later at the right time. But I do want to say a few words about the CEO of Binance, Changpeng (“CZ”) Zhao.

He’s the real fucking deal.

This is actually the first time I’ve met him. I’ve been at events he was at, and I even spoke at the recent Binance conference in Seoul. But I’ve never had the opportunity to meet him.

In Lichtenstein everyone involved in the deal stayed at the same small hotel, and there were only a handful of us. So I had the opportunity to have multiple meals with him as well as interactions at two official events.

In my days at TechCrunch I had the opportunity to meet and interview many of the leading business people of our time. Steve Jobs, Eric Schmidt, Larry Page, Jeff Bezos, Bill Gates, Mark Zuckerberg and many others.

I don’t know if CZ will reach the same level of success as these other people, but I do think one thing – he’s right up there in that group of titans in terms of personality, drive, charisma, etc.

These people have a variety of personality types and quirks, and achieved success in different ways. But they all have (or had, in the case of Steve Jobs) certain things in common, to varying degrees.

As I said in a follow up tweet, he’s thoughtful, strategic and deeply human. He seems to clearly understand where he wants Binance to go and how to give it the best chance of getting there. He also has a good sense of humor and good PR instincts.

A lot of my thoughts about him aren’t easily articulated, and it comes down largely to more of a gut level feeling. Still, after I tweeted about him people I know started reaching out to me to (mostly) agree.

One of those people is David Lee, who formerly ran SV Angel and is currently at Refactor Capital. After meeting CZ he was so impressed he wrote a note to his limited partners.

David’s notes, published with his permission:

My personal observation: he is impressive as a communicator and his talk was very precise. His statements felt authentic and very U.S. – focus on users, long-term view, embracing failure.
  1. 1. He thinks Binance has been successful so far because they want to lead on values and ethics. (see below).
  2. 2. Wants every competitor to copy their features – it grows the pie.
  3. 3. His goal is 1.2 BB users. They are at 10 MM now. That’s what he thinks about.
  4. 4. Decentralized exchanges are 5-10 years away from being superior to centralized. They will catch up though.
  5. 5. 2018 was supposed to be year of regulation. He views progress this year as “very positive”  in Asia (see below)
  6. 6. His vision – there will be millions of tokens in the future. Security tokens essential to this future. His vision – over 1mm tokens.
  7. 7. Won’t enter Korea unless someone else does. He will be a fast follower. He was very candid.
  8. 8. He doesn’t think we’re in a bear market and nowhere near the bottom.
  9. 9. He doesn’t read white papers. He just focuses on tech and operations.
  10. 10. He spends less than 15 minutes a day on Twitter.

David also mentioned that CZ spends as little time as possible facing outwards, that he is most happy when working on new features, the technical and operational side of the business. And that he uses “very crisp, precise speech.” I noticed this too.

If it seems like CZ is everywhere, that’s because the press always wants a piece of him. He’s probably only second to Vitalik Buterin when it comes to selfie requests at crypto events. But the side of him that i saw was quiet and thoughtful, not someone quick to talk or bluster. He clearly thinks at least a step or two ahead of most of his competitors (his decision to leave China at just the right time last year catapulted the company to the no. 1 position among its competitors).

And his team clearly believe in him, and Binance management in general. The vast majority (~90%) of them have opted to take their salaries in BNB coin instead of fiat. Whether you think that is smart or not, it clearly shows belief in the future of the company (and in fact BNB has been one of the best performing coins this year).

Bet on CZ if you can. Don’t bet against him if you can avoid it.

* The picture at the top of this post includes (from left to right) CZ, me, and Ripple SVP Ethan Beard.

 

 

 

Arrington XRP Capital In Korea: So Many Pictures

Two weeks ago Geoffrey and I went to Korea to speak at two crypto events: Beyond Blocks and the Binance- organized Blockchain Partners Summit.

This was an incredible trip. The Korean crypto community was vastly welcoming and accommodating.  We had a chance to see Seoul in all of its beauty, ate so many memorable meals with new and old friends, and had a chance to meet local entrepreneurs that we otherwise probably never would have had the opportunity to mingle with.

As usual, key investors and entrepreneurs from around the world, particularly Asia, attended the events. We saw many of our portfolio companies, and met dozens more companies trying new and interesting things with blockchain technology.

Special thanks to Hashed and Binance for organizing these events and inviting us to speak.

While we were in Seoul we also had the opportunity to visit Korean based exchanges UPbit an BitHumb.

And finally, I had a couple of interviews while I was there. The first was “Crypto” Ran NeuNer, and we had a fun talk here.

And last but definitely not least, Vivian Kim, a famous video journalist in Korea, had a long interview with me here.

Here are a few more pictures from the week: