anticipations for 2019

Und nun wollen wir glauben an ein langes Jahr, das uns
gegeben ist, neu, unberührt, voll nie gewesener Dinge...

"And now we would like to believe in a long year, given to us new, untouched, full of things that never before were..." -- Rainer Maria Rilke in a letter to his wife, January 1, 1907

I thought I'd start the new year with a few technology related anticipations.

1/ People will continue to awaken to the idea that social media and our social lives should not be synonymous with massive companies that monetize our attention and interactions with one another via advertising. I strongly believe we have the technical capability and increasingly, the consumer demand for social platforms that will allow us to communicate and share content with people that we care for without giving an effectively free license for that media and data to be compromised or sold and our privacy and attention jeopardized. Protocols like Scuttlebutt demonstrate how truly p2p social media might be designed, platforms like Steemit show how you might built endogenous content-monetization structures, and the increasing popularity of messengers like Signal or Telegram, and browsers like DuckDuckGo and Brave are encouraging.

Contextual Data: From Q32017 to Q32018, FB DAUs in the US & Canada didn’t grow (stayed flat at 185M). Europe DAUs grew only 1.5% yoy from 274M to 278M. However FB is growing quickly in Asia-Pacific and ‘Rest of World’. FB makes approximately $24 per user per year globally, and is doing annually approximately $52B in revenue at 40-45% operating margins. It also has 4 of the world’s top 5 most downloaded apps.

2/ Mobile-first consumer subscription software will continue to soar, although with more scrutiny on predatory practices and annual renewal rates, particularly for those apps that have favored annual subscriptions over monthly. A majority of the time these annual subscriptions represent one-off purchases (renewal rates under 50% are very common). Consumers will start to demand better tools for monitoring, organizing and managing services they have subscribed to.

Contextual Data: Sensor Tower estimates that Q32018 App Store revenue was $18B globally, up 23% from the year prior. $12B of those $18B came from the iOS App Store. Apple takes between 15-30% of subscription revenue and 30% of in-app purchases so safe to say if Sensor Tower is correct Apple is making ±$3B per quarter via App Store revenue. For it’s part Apple breaks out Total Services revenue which has been growing 20-30% yoy and in the most recent quarter reached $10B.

3/ Relations between the world's two largest superpowers will continue to deteriorate. On the American side, misperceptions and poor leadership will plague negotiations. Unpredictable incidents like the arrest of the Huawei CFO, which Trump reportedly was not aware of prior to the incident, will destabilize attempts at unwinding tension, and may provoke nationalistic fury from the Chinese directed towards America which we have largely avoided until now. On the Chinese side, the pursuit of 6%+ GDP growth at almost any cost (despite the fact that net new labourers has turned negative) will keep them at the negotiating table, but they will be increasingly sensitive to any actions that may jeopardize their own legitimacy and may therefore respond unpredictably.

Contextual Data: China's economy grew at 6.5% yoy in Q30218, down from 6.7% in Q2 and 6.8% in Q1

4/ There will be a deserved increase of concern over smartphone addiction, accompanied by an increase in smartphone usage. More links will be found between smartphone usage and anxiety, particularly among children and adolescents. This will help fuel a renewed push towards a clearer understanding of our own mental health and wellness, mindfulness, meditation, and the impact of psychedelics on consciousness and their capacity to treat mental health issues. The irony will be lost on people who will turn to smartphones to try and solve their smartphone addiction problems.

Contextual Data:

5/ As investor confidence and valuations continue to fall, several tech stocks will start to look cheap on a FCF yield basis. Network effects and monopoly power will continue to buoy profits, and with a split legislature and profit-driven President in power, legislative action to counter monopoly effects will not come to pass in 2019.

Contextual Data: In the twelve months ending Sep 30, 2018, Apple had ±$63.4B in free cash flow (based on my rough workings). At today's market cap of $675B that represents 9.4% FCF yield

back to basics > operating leverage

i've liked thinking about businesses in terms operating leverage since i started looking at internet companies seven years ago. why? it's a great framework for both founders and investors to think about profitability, scalability, and the stage of maturation of a business. it's also just a neat concept.

operating leverage is the rate of change of operating profit with respect to revenue. (in calculus speak d Op Profit / d Revenue) it is bound by 1 on the low end and infinity on the high end.

operating leverage is not to be mistaken for financial leverage. financial leverage is usually understood as debt. borrowing allows firms and funds to generate higher returns on equity by increasing the total amount of resources they can marshal. operating leverage on the other hand is something that is more inherent to a given business model, and in particular its cost structure. let's start with the equation. there are several definitions, and i prefer the following:

operating leverage = (contribution margin) / (operating profit margin)

so a lemonade stand that sells 10k cups of lemonade at $4 each with a unit cost of $2 and total fixed costs of $5k (stands are expensive) has operating leverage of 1.33x

how do i get there?

10k cups of lemonade * $4 revenue per cup = $40k in revenue
$40k - (10k cups * $2 cost per cup) = $20k contribution profit
$20k contribution profit / $40k revenue = 50% contribution margin

$20k contribution profit - $5k fixed costs = $15k operating profit
$15k operating profit / $40k revenue = 37.5% operating profit

50% contribution margin / 37.5% operating profit = 1.33x

this means that for every 1x unit increase in revenue, operating profit increases by 1.33x

you can also think about operating leverage more simply,

operating leverage = (fixed costs) / (total costs)

a company with a high proportion of fixed costs has high operating leverage. put another way, a company with a low proportion of variable costs also has high operating leverage.


why is that?

the classic example given for a business with high operating leverage was Microsoft back in the 90s. the R&D costs (developer salaries) incurred by creating enterprise software like Microsoft Word was relatively high even before a single CD of Microsoft Office was sold. once the software had been written, the incremental cost of each additional CD sold was essentially the cost of a blank CD (and the sales & marketing spend in order to get it onto store shelves and into companies). so Microsoft started in a hole of fixed costs, and each incremental copy of Office they sold was essentially pure profit. if they sold enough copies they dug themselves out of the hole and generated substantial profits on top.

other businesses that exhibit high operating leverage include gaming publishers (like EA or Supercell), software-as-a-service companies, pharmaceutical companies, and media consumer subscription companies (as long as they own the content they're selling).

i find operating leverage most helpful when used to compare two businesses within the same sector, like two software businesses offering the same service but one with an API-driven go-to-market and another focused on on-premise installations.

leverage can cut both ways, businesses with high operating leverage might be at risk of not recovering their fixed costs if a particular product or service doesn't perform well. it also makes the financial performance more sensitive to expectations and volatility in revenue growth (because a business with high operating leverage will recoup less overall costs in a downturn than a similar business with low operating leverage)

a short-hand way of determining whether a company has high operating leverage is to look at its gross margin. because COGS are generally variable costs, businesses with high gross margins also usually have high operating leverage (unless sales & marketing costs are unusually high).

as technology investors, most, but not all companies we look at have high operating leverage. incremental copies of the same strings of code have almost zero variable costs. API-driven businesses could have even lower variable costs than Microsoft used to have.

that said, people's attention increasingly does come at a cost. customer acquisitions cost (CAC) is a variable cost, and businesses with high CACs don't have high operating leverage. it's often not that simple to work out at an early stage what future CACs might look like. that tends to be a reason why venture investors like consumer businesses with an element of virality or strong network effects, but those deserve their own post.

in early stage venture, a companies cost structure is often still being built out, and it can be hard to ascertain whether or not particular company will have operating leverage. however, i still think the fixed cost vs variable cost lens is a really helpful way of thinking about businesses.

how many bitcoins does a nasdaq cost?

OK. You'll have to forgive me. This one is really because I was just curious of what the chart looks like. Why? I'm not sure. It's certainly not a fundamental analysis of anything, and I would be wrong to say you should read well, anything, into it.

On the other hand, somehow this chart is an attempt to answer questions as profound as

--Is Bitcoin a fraud?
--Is Facebook evil?
--If Bitcoin is a fraud, and Facebook is evil, what do we do now?

And other less important questions like

--Where are we at in the installation > deployment continuum of technological revolutions with regards to cryptocurrencies? What about with regard to 21st century software companies?
--Have we started to see one technological paradigm start to replace another?
--Have we seen financial capital decouple from productive capital in the context of software (or crypto)? Are we in bubble territory?
--If we are in a bubble territory, which is a bigger bubble? Open-source digitally-native money that has no cash flows or software companies trading at >20x earnings?

OK enough of that, can't think too hard here. Let's pull and normalize (grr Bitcoins trade on weekends and NASDAQs don't) the data, dig into the numbers, and look at some charts.

First off, this is what NASDAQ has done since Sep 13, 2011 (I started there because it was the furthest back I could find good BTC daily close data for). Basically it's had a steady grind higher for the last 7+ years, essentially tripling in value from ±2,500 to ±7,500, with recent turbulence bringing it down to ±7,200 (from an all-time high of ±8,000)


Secondly, this is what Bitcoin has done since Sep 13, 2011. It was basically worth nothing for a long time, and then it was worth very little until the end of 2013 when it became worth quite a lot quite quickly. And then it became worth relatively little again. And then over the course of 2017 it grew to be worth what many people now consider to be an absurd amount (±$20,000), and today people think that ±30% of that absurd amount sounds like the right number.


Finally, we turn to the question of how many Bitcoins a NASDAQ costs:


OK this first one isn't super helpful. From this perspective it's clear that a NASDAQ at one point cost a lot of Bitcoins and then later it's price appears to have collapsed (in terms of Bitcoins). In Oct 2011 in fact it would have taken 1,177 Bitcoins to buy a NASDAQ. And today you can buy a whole NASDAQ for only 1.31 Bitcoins. From this perspective it is fair to say that the NASDAQ looks really cheap on a long-term horizon (in terms of Bitcoins).

What if we zoom in?


This next chart shows us how many Bitcoins a NASDAQ has cost since Jan 1, 2014 (after that period in 2013 after Bitcoins became worth quite a lot quite quickly). This is a more interesting chart with probably 4 distinct phases.

(i) In the first phase, from Jan 1, 2014 to Jan 14, 2015, NASDAQs became 5x more expensive (in terms of Bitcoins) going from 5 BTC (Bitcoins) to 25 Bitcoins.

(ii) In the second phase, from Jan 2015 to Sep 2015, NASDAQs were bouncing up and down around 20 Bitcoins.

(iii) In the third phase, from Sep 16, 2015 to Dec 17, 2017 NASDAQ went into a complete free fall. You might have missed this in the headlines. On September 16, 2015 a NASDAQ would have cost you 21.48 BTC. Just two years and three months later, that same NASDAQ would only have been worth 0.36 BTC (an all time low), losing 98.3% of its value in terms of Bitcoin in the process.

(iv) The fourth phase spans from Dec 17, 2017 through to today and may also be of interest. Folks will often try and tell you that 2018 has been an unususal post GFC year in that asset prices across indices like NASDAQ have sagged (actually NASDAQ is up ±5% in USD terms through Nov 16, 2018). Crypto investors however might look at NASDAQ and see tremendous performance! NASDAQ is +153% YTD in Bitcoin terms!

Here's a chart dedicated just for the fourth phase


Likely nothing of value to take away here

how german policymakers are hurting berlin's startups

this post first appeared as an article on venturebeat on july 1, 2018. for more thoughts on employee equity, go to

You can hardly go a day without seeing an article heralding the prodigal rise of Berlin’s startup scene. It is true that Berlin has tremendous momentum and potential. There is an iconoclastic streak to the city, and it is attracting young makers with creative ambitions from all over the world. But there is something at the core of Berlin’s startups that is limiting their potential. German corporate structure and inefficient tax treatment is restricting young Berlin startups’ ability to effectively incentivize talent.

Growing tech companies need to source talent globally, and it’s an incredibly competitive market for high performers. People of this calibre, particularly those who have worked in the US or the UK, are used to being offered options as part of their compensation package. However, in Germany standard employee share option plans often don’t exist. Startups often implement VSOP (virtual share option programs) instead of standard option plans because the administrative overhead and employee tax liabilities associated with traditional option plans are very high.

Potential competitive hires perceive VSOPs to be overly complex, less tangible, and fraught with risks that don’t occur with standard options. Obligations to employees in a VSOP are often structured as an employee benefit or cash liability, putting them lower in the capital structure than common shareholders. And employees who leave the company often have to forfeit their virtual share options.

Several founders of Berlin-based startups have told me they have lost potential hires due to the disadvantage of virtual share options. If a hire has one offer for real options and another for virtual ones, which do you think she is more likely to choose?

If VSOPs are so disadvantageous, why implement them? The truth is, Berlin’s startup founders don’t really have viable alternatives. There is no tax-advantaged employee option scheme in Germany. Employees first have to pay to exercise their options, then the difference between their strike price and the market price of their shares is taxed at their income tax rate. Finally, when they sell their shares they are taxed a further 28 percent. Real option plans come with other burdens. Companies often have to create an entirely new share class, and minority shareholders must be consulted on major corporate decisions.

Berlin startups are losing in the battle for competitive talent due to the lack of a tax-advantaged employee option scheme. Elsewhere in Europe policymakers are more supportive and offer schemes that don’t penalize the use of share options to incentivize teams. In France, startups can use the BSPCE (Bons de Souscription de Parts de Creatur d’Enterprise), and in the UK, the EMI (Enterprise Management Incentive) scheme offers the friendliest employee option tax treatment on either side of the Atlantic.

Due to all of the above, founders and investors creating and investing in Berlin-based companies often choose to domicile their companies elsewhere, like the UK or the US, despite the fact that the company may be based and headquartered in Berlin. It’s high time German policymakers recognized the tremendous potential of their startup ecosystem and gave the iconoclasts the tools to build world-class teams that will help shape tomorrow’s world.

JOMO and smartphone intent destruction

i thought i'd flag a new piece of research done by the android UX research team (summarized in this blog post)

essentially the gist is that even google is coming around to the idea that smartphone / mobile addiction is a problem and they are studying the different approaches people are taking to get off their devices (what they're coining JOMO - the joy of missing out). i would even go further and suggest that smartphones are responsible for something far more problematic for productivity, both on a personal and system-level, intent destruction. we all are familiar with taking out our phones to accomplish a specific task, only to find ourselves scrolling through a self-esteem destroying feed minutes later.

why is this relevant for us in the tech community, in particular investors? well, i expect that as awareness and acceptance of this problem increases, apps will either be policed or begin to self-police. hopefully the yardsticks will change, and successful apps might start measuring their health not based on "user engagement", but user satisfaction or some measure of the quality or their contentment with their time spent. (see excerpt from paper below on reconsidering success metrics)

it's also relevant for us because governments have already shown their willingness to come in with a heavy-hand when they perceive the problem as being out of control. the chinese government's crackdown on teenage gaming addiction has contributed to a $200B loss to tencent's market cap since Jan.

i also think it's important we think about this as we invest in next-generation's winners. whether we feel it in our selves, our families or our friends, i do feel like technology that distracts rather than enables may turn out to be short-term profitable but ultimately long-term problematic

some great product and measurement thoughts from the paper:

Reconsider Success Metrics

"We feel that the technology industry’s focus on engagement metrics is core to this attention crisis that users are facing. The more that businesses are incentivized to increase user engagement, as measured through frequency and duration of use, the more it feeds the competition for users’ attention. Hakansson and Sengers [12] described user attention as a commodity sold to advertisers and stressed the importance of seeing the user as a non-consumer. Engagement metrics alone do not account for user satisfaction [2]; even when users enjoy an app, they can experience frustration and guilt from inability to cease engagement [26]. It’s important to consider alternative metrics to indicate success, relating to user satisfaction and quality of time spent."

product market fit

Copyright Bill Watterson

a lot of people smarter than me have written a lot of intelligent things about product market fit. i still get asked the question by entrepreneurs of how i would define it so i thought i'd lay down a summary of my thoughts here.

creative, but largely unhelpful definition:
where the rubber meets the road

or, as Andy Rachleff would say:
when the dogs start eating the dog food

this is the most simple definition. the market is ingesting what you're serving.

external (the investors) definition:

a non-trivial group of customers or users are engaging with your product and service, and have proven that they are willing to trade something valuable for it, usually time or money (or both)

internal (the founders) definition:

early observations of your original value hypothesis being proven correct. a value hypothesis articulates what exactly your product or service is, who will use it, and most importantly why they will value it.

when you have early signs that your product or service is being used by people who truly value it, you've achieved product market fit.

this framework may seem a bit at odds with lean startup methodology.

  1. what if the product or service that customers are valuing is not core to our business?
  2. what if my core product or service is being valued by customers we didn't built it for?

shouldn't these be celebrated? shouldn't that count as product market fit? yes, eventually. but in the first instance you need to rally the company around the product or service that is taking off, and potentially rethink your long-term mission, your medium term strategy and your short-term tactics. in the second instance you should run with it, but also ask yourself why your targeted audience isn't ingesting the product or service and another one is, and potentially rejig the customer facing aspects of your business accordingly.

the above definitions may seem vague and imprecise. the truth is, it's hard to find a universal definition of product market fit that applies to every company. it might mean 4 enterprise customers signing sizeable contracts, it might mean $80k MRR, it might mean participants in a network starting the share meaningful content with one another, it might mean one developer deploying your framework for the first time in production...

perhaps it's clear, but of the above, i think the internal definition is most vital. if you're confident you've achieved product market fit but an investor or external party doesn't agree, go find one that does.

prioritizing progression over perpetuation

over the years i've developed and refined a really simple framework for prioritization that i wanted to share.

whether it's an athletic pursuit, house chores, or your work, you can bucket every task into either 'progress' or 'perpetuation'. depending on how satisfied with where you are today vs. where you want to be, you can dial up and down the relative weights of those tasks. when you're not happy, you should be spending at least 2/3 of your time on progression, and minimize perpetuation.

what do i really mean?

well, let's go through some examples.

back when most of my life was dedicated towards swimming, i was practicing 10 times a week, often swimming 5-7km each practice. at the beginning of a season, when you might be out of shape, you do a tremendous amount of threshold/endurance mileage to improve your conditioning and increase your anaerobic threshold. This is progressive work. You're pushing your boundaries and improving. As your main competition approaches and you start feeling strong in the water, you take your foot off the gas pedal and start to back off the mileage, the goal is the maintain or perpetuate your condition and even to back off and get some rest. Both of these stages are important and valid to swimming your fastest. But not everything is as clear cut as swimming.

what about at home? any given week there are a set of tasks you might do to maintain the status quo (we often call it "upkeep": taking out the trash, vacuuming, or washing your sheets. but sometimes it's also also vital to do things to fundamentally redesign or rethink an aspect of your living space, particularly if you're unhappy. maybe that means research for moving, or just repairing something that has been broken for a while. the problem is, most of us are constrained for time, and the perpetual tasks can eat up most of it. we kick the can down the road and never do the things that will help us progress out of the status quo, building frustration and a feeling of ineffectiveness.

this leads me to work. i actually mostly generated this framework when i was in between jobs. i was not happy about that. i knew that i needed to change the status quo but found myself frustrated that things weren't progressing as quickly as i would have liked. why not? well, it turns out i was spending a lot of time on things that weren't going to generate a meaningful shift in my situation. i realized i needed to minimize time on tasks that were necessary but just perpetuated the status quo, and focus on tasks that were riskier but might one day lead to a job or a project that would fundamentally change my circumstance. that meant taking risks with whom i met, or reaching out to people i hadn't spoken to in years.

i ended up getting my next job, at soundcloud. now, in my day to day work as an investor, i tend to think about this framework in more simple terms. monitoring and staying on top of my email is perpetuation, it's "staying on top of things". i need to do it, and because i'm happy with the status quo, i also want to do it. but more important is the work i do to make myself a better investor, improve the firm, or help our portfolio companies level-up. often, this means reading and learning, spending time outside of my comfort zone, listening to people smarter than me, tinkering around with unfamiliar software and networks, and keeping my phone in my pocket.

the proverbs of john heywood - 1546

when you learn Mandarin one of the most delightful aspects of the language is learning chengyu. Chengyu are idioms, typically of four characters, with rich (and convoluted) stories behind them. Today, Chinese often use them in day-to-day contexts as sort of common-sense teachings or even just throwaway expressions.

In English, it strikes me we don't have as strict a framework for our idioms. Recently, I came across Proverbs by John Heywood, published in 1546. I thought I'd share some of my favorites:

Soft fire makes sweet malt.

As he writes, "You must not leape over the stile before you come at it". Be patient.

Strike whilst the iron is hot

Perhaps contradictorily to the above, opportunities are not always ready for the taking. When they appear you have to seize them. Especially true in venture..

Out of sight, out of mind

In this day and age it's find to hard peace of mind. For me this represents the importance of being present in where you are, rather than being distracted by things happening far away from you. Information now travels at the speed of light but it doesn't mean we should always be paying attention to it. (Interestingly, origin is from a 1320 early English fragment that I interpret as Far from eyes, far from heart)

Mine Ease in Myne Inne

The comforts of home.

Better Late Than Never

apparently from Tusser's Five Hundred Points of Good Husbandry...

The rolling stone never gathers moss

One I've really taken to heart so far.
Loving the origin of this one:

Herod: Speake thou three-legd tripos, is thy shippe of fooles a flote yet?

Dondolo: I ha many things in my head to tell you.

Herod: I, thy head is alwaies working ; it roles, and it roles, Dondolo, but it gathers no mosse, Dondolo.

The Fawn, 1606, by John Marston

Will leave you with those

three theses

ACINQ Lightning Implementation Live on their Testnet

One of the unusual things about looking at promising crypto projects focused on decentralization is that many are already well capitalized. As an investor it means that conversations are quite balanced and you have to spend as much time pitching the entrepreneur as they are you.

It's not the subject of this post but it does force us to distil our USP as investors. (As a "traditional" VC, I often tell entrepreneurs that while we're only halfway down the rabbit hole, sometimes it helps to have an ear above ground and an ear below). For example, many projects aren't properly equipped to properly hire and build out teams to fulfil the ambitious goals they have set for themselves (and that their current valuations price in).

One of the most important qualities we can bring is strategic perspective, and one way to gauge that is to have a dialogue about our theses and perspectives. With that, I wanted to quickly list out my theses in the space and get your feedback. None of these are rocket science or particularly groundbreaking, but they are a helpful framework for me.

Simple and Secure UX

My grandma got an iPhone last year. She just got FaceTime down. Imagine my grandma trying to convert some RDN into ETH on etherdelta using her Ledger. "Grandma, make sure the wallet holding RDN tokens has enough ETH to pay for the gas costs!"

To be clear, we've made huge strides here, particularly with regards to wallets and exchanges. We are investors in two plays here, Luno and Revolut, and no one can deny how strong the UX at Coinbase is, but we're only scratching the surface of what's possible, particularly when you look at use cases of blockchains beyond buying/selling. There are some well established projects trying to become the light client / ethereum browser of choice (Status, Toshi, Metamask, etc), but I think the playing field is still wide open here for someone who can combine an elegant UX with ironclad private key storage, ideally with a social layer included. Wouldn't it be nice if we could have a more-private social media environment that didn't rely on advertisers and other actors trying to influence our thoughts in order to monetize?


In 2018 scalability should really become a hygiene factor. Network throughputs have been put to the test earlier than anticipated and while the ecosystem is iterating rapidly we're still nowhere near transaction speeds (or costs) traditional databases offer. The ~15 tx/sec on ethereum clearly doesn't cut it and suffice to say that any project that can meaningfully improve throughput is going to be valuable. I tend to think about these solutions in two ways. Firstly, there are solutions that are enabling off-chain computation and then on/off-chain reconciliation. Secondly, there are solutions to increase on-chain throughput. Some exciting projects addressing scalability include Tendermint (can get ETH to 200 tx/sec and Tendermint core can run up to 5,000 tx/sec), Truebit, Raiden (ETH version of lightning), Plasma, Sharding, and of course Lightning Networks that are already live on BTC mainnet) and testnets. With Lightning Networks I do worry about the requirements to open and close payment channels on-chain and that in practice they seem to trend towards recentralization. But perhaps until we see stronger adoption that's neither here nor there. (Open question?)

Interoperability now lists >1,000 tokens. That's more than a thousand networks or public blockchains. While ERC20 and other token standards and individuals ecosystems like NEO or Cardano have created a degree of interoperability among many subsets of blockchains, many others resemble LANs that aren't connected to the internet with TCP/IP. We're at a speculative frenzy right now where many people are taking advantage of the funding environment to establish new networks of dubious durable value. If you believe in a decentralized future it will be key to be able to link those networks on a more fundamental level (without committing the blunder of recentralization). Why? Well direct asset-to-asset fungibility is an interesting monetary development that precludes the need for a generic store of value (read: money). Moreover, if I just tend to think that more and more valuable data is going to be stored on blockchains that other applications or middleware will want to leverage. Some projects here that are neat are well known like Web 3 and Polkadot, or Tendermint with their Cosmos network (allowing for communication via IBC, the inter-blockchain-communication protocol). I also like projects like oraclize that are doing important work linking smart contracts to external web APIs and providing channels and validation to allow blockchains to speak to the outside world.

Anything I've missed or gotten wrong? Would love to have your thoughts.

quantifying the decentralized ecosystem

what's the most overvalued token relative to it's open source traction? with the rise of token sales as a new funding paradigm, we've seen a really healthy dissemination of frameworks for token valuation (like this one from Chris Burniske, or a more elementary checklist from Fred Wilson). many of these frameworks think about these networks from a top-down perspective, which can be helpful in some cases, but may not be relevant in others.

i've taken a list of tokenized projects, dapps (big thanks to and networks and quantified their github stargazers, contributers and commits. big thanks to hugo murphy for the help here.

aside from the problem of centralizing all the world's code on a closed-source github, (quick aside: some great projects tackling that problem, from oscoin to gitcoin to gittorrent) i think github repository data remains one of the better publicly-available datasets we can use to make like-for-like comparisons across a broad array of projects.

there are other problems with this methodology. if i had more time perhaps i would weight certain stars from certain users more highly, or i would introduce a code quality screen (more volume does not mean better code), or we'd look at publicly available usage data.

many folks in the decentralized ecosystem don't trust anything that hasn't been open sourced. i certainly don't. particularly in this space, where claims are often exaggerated, and fundamental quality can be hard to ascertain, it is vital to open source your work to get community buy-in, earn community trust, and improve the quality of your code. and i don't think posting the whitepaper to github counts.

important to note that when a project has multiple repositories we used the one that was either core to development (so a core library vs. a wallet library for instance), or the one with the most stargazers. secondly, a lot of the GitHub data is accurate from Sep 17, 2017 so almost all of the numbers will be slightly higher today.

with that, let's dive in

first off, here's the dataset i'm working off of. i've open sourced it and it's fully editable, it's not entirely complete so feel free to go in there and make changes.

first off, what kinds of projects are people starting?

i understand that some of these categories are fairly arbitrary, and we haven't done a perfect job, but safe to say we see a pretty balanced distribution of projects across all these classes

what about if we look at the breakdown of github contributors across the classes of projects? now suddenly we see currencies take the lions share, with infrastructure another major portion.

and if we look at stargazers? the interesting thing here is that infrastructure projects jump up in relevance majorly, even surpassing currencies

what about individual projects? let's look at the breakdown of stargazers across the top 20 projects with the most stargazers. Ethereum and IPFS are well ahead of the rest.

but it's a far different story for contributors. the repositories belong to the projects with most contributors are actually qtum, dash, zcash, and myetherwallet

interestingly, when we look at commits across projects the breakdown starts to balance out more evenly again.

i began this post with a reference to valuation frameworks. while this is a certainly a very rough and untested framework, i would propose that looking at some measure of market cap / open-source activity multiple might belong in the toolkit of some people valuing these networks. (disclaimer: i didn't find very high correlations between market caps and any of the github metrics).

by this metric, the most "overvalued" token is bitconnect (BCC), which is valued at $1.7B and has 46 stargazers, which means it's trading at approximately $37.5M per stargazer!

as always, feedback welcome, and again please feel free to share this around along with the sheet