Cats are taking over the blockchain

CryptoKitties is the newest craze in cryptocurrency. So many people are buying, selling, and breeding CryptoKitties that the Ethereum blockchain is struggling to keep up with all the activity.

The average cat is trading for $100 in ether and users have spent over $3M total on breeding, buying and selling the in-game items (up from $1M yesterday).

Two days ago, a true believer of cat-based technologies bought the genesis cat (the first cat) for 250 ETH, which is over $100,000. Today, CryptoKitties is the most active smart contract on the Ethereum network, accounting for over 16% of all Ethereum transactions.

CryptoKitties launched on Product Hunt six days ago, where maker Mack Flavelle explained the idea behind it:

“Blockchain technology could be the biggest revolution since the internet, but the majority of projects in this space are unapproachable to muggles. That’s something we wanted to change with CryptoKitties. We figured- if you want to speak to regular people speak in regular language. And cats are the regular language of the internet.”

 And went on to explain the dynamics of CryptoKitty:

“In CryptoKitties, users collect and breed digital cats. Through breeding, unique cattributes can be unlocked. Each CryptoKitty has a 256-bit genome that dictates its appearance and hidden traits, with 4-billion possible combinations. And we have Fancy Cats – kitties with custom art, including a little treat for Product Hunt fans.”

Right now the best way to try out CryptoKitties is by downloading MetaMask, a chrome extension that makes it easy to interact with the Ethereum blockchain directly from your browser. You’re also going to need a little Ether, which you can buy from exchanges like Coinbase.

By leveraging the power of cats on the internet, CryptoKitties is introducing the public to cryptocurrencies and blockchain based technologies. If you want to learn a bit more about how the game mechanics work you can check out Fitz Tepper’s excellent post on TechCrunch.

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ICO Tokens: A Serious Barrier to User Acquisition?

Anyone even moderately following tech right now knows that ICOs are exploding in popularity as entrepreneurs seek to raise large sum of non-dilutive capital for their company — while they can.

I have spent the year advising several tech companies, many of which have raised capital in the ICO market. Through this process, I have stood side-by-side with CEOs while they think through the challenges that inevitably come up during an ICO. I recently wrote about the conflicting legal advice around token sales and provided a framework that may be compliant within US law.

Today, I turn my focus towards another issue that blockchain companies don’t even realize they’re facing yet. Here it is…

Utility tokens, which customers must purchase in order to use the services of a blockchain platform, may be an insurmountable barrier to user acquisition.

Understanding the “holy” conversion funnel

An optimized conversion funnel is vital to successful online marketing, and blockchain companies are no exception. This practice of funnel optimization focuses on finding and removing “leaks” at various points through a visitor’s journey across a website in order increase the likelihood of the visitor taking a desired action.

Companies that ICO will ultimately be under pressure from their token holders to increase their token’s value, which over the long run must come from legitimate demand of the underlying platform. Unfortunately, there are substantial user acquisition problems that emerge when a token is added to the conversion funnel.

Let’s dive into this further with an example.

The fight is on: Airbnb vs. CryptoBNB

Imagine that you are a vacationer searching for a place to stay. You start by Googling “rent a vacation home” and see various results, including Airbnb, VRBO, HomeAway and the other usual players. You also find a couple of new names, which happen to be well-funded ICO projects, including Zangll and CryptoBNB, which is a company I made up in order to not spend this article trashing Zangll.


You take the next step and visit Airbnb’s and CryptoBNB’s websites to compare their offerings.

On Airbnb, you find a refined site with tons of listings and the ability to pay by credit card.

On CryptoBNB, you find a site that uses decentralization and blockchain terminology, with few listings and the ability to pay only in CBNB tokens.

It is clear that one of these companies has an advantage for converting the average consumer… Airbnb. Over the course of years, their company has had time to grow its listings and optimize its user acquisition funnel down to a science.

Lost customer at the last minute, again!

Ignoring the fact that Airbnb has a multi-year operating advantage over CryptoBNB — which this is NOT an insignificant issue — let’s focus on the role that payment options play in user acquisition.

E-commerce companies spend considerable time reducing friction in the checkout process. Here are a few points that digital marketers focus on related to payments:

  • Reducing the information required from the customer
  • Optimizing the site for mobile visitors
  • Taking advantage of AutoFill
  • Accepting many types of payment options

Requiring payment in the form of CBNB tokens will present CryptoBNB with problems on all of these points. The checkout process for a typical user would go something like this… Visit site > select listing > go to checkout > be asked for CBNB tokens > don’t have any CBNB tokens? no problem! purchase them from a third-party foreign exchange > customer gets confused > customer goes to Airbnb.


Guy must be thinking through user acquisition of a tokenized blockchain platform.

Let’s not forget that cryptocurrency is challenging to obtain and use for the average consumer, and it is certainly not as easy to use as a credit card. Consequently, every consumer-oriented blockchain company with a token has a conversion problem lying ahead.

Decisions, decisions…

For companies whose token acts a means of payment (very common), there are two primary approaches that I currently see companies taking:

  1. Decentralized approach. Customers will pay the network directly using the token. While this option is more in line with the goal of decentralization, the need for users to acquire tokens via a third party website is a critical point of failure for conversion. There are additional costs to the consumer too, including exchange fees, which is a situation that is clearly inferior to the status quo where they earn points with their credit card.
  2. Centralized approach. In this method, customers will pay the company by credit card, and the company will in turn pay the network with tokens behind the scenes. This approach cuts out the barrier to conversion, but the company will assume several costs that Airbnb will never have, including exchange fees, implied cost of the bid/ask spread, order book slippage, Ethereum network fees and more.

It seems that companies are unnecessarily putting themselves in a disadvantaged competitive position in order to raise capital through an ICO. This is one reason why I am bearish on utility tokens whose primary purpose is as a payment method. I don’t believe that the advantage of “blockchain” will add enough value in most consumer applications to compete with lower cost competitors.


Why do you even have a token, broh?

In e-commerce, it is hard to see how a tokenized blockchain company could ever compete against an equity-backed tech company on a “per unit” cost basis, unless the existence of a blockchain…

  1. Is mandatory.
  2. Adds value that consumers care about.
  3. Creates significant cost reductions elsewhere.

Offering tangible value over competitors on the order of a magnitude is critical for blockchain companies. Over the long run, the value of every utility token will rely on the existence of real demand for an underlying platform, which may never materialize if a company has tokenized barriers to user acquisition.

In most cases I have seen, companies whose ICOs revolve around a payment token have not found a strong enough purpose for issuing a token or using blockchain. One rule of thumb I commonly ask companies is: “Why can’t your platform just accept ETH and charge on a typical SaaS model basis?” The answer to this question will generally shine light on whether the platform‘s token is useful, or if the company is simply creating the token as an excuse to raise capital through an ICO.

Payment tokens will be the first to fail

In the second half of 2018, investors will begin focusing on the adoption metrics of tokenized blockchain platforms in order to make newly informed investment decisions. In this process, blockchain platforms that don’t provide meaningful value over competing technologies will be discovered and “punished” by the market through their token price.

Companies who have created a token solely as a means of raising funds through an ICO have not set themselves up for long term success once the market becomes less speculative. Because payment tokens have an inherent disadvantage on conversion and platform adoption, I believe they will be the first type of utility token to fail.

There will still be a few success stories, of course, but most entrepreneurs won’t be able to create enough tangible value for their customers to overcome their user acquisition hurdles.

In search of tokens with merit…

ICO investors looking for longer term viability in their investment should look to tokens whose existence won’t be a barrier to user acquisition. This means that the token’s purpose within the platform is likely “inventive” in some way, plays an operational role and is abstracted so as to be user friendly.

One example of a token that fits these qualifications is that being created by AQUA, whose company is building an IP rights platform with a primary focus on pharmaceutical R&D. Their token enables the assignment of fractional Intellectual Property (IP) rights, which could create an ecosystem for global collaboration in R&D. AQUA’s token has two characteristics that I find particularly interesting. The first is its flexible architecture that allows one group’s IP to be combined into another group’s IP later on, which allows research to build on top of prior research. The second is its fundamental token value structure, which gives token holders a stake in the success of all IP on the AQUA platform.


Within the next 12 months, asset fundamentals will begin eclipsing speculation to drive token valuations. Investors in ICOs should therefore assess each token’s impact on the underlying platform’s long term viability. Tokens whose primary purpose is to serve as a payment mechanism seem to have an inherent disadvantage on this point. Voting rights, power, operations and other areas where traditional equity funding does not exist are use cases where tokens are more likely to retain long term value.

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Gold Mining Company’s Shares Jump 1,300% After Switch to Bitcoin – Bitcoin News


Gold Mining Company's Shares Jump 1,300% After Switch to Bitcoin

Gold Mining Company's Shares Jump 1,300% After Switch to Bitcoin

Natural Resource Holdings is a little-known company whose investments so far consist mostly of land and mineral assets of gold, silver, zinc, and lead deposits.

The company’s shares, which are publicly traded on the Tel Aviv Stock Exchange, have jumped about 1,300% in price since the company announced it is refocusing on blockchain and cryptocurrencies just a month and a half ago.

Now it appears that the company actually has a plan how to diversity into bitcoin mining and it is not just all hype. According to reports today in the Israeli financial media, Natural Resource has revealed its first step towards entering the market: acquiring a Canadian bitcoin mining farm.

Mining Is Booming

The company has announced that it is in negotiations with BACKBONE Hosting Solutions, operating under the commercial brand Bitfarms, to buy 75% of its shares in exchange for 75% its own stocks. In response to the report, investors have poured in, making the relatively small company the tenth most traded on the TASE by volume.

Gold Mining Company's Shares Jump 1,300% After Switch to Bitcoin

The Canadian company is said to have 4 server farms in the province of Quebec, providing services for mining bitcoin, ethereum, bitcoin cash and litecoin. It is also said to have two more server farms under construction that will come online early next year. The company supposedly brings in over $8.3 million a month, at an operational cost of just 12%.

According to its own website, BACKBONE started operating in 2016 with a primary focus to offer cost effective mining hardware hosting solutions for cryptocurrency hobbyists and professionals. Boasting an ‘eco-friendly’ operation, the company says its power is generated from an hydro-electrical plant located close to the facility and that it benefits from being in a Tundra Climate where cooling is not an issue 10 months a year.

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World Computer? New Protocol Could Supercharge Ethereum Blockchain

With scaling the center of attention in the public blockchain sector, an older but lesser known attempt to overcome the restrictions inherent in ethereum is getting a refresh.

Revealed in an exclusive interview with CoinDesk, a new TrueBit protocol is being released this December, one that removes the ethereum “gas limit,” which today puts an upper-bound on the number of computations the network can achieve, bringing the second largest blockchain by market capitalization closer to its oft-touted goal of becoming a “world computer.”

While TrueBit is one of many in-progress scaling solutions being engineered for the ethereum platform – working alongside mechanisms such as sharding, state channels and Raiden – it distinguishes itself by focusing on the computational power of the network at large, instead of just transaction speed.

Geared specifically towards heavy computations, such as those video broadcasting and machine learning would require, TrueBit could resolve the fact that ethereum is still about as fast as a “smartphone from 1999,” as ethereum creator Vitalik Buterin joked last year.

“In short, the new scheme would be a vast simplification of the current TrueBit protocol,” said Zack Lawrence, the co-founder of 1protocol, who developed the technology.

And these gains all came about after speculation that someone could exploit the protocol, after an amendment to its white paper was released last month.

Jason Teutsch, a mathematician and co-founder of TrueBit, framed the speculation, and the process for patching the vulnerability, with a silver lining:

“When so many people have eyes on the papers, over time, you get more and more confident that it’s correct, but it’s always an ongoing process for these things that are living systems… Now, we go another layer down the protocol rabbit hole, it’s this iterative process of getting deeper and deeper into this.”

Hit the jackpot?

And going deeper led the devs to the incentive mechanism used in the protocol.

TrueBit aims to remove the gas limit on ethereum by moving computations off-chain – outsourcing them to an external marketplace that rewards participants for solving and verifying the computations. Within the marketplace “task givers” pay “verifiers” to solve computations in exchange for rewards, while “validators” check that the computations are correct.

To make sure everyone runs effectively, Truebit relies on an incentive scheme dubbed the “forced errors jackpot,” which ensures validators are actively checking for correctness by requiring verifiers to occasionally submit incorrect information. If a validator finds these forced errors, they’re rewarded with a substantial payout: the “jackpot.”

But according to Lawrence, that process can be a lot less complicated.

Within the new protocol, instead of limiting the participants’ tasks, everyone can participate openly.

Those that verify correct computations still get paid, but if another participant finds an error, they can submit what they believe the computation should be and enter that into the verification game. All the potential answers are then pooled together until a consensus is reached.

Because that verification pool is costly to participants, the protocol incentivizes them to work together honestly so disputes do not occur, since the reaching consensus within that verification pool would be costly for everyone.

Not only does this iteration eliminate the security flaws pointed out when the amendment was released, but it’s also easier to implement and could increase the number of computations participants are willing to perform since it eliminates the once-every-so-often jackpot, Lawrence told CoinDesk.

Security challenge

Still, the new protocol may not be the last step in evolving TrueBit to achieve optimum efficiency.

Teutsch explained that both versions of the protocol will still hit against eventual limits when it comes to massive computations. If, for example, verification takes too long or gets too expensive, those who notice errors might be inclined to keep quiet, and just let them go.

“Remember that the verification game is really slow compared to native computation, so my concern expressed here is more than just theoretical,” he said.

Plus, because TrueBit is a protocol built on game theory (rather than relying on more familiar security auditing processes), Teutsch said, its “security is an observational science,” in which devs try to put themselves in every position an attacker might be in.

Because of this, Teutsch said the developers may decide to run both the original protocol (now internally nicknamed TrueBit Classic) and the new protocol in parallel for better security.

But nodding to the fact that digital security is an immensely challenging prospect that takes continual work, Teutsch told CoinDesk:

“Full confidence happens once you have all the money in the world behind it, and it’s sat there for a few years.”

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Blockchain’s Big 3 Societal Changes

Proselytizers of blockchain often speak of its inherent and inevitable benefits to society. While you might not yet be a crypto trader, you might still be interested in – and affected by – blockchain’s apparent power to change our current centralized financial systems.

Bill Carmody of has these big 3 benefits in sight:

  1. No more intermediaries
  2. Security
  3. Financial tools and digital assets

In his article, Carmody writes: “With widely-scaled decentralized systems, we can eradicate fraud, automate manual processes, and control for issues of authentication and trust. The power of blockchain can enable humans to redefine legacy architectures of governance and law, reinvigorating lost concepts of true democracy and meritocracy.”

Read more in the full article at