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What percentage of that funding is just buying and holding Bitcoins? Many of these large rounds have that business model baked into the amount they raise. The

by jboggan 12y ago

What percentage of that funding is just buying and holding Bitcoins? Many of these large rounds have that business model baked into the amount they raise. There's much more profit to be had from buying at current prices and selling at a consumer inflection point than there is in actually building a Bitcoin service.

malenm 12y ago
I think building Bitcoin services is the only way to make Bitcoin _reach_ that consumer inflection point.
IkmoIkmo 12y ago
It's idiotic to assume an investor will invest in a company to buy coins, rather than coins directly. Maybe if it was expensive art, exotic animals or something difficult and tricky to buy and store without having specialized knowledge, yes then you'd invest in a company to buy and manage these assets. But storing bitcoin is storing private keys... a password. Anyone can buy it and store it. Hell you can even buy it on registered exchanges, or as a security from SecondMarket's bitcoin fund. No. These guys raised money to hire software and hardware engineers, they're looking to build a product. Does that mean the investors aren't buying bitcoin? No, they do so, but outside the company. It's well known that there are a number of VCs (e.g. Chamath) who have bought a few million worth of bitcoins besides their investments in bitcoin companies. I don't any evidence that many of the 'large rounds' have this business model. There are some companies that bought bitcoin, but that's for liquidity, not investments. Circle, Coinbase or exchanges all need bitcoin to sell as they're brokers/exchanges. But they didn't buy it as an investment, they could just buy bitcoin as individuals, as could investors.
- jafaku 12y ago
  It's not idiotic, that's why there is a Bitcoin fund, and soon there will be a Bitcoin ETF. If being an expert in computer security isn't "specialized knowledge", I don't know what it is.
  - IkmoIkmo 12y ago
    You're not following. I'm not arguing whether investors right now buy bitcoin directly or through a fund. Obviously they do both. I'm arguing that NOBODY buys bitcoin through a non-fund bitcoin company that has actual products, like payment processing, consumer brokerage, wallet etc, which is what this new company is about. It's not a fund, it's a company with a product. i.e. nobody invests in jet fuel by investing in an airline, despite the fact that all airlines trade in jetfuel. They either buy jetfuel (rare considering its properties) or buy into a jetfuel fund, etf, index. It's just completely ridiculous and not true and unsupported by any evidence, that investors would want exposure to the price of bitcoin by investing in say Coinbase or Circle or Bitpay. They're two completely separate investments. This is a company that will build hardware and software. It has engineers, management, marketing people, customer service, offices, warehouses, factories, supply chains. It has a product and it has costs. To invest in all of those costs to get exposure to the bitcoin price is ridiculous, again you either buy bitcoin directly, or you buy through a fund like I mentioned in my last post. As for needing to be an expert in computer security to buy and store bitcoin, hardly, but that's another discussion.
- jboggan 12y ago
  I spent 2014 trying to get a Bitcoin derivatives exchange off the ground and had a lot of intimate conversations about business models with large players, I am not speculating here. Consider that Bitcoin has return characteristics that are highly desirable to a VC's risk profile, yet the restrictions of their limited partnership agreements precludes VCs from directly buying Bitcoin.
  - IkmoIkmo 12y ago
    So you're saying Coinbase, Bitpay etc or likewise have bought bitcoin purely for speculation (not as necessary liquidity as part of the product they're offering) with VC money and directed by VC orders to act as an investment vehicle for bitcoin, while using the tens of engineers etc and products as a front? While simultaneously lying to the VC funds' investors who have set restrictions that they're actively circumventing?

by jboggan 12y ago

malenm 12y ago

I think building Bitcoin services is the only way to make Bitcoin _reach_ that consumer inflection point.

IkmoIkmo 12y ago

It's idiotic to assume an investor will invest in a company to buy coins, rather than coins directly. Maybe if it was expensive art, exotic animals or something difficult and tricky to buy and store without having specialized knowledge, yes then you'd invest in a company to buy and manage these assets. But storing bitcoin is storing private keys... a password. Anyone can buy it and store it. Hell you can even buy it on registered exchanges, or as a security from SecondMarket's bitcoin fund. No. These guys raised money to hire software and hardware engineers, they're looking to build a product. Does that mean the investors aren't buying bitcoin? No, they do so, but outside the company. It's well known that there are a number of VCs (e.g. Chamath) who have bought a few million worth of bitcoins besides their investments in bitcoin companies. I don't any evidence that many of the 'large rounds' have this business model. There are some companies that bought bitcoin, but that's for liquidity, not investments. Circle, Coinbase or exchanges all need bitcoin to sell as they're brokers/exchanges. But they didn't buy it as an investment, they could just buy bitcoin as individuals, as could investors.

jafaku 12y ago
It's not idiotic, that's why there is a Bitcoin fund, and soon there will be a Bitcoin ETF. If being an expert in computer security isn't "specialized knowledge", I don't know what it is.
- IkmoIkmo 12y ago
  You're not following. I'm not arguing whether investors right now buy bitcoin directly or through a fund. Obviously they do both. I'm arguing that NOBODY buys bitcoin through a non-fund bitcoin company that has actual products, like payment processing, consumer brokerage, wallet etc, which is what this new company is about. It's not a fund, it's a company with a product. i.e. nobody invests in jet fuel by investing in an airline, despite the fact that all airlines trade in jetfuel. They either buy jetfuel (rare considering its properties) or buy into a jetfuel fund, etf, index. It's just completely ridiculous and not true and unsupported by any evidence, that investors would want exposure to the price of bitcoin by investing in say Coinbase or Circle or Bitpay. They're two completely separate investments. This is a company that will build hardware and software. It has engineers, management, marketing people, customer service, offices, warehouses, factories, supply chains. It has a product and it has costs. To invest in all of those costs to get exposure to the bitcoin price is ridiculous, again you either buy bitcoin directly, or you buy through a fund like I mentioned in my last post. As for needing to be an expert in computer security to buy and store bitcoin, hardly, but that's another discussion.
jboggan 12y ago
I spent 2014 trying to get a Bitcoin derivatives exchange off the ground and had a lot of intimate conversations about business models with large players, I am not speculating here. Consider that Bitcoin has return characteristics that are highly desirable to a VC's risk profile, yet the restrictions of their limited partnership agreements precludes VCs from directly buying Bitcoin.
- IkmoIkmo 12y ago
  So you're saying Coinbase, Bitpay etc or likewise have bought bitcoin purely for speculation (not as necessary liquidity as part of the product they're offering) with VC money and directed by VC orders to act as an investment vehicle for bitcoin, while using the tens of engineers etc and products as a front? While simultaneously lying to the VC funds' investors who have set restrictions that they're actively circumventing?