Protocol Labs is laying off 21% of staff (89 people)(protocol.ai)
protocol.ai
Protocol Labs is laying off 21% of staff (89 people)
https://protocol.ai/blog/2023-02-03-crypto-winter-update/
174 comments
Just like a forest fire, if you let it happen when it should, it’s not so bad. But if you keep suppressing it (with firefighters…or low interest rates) then when it finally happens, it can be a disaster.
Low interest rates didn't force VCs to invest this money. And it didn't force LPs to give the money to VCs. And obviously, startup founders weren't forced to take it. The various central banks played a role here, but definitely not a starring one.
> Low interest rates didn't force VCs to invest this money. And it didn't force LPs to give the money to VCs.
One can debate whether "force" is the right word, but 100%, absolutely the goal of low interest rates was to force savers into riskier assets, when banks and bonds were returning close to 0. So many companies never would have funded in a normalized rate environment.
One can debate whether "force" is the right word, but 100%, absolutely the goal of low interest rates was to force savers into riskier assets, when banks and bonds were returning close to 0. So many companies never would have funded in a normalized rate environment.
Can you show me something from a few central banks saying that they were trying to force savers into riskier assets?
I agree that can be a consequence (although it isn't necessarily so; many people just leave their savings be), but I don't believe it ever was a goal.
And regardless, I think it's a big leap from "some savers wanted higher returns" to "let's throw a lot of money into things without due diligence or a coherent success story". Which unarguably happened lately. E.g., all the "smart" money invested in FTX, which we now know to be an absolute clown show. Other, better choices were possible. Including the supposed experts saying, "Sorry, we can't deploy this capital for you, as we don't think there are good opportunities in the current market conditions."
I agree that can be a consequence (although it isn't necessarily so; many people just leave their savings be), but I don't believe it ever was a goal.
And regardless, I think it's a big leap from "some savers wanted higher returns" to "let's throw a lot of money into things without due diligence or a coherent success story". Which unarguably happened lately. E.g., all the "smart" money invested in FTX, which we now know to be an absolute clown show. Other, better choices were possible. Including the supposed experts saying, "Sorry, we can't deploy this capital for you, as we don't think there are good opportunities in the current market conditions."
Central banks are forcing the rich to create capital flows because our politicians can't do it (e.g. taxes).
They do this by suppressing interest because parked money loses value to inflation in such an environment.
In reality, the better solution is probably to raise taxes, but none of our politicians have the will.
They do this by suppressing interest because parked money loses value to inflation in such an environment.
In reality, the better solution is probably to raise taxes, but none of our politicians have the will.
Rich people aren't forced to do anything here. They're rich. They have have plenty of choice. They may be choosing riskier investments in pursuit of the returns they want. But then they are also choosing higher risk of the sort of losses that would also lose money over time.
They are forced to because in a low interest environment, they are literally losing value to inflation.
They are not forced. The FBI did not show up with guns and say, "Invest in this dumb-ass startup or we shoot you."
During a recession, they decided that rather than lose some value to inflation, they wanted to risk losing all of their investment in hopes of a higher long-term return.
This is called a choice. They made it. Nobody owes them a guaranteed safe rate of return just because they're rich.
During a recession, they decided that rather than lose some value to inflation, they wanted to risk losing all of their investment in hopes of a higher long-term return.
This is called a choice. They made it. Nobody owes them a guaranteed safe rate of return just because they're rich.
So many of these kinds of arguments end up just being semantics. Strictly speaking, they were not forced.
Realistically, an environment was purposefully created that would make the average actor move a certain way. Sure, the individual may have had the option to just eat the losses.
Realistically, an environment was purposefully created that would make the average actor move a certain way. Sure, the individual may have had the option to just eat the losses.
This is not just semantics in that people often use particular language to direct attention away from actual agency.
Returning to my original point, forest fires are about a natural phenomenon. Fire doesn't want anything and doesn't make choices.
But startup founders and venture capitalists and limited partners are all morally competent actors who get to make choices. No matter how much money is available, nobody is forced to put together a startup. Nobody is forced to invest in it regardless of its chances of success.
Language that makes their bad choices the fault of government or whomever is something that is very convenient for preserving their egos and keeping the game going. But it is not factually correct, and I am not obliged to swallow my objections to it just because some find it an uncomfortable truth.
Returning to my original point, forest fires are about a natural phenomenon. Fire doesn't want anything and doesn't make choices.
But startup founders and venture capitalists and limited partners are all morally competent actors who get to make choices. No matter how much money is available, nobody is forced to put together a startup. Nobody is forced to invest in it regardless of its chances of success.
Language that makes their bad choices the fault of government or whomever is something that is very convenient for preserving their egos and keeping the game going. But it is not factually correct, and I am not obliged to swallow my objections to it just because some find it an uncomfortable truth.
You seem to be overly focused on a single definition of "force". Nobody (except maybe you?) is confused that the FBI might be holding a gun to VC's heads. Webster has a lot of definitions of "force", and most of them don't have anything to do with coercion in the face of violence. For example
3 : to make or cause especially through natural or logical necessity
"forced to admit my error"
8 : to induce (a particular bid or play by another player) in a card game by some conventional act, play, bid, or responseYes, but no. No reasonable definition of "force" applies here.
Central banks don't say a lot about what they are / are not trying to do. Ask the reverse question: What do Central Banks say they are trying to do when lowering interest rates? They only really make vague statements like 'easing conditions' or 'providing liquidity'.
In the US, we can only go by their stated goals, dual mandate from congress: keep inflation and unemployment low. https://www.stlouisfed.org/in-plain-english/the-fed-and-the-...
So what are the mechanisms that they can keep unemployment low (create jobs)? They lower interest rates, which causes people to sell assets that don't create jobs (treasury bills) and buy ones that do (corporate bonds, VC funds, etc) in attempt to get a return on capital (however, with more risk).
It's not some secret that lowering / raising interest rates affects all investors risk curve.
In the US, we can only go by their stated goals, dual mandate from congress: keep inflation and unemployment low. https://www.stlouisfed.org/in-plain-english/the-fed-and-the-...
So what are the mechanisms that they can keep unemployment low (create jobs)? They lower interest rates, which causes people to sell assets that don't create jobs (treasury bills) and buy ones that do (corporate bonds, VC funds, etc) in attempt to get a return on capital (however, with more risk).
It's not some secret that lowering / raising interest rates affects all investors risk curve.
I of course agree that they are affecting incentives. I am specifically disagreeing with the claim that the "goal of low interest rates was to force savers into riskier assets". Force is the wrong word here, and I don't think individual savers are at all the people the Fed is trying to affect here.
And although they are affecting incentives, people are not robotically obliged to follow them. VCs cannot be simultaneously such brilliant investors that they deserve to be wildly rich and also so without agency that a drop in the federal funds rate forces them to waste money on bad startups.
And although they are affecting incentives, people are not robotically obliged to follow them. VCs cannot be simultaneously such brilliant investors that they deserve to be wildly rich and also so without agency that a drop in the federal funds rate forces them to waste money on bad startups.
> some savers wanted higher returns
Or, to put it differently, some savers didn't want to pay the bank for holding their money and suffer 10% inflation. Of course that'll push them into funds and shares. Is it a goal? Possibly not, but it's a known and unavoidable side-effect, like having to poop at some point after you eat things.
As for the terms of investment being better for companies: that's just supply and demand. Everyone wants to invest their money, so the deals get worse.
Or, to put it differently, some savers didn't want to pay the bank for holding their money and suffer 10% inflation. Of course that'll push them into funds and shares. Is it a goal? Possibly not, but it's a known and unavoidable side-effect, like having to poop at some point after you eat things.
As for the terms of investment being better for companies: that's just supply and demand. Everyone wants to invest their money, so the deals get worse.
Yes, as I have been clear, I'm not saying it's not a predictable outcome. I'm just saying it's not a central bank goal. Their goal is just to prevent recessions and keep inflation under control.
> that's just supply and demand. Everyone wants to invest their money, so the deals get worse.
If people would rather lose money in a bad investment than due to overall inflation, that is a choice they can make. But that doesn't force the creation of bad investments. Some people create the bad companies, and others, ones who nominally should know better, put other people's money into them.
> that's just supply and demand. Everyone wants to invest their money, so the deals get worse.
If people would rather lose money in a bad investment than due to overall inflation, that is a choice they can make. But that doesn't force the creation of bad investments. Some people create the bad companies, and others, ones who nominally should know better, put other people's money into them.
Forcing is probably too strong since nobody is holding a gun to anyone's head, but risk is part of the cost of the investment. When the supply side is limited, the cost increases - that could be paying more for less equity or taking riskier deals.
Since there isn't an unlimited amount of low-risk deals that you can bid on and pay more to be a part of, accepting higher risk is the only other option that still has a chance at being better than keeping the money in a bank and losing 10+% per year.
Since there isn't an unlimited amount of low-risk deals that you can bid on and pay more to be a part of, accepting higher risk is the only other option that still has a chance at being better than keeping the money in a bank and losing 10+% per year.
Exactly. Some people want to maintain their return on capital during a recession even at higher risk of losing their money. That's a choice they make based on desires they have.
Other people make different choices. Which can be quite good ones! US inflation in 2022 was 6.5%, but the NASDAQ lost something like 30%.
Might VCs choose a spray-and-pray approach when money is abundant? Sure. Might LPs choose to give money to those VCs? Yes. But my point here is this is not mean old Jerome Powell ordering around robots or slaves or whatever. VCs can just not invest if there isn't something good. They can return the money or not take it.
Heck, even startups are not compelled to take the money. The last time I did one we eventually decided we had dug a dry hole, so we gave back the remainder of they money to investors. We were not compelled to spend it past the point we thought it was actually a good investment.
Other people make different choices. Which can be quite good ones! US inflation in 2022 was 6.5%, but the NASDAQ lost something like 30%.
Might VCs choose a spray-and-pray approach when money is abundant? Sure. Might LPs choose to give money to those VCs? Yes. But my point here is this is not mean old Jerome Powell ordering around robots or slaves or whatever. VCs can just not invest if there isn't something good. They can return the money or not take it.
Heck, even startups are not compelled to take the money. The last time I did one we eventually decided we had dug a dry hole, so we gave back the remainder of they money to investors. We were not compelled to spend it past the point we thought it was actually a good investment.
> Exactly. Some people want to maintain their return on capital during a recession even at higher risk of losing their money.
But we weren't in a recession when they made those investments, we had negative rates, 6-10% inflation and low unemployment in many countries (and certainly in the US). It's hard to argue that we're in a recession even now, since inflation is still high and unemployment is still low, these layoffs are publicized, but they're not moving the needle much.
> They can return the money or not take it.
What do investors do with the money instead? Yes, they can pass it on to the bank and have a 100% chance of the value going down 6-10% a year. How is that a choice, do pension funds just say "sorry, folks, we didn't see any good opportunities while the fed injected money, so your pensions will be 50% lower than expected"?
But we weren't in a recession when they made those investments, we had negative rates, 6-10% inflation and low unemployment in many countries (and certainly in the US). It's hard to argue that we're in a recession even now, since inflation is still high and unemployment is still low, these layoffs are publicized, but they're not moving the needle much.
> They can return the money or not take it.
What do investors do with the money instead? Yes, they can pass it on to the bank and have a 100% chance of the value going down 6-10% a year. How is that a choice, do pension funds just say "sorry, folks, we didn't see any good opportunities while the fed injected money, so your pensions will be 50% lower than expected"?
You conspicuously ignore the VCs here. They were not obliged to do jack. Neither were the founders who took more money than they could successfully apply. It's funny how many people here are stubbornly unable to find the people with moral agency in the startup funding chain.
But yes, part of fiduciary duty is acting for the benefit of the person whose money you are holding. That obliges them to get the best return possible, no more and no less. If a lack of good opportunities means that the best actual return is a lower one than people hoped, that's the job. Because it's not like the people whose pension money went into FTX are going to do particularly well on the deal either.
But yes, part of fiduciary duty is acting for the benefit of the person whose money you are holding. That obliges them to get the best return possible, no more and no less. If a lack of good opportunities means that the best actual return is a lower one than people hoped, that's the job. Because it's not like the people whose pension money went into FTX are going to do particularly well on the deal either.
I feel like it is pretty uncontroversial that the purpose of the Fed fiddling with interest rates is to encourage or discourage investment. What else would they be up to?
I am specifically objecting here to the notion that the "goal of low interest rates was to force savers into riskier assets".
What a given central bank is up to depends on the central bank. But the Fed is pretty clear about its goals. E.g.: https://www.stlouisfed.org/in-plain-english/the-fed-and-the-...
I agree it's true that they change interest rates as a way of influencing investment rates as they pursue their goals. But I believe they have very interest in influencing the average individual saver in any particular direction, let alone having that as a goal. And I absolutely disagree that "force" and "encourage or discourage" mean the same thing.
My broad point here is that the Fed, using pretty blunt instruments, tries to keep us from both recession and inflation, but that does not "force" rich people to do anything. Those investing in startups have enough money that they have incredible agency in what they do with that money.
I can believe that VCs feel compelled to invest so they can keep up their reputations and their fat checks. But if so, they are compelled by prestige and greed, not by Jerome Powell.
What a given central bank is up to depends on the central bank. But the Fed is pretty clear about its goals. E.g.: https://www.stlouisfed.org/in-plain-english/the-fed-and-the-...
I agree it's true that they change interest rates as a way of influencing investment rates as they pursue their goals. But I believe they have very interest in influencing the average individual saver in any particular direction, let alone having that as a goal. And I absolutely disagree that "force" and "encourage or discourage" mean the same thing.
My broad point here is that the Fed, using pretty blunt instruments, tries to keep us from both recession and inflation, but that does not "force" rich people to do anything. Those investing in startups have enough money that they have incredible agency in what they do with that money.
I can believe that VCs feel compelled to invest so they can keep up their reputations and their fat checks. But if so, they are compelled by prestige and greed, not by Jerome Powell.
They write here that they intend to maximize employment and yet I can easily pick up a newspaper and read them fretting that employment is too high. e.g., https://apple.news/AtzUI_uozTyOjXZhyAcUpPw
Now sure, we can say that’s just the “dual mandate” at work, since they tie this concern to inflation. But still, I wouldn’t take a public statement like this as gospel.
I suppose it is true that no one person is forced to do anything, but if you create strong incentives to do one thing and disincentives to do another then I don’t think the difference is that meaningful in the aggregate.
Now sure, we can say that’s just the “dual mandate” at work, since they tie this concern to inflation. But still, I wouldn’t take a public statement like this as gospel.
I suppose it is true that no one person is forced to do anything, but if you create strong incentives to do one thing and disincentives to do another then I don’t think the difference is that meaningful in the aggregate.
Yes, that is exactly the dual mandate at work. Too tight a labor market causes labor price inflation, which quickly causes general price inflation, eroding the value of the higher wages and causing all sorts of other problems. None of that is proof that their goal is to "force savers into riskier assets".
And I'd say the difference is absolutely meaningful, because people have moral agency. People have "incentives" to do all sorts of harmful things. But we can still expect them to make good choices, and to own it when they make bad ones.
As an example, take FTX and Sam Bankman-Fried. He clearly had plenty of incentives to do what he did. That doesn't make what he did any less wrong. Indeed, morals that only applied when one had no incentive to act against them would be meaningless. It's exactly when the incentives favor harmful actions that morals most matter.
And I'd say the difference is absolutely meaningful, because people have moral agency. People have "incentives" to do all sorts of harmful things. But we can still expect them to make good choices, and to own it when they make bad ones.
As an example, take FTX and Sam Bankman-Fried. He clearly had plenty of incentives to do what he did. That doesn't make what he did any less wrong. Indeed, morals that only applied when one had no incentive to act against them would be meaningless. It's exactly when the incentives favor harmful actions that morals most matter.
I can’t really agree that investing in a financially unsound business is “immoral.” I’d also point out that in that story the Fed is fretting about high employment in spite of prices beginning to stabilize, so I think maybe “Political Aspects of Full Employment” would be a more useful tract to read to understand the dynamics at work than “what the Fed does in simple English.”
You're welcome to argue that investing one's own money badly is not immoral, just dumb. But there are other people involved here, and it's surprising to me they have escaped your notice.
Here you go: https://en.wikipedia.org/wiki/IS%E2%80%93LM_model
From the article: I(r) represents business investment decreasing as a function of the real interest rate
Businesses invest less as the rate increases. That's equivalent to businesses save less as the rate decreases.
From the article: I(r) represents business investment decreasing as a function of the real interest rate
Businesses invest less as the rate increases. That's equivalent to businesses save less as the rate decreases.
That's a theoretical model of a consequence. I never denied the consequence, I denied that this particular consequence is the goal for central banks. Which is why I asked for something different than what you provided.
Central banks are famously cryptic. If you’re looking for a smoking gun, this 2020 statement by Powell might satisfy you.
“If you look at P/Es they’re historically high, but in a world where the risk-free rate is going to be low for a sustained period, the equity premium, which is really the reward you get for taking equity risk, would be what you’d look at,” Powell said.
As you may know, this statement was made after Powell famously reversed course on his 2018 unwind of Yellen’s put after asset prices started to fall.
https://www.hindustantimes.com/world-news/powell-busts-out-f...
“If you look at P/Es they’re historically high, but in a world where the risk-free rate is going to be low for a sustained period, the equity premium, which is really the reward you get for taking equity risk, would be what you’d look at,” Powell said.
As you may know, this statement was made after Powell famously reversed course on his 2018 unwind of Yellen’s put after asset prices started to fall.
https://www.hindustantimes.com/world-news/powell-busts-out-f...
Central banks are famously cryptic about some things, especially about things that may be taken as indication of future action. But they are pretty transparent about goals. E.g.: https://www.stlouisfed.org/in-plain-english/the-fed-and-the-...
What you have is at best an acknowledgement of a typical consequence of one kind of Fed intervention, but I don't think that's at all evidence of a goal.
What you have is at best an acknowledgement of a typical consequence of one kind of Fed intervention, but I don't think that's at all evidence of a goal.
I suppose I can only appeal to the broadly held view that investment and debt are considered to have effects on employment rates and economic growth.
Sure. I agree that there are broad effects and never said otherwise. My objection in this subthread is to the much more specific claim "the goal of low interest rates was to force savers into riskier assets".
At no point has your question been misunderstood.
The whole concept of reducing interest rates was to encourage borrowing and discourage saving, to get money moving. Naturally this was into more risky investments as pretty much everything is more risky than savings accounts, bonds, and not borrowing money at all.
That’s quite literally the goal of low interest rates is to encourage spending and investing.
The general goal of rate cuts is, yes, to increase overall economic activity. But that doesn't mean that any specific person is obliged to put money in a particular thing if it's bad.
E.g., when interest rates drop, so do auto loan rates. But even if you can now suddenly afford a Hummer, you still get to decide whether or not that is a good choice for you. And if it turns out it wasn't, you don't get to blame the Federal Reserve for your choice.
E.g., when interest rates drop, so do auto loan rates. But even if you can now suddenly afford a Hummer, you still get to decide whether or not that is a good choice for you. And if it turns out it wasn't, you don't get to blame the Federal Reserve for your choice.
A Hummer is not an investment.
The problem in a low interest environment is that parked cash loses value to inflation so it is forced to flow.
The problem in a low interest environment is that parked cash loses value to inflation so it is forced to flow.
Then it's a good thing I never said a Hummer was an investment.
Cash isn't forced to do anything. It's not an actor here. People are. Those people make choices with their money. They choose more risk during a recession rather than a predictable loss.
Cash isn't forced to do anything. It's not an actor here. People are. Those people make choices with their money. They choose more risk during a recession rather than a predictable loss.
> But even if you can now suddenly afford a Hummer, you still get to decide whether or not that is a good choice for you
Our question here is whether wealthy investors should invest their capital into VCs or interest-linked instruments. The whole point is that your analogy of the buying the Hummer is useless because a Hummer isn't an investment but an expense so there's no point in using your analogy.
Our question here is whether wealthy investors should invest their capital into VCs or interest-linked instruments. The whole point is that your analogy of the buying the Hummer is useless because a Hummer isn't an investment but an expense so there's no point in using your analogy.
No, that's not the point of my analogy. Some people thing buying a Hummer is a very good use of their money. Some don't. Some do and later change their minds.
My point is that easy money does not cause choices. People choose. Jerome Powell did not make anybody buy a Hummer, even if that was a predictable outcome of a drop in interest rates. Investment in bad startups may be a predictable outcome of easy money, but specific people still specifically chose those specific bad startups when they could have made better choices.
My point is that easy money does not cause choices. People choose. Jerome Powell did not make anybody buy a Hummer, even if that was a predictable outcome of a drop in interest rates. Investment in bad startups may be a predictable outcome of easy money, but specific people still specifically chose those specific bad startups when they could have made better choices.
I think you should spend a bit of time looking into how VCs operate. Their LPs are looking for returns and inject them with more and more cash during ZIRP. A VC fund isn’t a bank, they have to invest. So they make progressively poorer and poorer decisions under the constant weight of easy money.
That's some impressive condescension from somebody who does not know how VCs work. They are not obligated to take the initial investment, they are not obliged to make a capital call, and they are not obligated to just spend the money they do take. They choose to make poorer and poorer decisions because it's in their short-term financial interest to do so.
[deleted]
The Forest Service lands in the middle. The contemporary approach to land management in relation to fire involves regularly setting controlled fires under optimal weather conditions.
It’s good for forest ecology, which depends on fire, and it’s good for people, since we generally don’t like crazy forest fires.
https://www.fs.usda.gov/managing-land/prescribed-fire
It’s good for forest ecology, which depends on fire, and it’s good for people, since we generally don’t like crazy forest fires.
https://www.fs.usda.gov/managing-land/prescribed-fire
Depends on for whom we mean. I don’t mind having had the opportunity to book a lot of wages in the meantime.
Low interest rates lower the activation energy to discovering good ideas too.
In reality, low interest rates allow businesses building a growth story on sellong dollars for pennies to survive much longer rhan they should. All while ruining businesses that would otherwise be totally viable and sustainable but don't have access to VC money. IMHO, the start-up cleaning that seems to be on the horizon can only be a good thing.
> or low interest rates
Are VCs borrowing heavily?
For some reason I imagined that wasn’t the case generally.
Are VCs borrowing heavily?
For some reason I imagined that wasn’t the case generally.
That's not it.
When interest rates are low and you have piles of money, you seek higher risk investments with higher returns because low risk investments have virtually no returns on interest (if you factor in inflation, you've lost money over time in a low interest environment).
Think about this way: you wouldn't put $10,000 into a cash deposit for risk free 0.1% annualized return, but you might for 5%. So the shift in interest has changed the favorability of different investment vehicles.
If you are a VC, you might fund 100 companies and only 2-3 will be super profitable and generate the majority of your returns. Those returns in aggregate need to be greater than what could be achieved by parking the money in lower risk instruments. Easy in 2020 when interest was nearly 0. Now? Those lower risk instruments are much higher performing than they were 3 years ago. So if a VC portfolio had returns of 5% previously and now I can just park my $1m in a CD and get 4% RISK FREE, that VC suddenly has to perform at a higher level to compete. Otherwise if I'm a wealthy investor, why not just park my money in bonds or other investments that benefit from higher interest?
When interest rates are low and you have piles of money, you seek higher risk investments with higher returns because low risk investments have virtually no returns on interest (if you factor in inflation, you've lost money over time in a low interest environment).
Think about this way: you wouldn't put $10,000 into a cash deposit for risk free 0.1% annualized return, but you might for 5%. So the shift in interest has changed the favorability of different investment vehicles.
If you are a VC, you might fund 100 companies and only 2-3 will be super profitable and generate the majority of your returns. Those returns in aggregate need to be greater than what could be achieved by parking the money in lower risk instruments. Easy in 2020 when interest was nearly 0. Now? Those lower risk instruments are much higher performing than they were 3 years ago. So if a VC portfolio had returns of 5% previously and now I can just park my $1m in a CD and get 4% RISK FREE, that VC suddenly has to perform at a higher level to compete. Otherwise if I'm a wealthy investor, why not just park my money in bonds or other investments that benefit from higher interest?
No, but some people have put their money into startups because banks were paying 0.5% interest.
Now, investors are getting a much better offer from the banks. Maybe they'll decide selling $10 taxi rides for $7 isn't something they want to continue funding.
Now, investors are getting a much better offer from the banks. Maybe they'll decide selling $10 taxi rides for $7 isn't something they want to continue funding.
Most banks would pay a negative interest. If you have any sort of fortune, you need to invest to make any interest, otherwise you'd see that fortune become smaller and smaller.
Arguably some have found it beneficial to invest in bonds with negative yields, because then they'd at least know that their money was safe and exactly how much it would cost over a given period.
Arguably some have found it beneficial to invest in bonds with negative yields, because then they'd at least know that their money was safe and exactly how much it would cost over a given period.
VC's probably aren't, at least not in the way you or i might, rather they're the recipient of other's investment cash. If interest rates are low, there are fewer opportunities for getting any kind of a return, so more investors will look at riskier options. Institutional investors, mutuals, retirement finds etc all have targeted return rates, even if it's "just" x% above inflation.
So while their risk models might still only let them invest a small fraction of their capital in high risk instruments, that's still a small fraction of a very, very big pie.
Google tell me the US VC market is 68.9bn, measured by revenue or 233bn globally.
While it's the extreme comparison, Blackrock have 8.5 trillion worth of assets under management.
So it would seem to me that relatively small changes in risk appetite have the potential for huge changes to vc funding.. because it was always a tiny part of the wider market
While it's the extreme comparison, Blackrock have 8.5 trillion worth of assets under management.
So it would seem to me that relatively small changes in risk appetite have the potential for huge changes to vc funding.. because it was always a tiny part of the wider market
> The M&A scenario is where you hear about a startup getting acquired for a billion $ and employees are popping corks only to find out that they get nothing (despite all those options/shares) and are now an employee of some other shop that has them on a short list to be axed to realize “synergies” created by the deal.
Can you explain this point a bit more?
If a company was acquired for billions, and they have a contract entitling them to shares of the company, why wouldn’t they have a nice exit?
Can you explain this point a bit more?
If a company was acquired for billions, and they have a contract entitling them to shares of the company, why wouldn’t they have a nice exit?
Startup equity is a minefield for employees.
If a startup issues options to you while the valuation is high (2021-2022, for example) and then the valuation falls, your options could have a negative value.
Follow-on investment rounds could come with liquidation preferences, meaning the most recent investors get paid first. This is commonly 1X, meaning most recent investors get 100% of their money back at minimum (if the money is there) before the remaining money can be paid into the rest of the preference stack. I've seen situations where liquidation preference can be 2X or more. It's also common for liquidation preferences to stack, so you as the employee are at the bottom of a stack of guaranteed payoffs for investors. You only get a share of what's left.
Remember the Eero WiFi routers that everyone loved? Amazon bought Eero for $100 million, but most of the employees ended up with worthless shares. Amazon sweetened the deal by giving the founders multi-million dollar acquisition bonuses, but employees got nothing. There are several stories about it if you want to read more: https://mashable.com/article/amazon-eero-wifi-router-sale
> If a company was acquired for billions, and they have a contract entitling them to shares of the company, why wouldn’t they have a nice exit?
Read the Eero article for a real-world example. Employees had shares, but they were issued at prices as high as $3.54 per share. By the time of acquisition and after all the other issues were sorted out, the shares were only worth $0.03. Exercising those options would have negative value. Employees who exercised early could have actually lost a lot of money on their shares.
If a startup issues options to you while the valuation is high (2021-2022, for example) and then the valuation falls, your options could have a negative value.
Follow-on investment rounds could come with liquidation preferences, meaning the most recent investors get paid first. This is commonly 1X, meaning most recent investors get 100% of their money back at minimum (if the money is there) before the remaining money can be paid into the rest of the preference stack. I've seen situations where liquidation preference can be 2X or more. It's also common for liquidation preferences to stack, so you as the employee are at the bottom of a stack of guaranteed payoffs for investors. You only get a share of what's left.
Remember the Eero WiFi routers that everyone loved? Amazon bought Eero for $100 million, but most of the employees ended up with worthless shares. Amazon sweetened the deal by giving the founders multi-million dollar acquisition bonuses, but employees got nothing. There are several stories about it if you want to read more: https://mashable.com/article/amazon-eero-wifi-router-sale
> If a company was acquired for billions, and they have a contract entitling them to shares of the company, why wouldn’t they have a nice exit?
Read the Eero article for a real-world example. Employees had shares, but they were issued at prices as high as $3.54 per share. By the time of acquisition and after all the other issues were sorted out, the shares were only worth $0.03. Exercising those options would have negative value. Employees who exercised early could have actually lost a lot of money on their shares.
Preferred shares get paid first.
Most investors get preferred shares that give them a “liquidation preference” which means they can get the money they put into the company back out (or some multiple of that money) off the top of the purchase price.
If the purchase price of the company isn’t greater than the money VCs put into the company, the common shares are typically worthless.
Sometimes preferred shareholders have to choose “exercise this preference” and then the shares go poof (“non-participating preferred”) and sometimes preferred shareholders can get this preference AND then also become common shareholders alongside everyone else and get to share what’s left after the preference is paid (“participating preferred”)
Most investors get preferred shares that give them a “liquidation preference” which means they can get the money they put into the company back out (or some multiple of that money) off the top of the purchase price.
If the purchase price of the company isn’t greater than the money VCs put into the company, the common shares are typically worthless.
Sometimes preferred shareholders have to choose “exercise this preference” and then the shares go poof (“non-participating preferred”) and sometimes preferred shareholders can get this preference AND then also become common shareholders alongside everyone else and get to share what’s left after the preference is paid (“participating preferred”)
The investors usually have liquidation preferences and/or participating preferred stock, or similar.
Common stockholders (including founders) are only entitled to a share of what's left over after investors are paid, as their equity rights are more junior -though often founders/execs will get large bonuses to make the deal happen even if their stock is worthless.
Common stockholders (including founders) are only entitled to a share of what's left over after investors are paid, as their equity rights are more junior -though often founders/execs will get large bonuses to make the deal happen even if their stock is worthless.
[deleted]
Preferred shares with liquidation preferences can entitle an investor to recoup a multiple (or at least not lose money) before any common shares shareholders can get paid anything. VC stands for Vulture Capital in some circles.
It's a pyramid scheme not an unprofitable startup. You could always pivot, find a relative with more money, make your guys work as cheap consultants for bigger corps. But who will hire or lend or invest in a crypto thing NOW, afrer FTX Bahamas extradition and the Celsius examiner's report.
Now all is clear: there is no business model, there is simply a black box where there is less money coming out than there was coming in. It doesnt transform nature (what people call "adding value" or "providing utility") so it can't make money.
Now all is clear: there is no business model, there is simply a black box where there is less money coming out than there was coming in. It doesnt transform nature (what people call "adding value" or "providing utility") so it can't make money.
Downround or liquidation preference.
>take a down-round hit
That sounds like it could be below-the-belt.
That sounds like it could be below-the-belt.
Who wouldn't want to join now? 14 open positions that couldn't be filled by 89 current employees ... what an opportunity to learn and grow, err, "push humanity forward" (in a downward direction)! https://boards.greenhouse.io/protocollabs
This is the worst. I was at a startup one time that laid off people who had the right skillsets to fill the roles they were actively hiring for. It sucks when they don’t dogfood current people on the chopping block for open roles.
> This is the worst. I was at a startup one time that laid off people who had the right skillsets to fill the roles they were actively hiring for.
To me this sounds like these firing spirals have zero to do with results and revenue and the economy, and everything to do with conspiring against their own staff.
To me this sounds like these firing spirals have zero to do with results and revenue and the economy, and everything to do with conspiring against their own staff.
I think it's far more banal that conspiracy. I think these people are just not very good managers and they don't care much about the people they hire. And that they are rewarded for performing toughness, as indicated by being tough not with themselves, but the people they have power over.
> I think these people are just not very good managers and they don't care much about the people they hire.
The diktat to fire people didn't sprung from the same org level that was tasked to do the firing.
Those who ordered X% to be fired didn't even bothered with freezing hiring.
In cases like Amazon, apparently they even forbade internal transfers.
The diktat to fire people didn't sprung from the same org level that was tasked to do the firing.
Those who ordered X% to be fired didn't even bothered with freezing hiring.
In cases like Amazon, apparently they even forbade internal transfers.
I recently saw this myself.
Woefully under-utilized talent before the layoff, followed by a drastic headcount reduction.
Those affected ranged from “yea I can see why” to “complete footgun letting this person go, GG”
For me personally, being free and with time now feels amazing. I no longer feel like my skills are stagnating or my brain is curdling. In retrospect, I think the politics may have screwed me…
Woefully under-utilized talent before the layoff, followed by a drastic headcount reduction.
Those affected ranged from “yea I can see why” to “complete footgun letting this person go, GG”
For me personally, being free and with time now feels amazing. I no longer feel like my skills are stagnating or my brain is curdling. In retrospect, I think the politics may have screwed me…
Or they just want to replace the positions with cheaper (probably less experienced) people.
Laying off X% of your staff can be required to raise capital. Gotta show the investors you aren't being frivolous.
You can, of course, hire the same people back (assuming they are still willing to work there).
You can, of course, hire the same people back (assuming they are still willing to work there).
Those could be evergreen roles or not active positions. Some companies leave postings open to collect resumes until head count opens up.
What a great opportunity for some of the people they fired!
This summer is going to be brutal for non-revenue generating startups (which is most of them). Assuming their last raise was last summer, they usually only have 18 months of runway before they run out of money. I don't think any of them can raise and even if they can, their valuation will take a significant hit.
Protocol Labs certainly has several years of runway.
I'm always surprised how often people naively talk about "runway" when looking at the health of a startup (or any company).
These arguments always presuppose that the reason companies exist is to keep people employed, and thus 'runway' assumes they can keep doing that is for N years.
But runway is a more or less meaningless piece of information unless you're looking at just a few months and have to close shop soon.
Whether a startup or a publicly traded company, you only invest because you think that runway most certainly ends in a massive reward for you. The claim that "hey we can keep existing for N months!" is not interesting to investors. Even if a startup has 10 years of cash on hand, if they aren't showing the potential for rapid growth, especially when investors are less interested in risk, they're still going to die.
These arguments always presuppose that the reason companies exist is to keep people employed, and thus 'runway' assumes they can keep doing that is for N years.
But runway is a more or less meaningless piece of information unless you're looking at just a few months and have to close shop soon.
Whether a startup or a publicly traded company, you only invest because you think that runway most certainly ends in a massive reward for you. The claim that "hey we can keep existing for N months!" is not interesting to investors. Even if a startup has 10 years of cash on hand, if they aren't showing the potential for rapid growth, especially when investors are less interested in risk, they're still going to die.
The runway is for takeoff, not landing. When you run out of runway you crash. If you’re still talking about runway, you haven’t taken off yet.
As the saying goes, they may have enough runway but do they have enough to take off?
Not a good time to raise
I always wondered how VC funding works in the land of make believe
When a company describes their purpose to "push humanity further" it gives the impression that the main function of the company is to procure investment and foster a narrative-based exit. "Storybook" organizations are more financial instruments than actual firms. They cover themselves in "innovation theater" to provide the impression of a technology too complex and innovative to price future cash flows, giving them license to over-indulge in "potential" successes within their projections. The story, rather than the firm becomes the main basis of value.
If you can't describe to your target audience what you're building in 1-2 short sentences, then you're most likely not building anything valuable.
We're hiring at status for a number of different engineering and supporting roles, check out or postings here - https://jobs.status.im/. We rely on some of the technologies built by PL and the surrounding community and would love to engage with talented individual contributors that want to continue building p2p and decentralized solutions across the board. You can hit me up directly with any questions at dryajov at status dot im.
Are you guys still heavy into Nim? I think you're one of the largest companies using Nim today, rock on!
Yep, we're very invested in Nim, having an inhouse libp2p implementation written in it, among many other things.
When I read their mission is to "push humanity further." It immediately reminded me of HBO's Silicon Valley.
Curious that the reasoning the author gives for the crypto winter is normal economic downturn reasons and not the trashy behaviour and reputation that underpins much of the crypto industry and the many recent news items featuring it.
Agreed. It's ethically problematic the terminology "winter" has taken hold as though there's some sort of eternal truth and seasonality to crypto, when in reality the irrefutable mathematical truth is the ultimate value of crypto is $0. It's not an industry experiencing another periodic downturn "winter," but the end of a useless industry. There may be some edge cases for the use of various technologies, but it has zero chance of scaling or becoming useful to folks living in the real world.
Have you read up on what Protocol Labs are doing? Sounds pretty useful to me living in the real world.
I read up on what Protocol Labs are doing. Seems pretty not-useful to me living in the real world. I'm pretty sure distributed vague-but-epic-crypto-bro-sounding super-important-"let's back up the worlds most important information on the blockchain and also it's a file system like dropbox but on the chain" resonates with some folks, but to me, it's just more of the same: rich folks saying that they better have control of the info, the coins, the way its distributed. It all comes down to _agency_. They actually want to be a centralized owner of information. Crypto is full of ridiculous offerings like Protocol Labs.
I think the web already solves this problem. That's the larger issue I have with web3, trying to solve a problem that doesn't exist.
I think the web already solves this problem. That's the larger issue I have with web3, trying to solve a problem that doesn't exist.
I appreciate you reading to and responding to my words, and I'll try to find something useful in their offering in the real world. But, honestly, their layoff statement was all I needed to know, a CEO completely out of touch with main street and living in the crypto-futurist-whiz-bang-only-for-rich-folks future. Maybe one day folks will call things as they see it, for instance blockchain might have a future as a rebrand under "append-only ledgers" (technology from the 1970's), etc. But a specific example, just for the sake of discourse, would be appreciated here.
[deleted]
Do you have any examples?
>Dear Labbers,
Please stop.
Please stop.
Are their staff artists called “Labradoodlers”?
I remember those [Git]Hubbers.
Sorry to see it.
I am a little curious, though. I believe they raised something like 250 million a few years ago -- is there really not enough money to make due?
It's a little weird to me sometimes when the infinite wealth holders act like us non infinite wealth holders. Like, does OPEC say, "gosh the economy is tough this year we need to save some money" while sitting on billions of dollars? If Asana, whose Market Cap is $3 billion goes through issues, does their CEO, whose net worth is something like 10 billion, feel okay telling people he needs to lay them off?
Sometimes it feels like companies, like people, sometimes just do the things "companies do" because that's what they feel they're supposed to do.
I am a little curious, though. I believe they raised something like 250 million a few years ago -- is there really not enough money to make due?
It's a little weird to me sometimes when the infinite wealth holders act like us non infinite wealth holders. Like, does OPEC say, "gosh the economy is tough this year we need to save some money" while sitting on billions of dollars? If Asana, whose Market Cap is $3 billion goes through issues, does their CEO, whose net worth is something like 10 billion, feel okay telling people he needs to lay them off?
Sometimes it feels like companies, like people, sometimes just do the things "companies do" because that's what they feel they're supposed to do.
[deleted]
they really hired hundreds of people. I’m guessing that a lot of these companies played a bit too much with their runway in the way they were hiring
ipfs and filecoin are extremely successful. I am surprised they can't fund the team from filecoin treasury. Maybe they overhired and used the downturn as a reason to correct? This might also be an example of how many orgs in and around web3 have trouble monetizing because they end up building public goods. Which is ironic given the glut of money in web3.
> ipfs and filecoin are extremely successful
What am I missing? Both seem to be getting less attention nowadays than they did a few years ago, and while I'd give IPFS that it actually works and seems usable for some things, as you say it doesn't pay the bills.
What am I missing? Both seem to be getting less attention nowadays than they did a few years ago, and while I'd give IPFS that it actually works and seems usable for some things, as you say it doesn't pay the bills.
What's your measure for success here?
As far as I can tell, most (if not all) of "web3" is in what I would consider to be the pre-product-market-fit stage. These things have believers, of course, and the believers generate activity. But I'm not seeing a lot of real-world economic activity that could only be solved with "web3" approaches, or even ones where "web3" technologies provide significant cost reductions.
So what signs are there for people who don't go to crypto-church that there are functional businesses here?
As far as I can tell, most (if not all) of "web3" is in what I would consider to be the pre-product-market-fit stage. These things have believers, of course, and the believers generate activity. But I'm not seeing a lot of real-world economic activity that could only be solved with "web3" approaches, or even ones where "web3" technologies provide significant cost reductions.
So what signs are there for people who don't go to crypto-church that there are functional businesses here?
Layoffs aren't about need. That's the cozy "we're all in this together" narrative that they keep feeding you. They probably can fund these people, as you say. But layoffs are fashionable today.
Right. The _unspoken truth_ in all of these announcements is that _the CEO failed at their one job of keeping the company disciplined_ but it's the _rank and file_ who suffer the consequences of the "tough decision". It's a "not subtle at all" power check to calculated to intimidate the unfortunate people who remain. They've wanted to do this so bad for so long: it's why they kept feeding the media the weak "great resignation" narrative that they lapped up and regurgitated on HN and elsewhere.
> Maybe they overhired and used the downturn as a reason to correct?
What downturn?
I understand Amazon is reporting poor results, but they seem to be mostly due to reporting losses from past investments that didn't panned out yet, like Rivian.
But it's not like each and every tech turn in the world has invested in Rivian.
What downturn?
I understand Amazon is reporting poor results, but they seem to be mostly due to reporting losses from past investments that didn't panned out yet, like Rivian.
But it's not like each and every tech turn in the world has invested in Rivian.
This is a consequence of money getting more expensive. When rates are low, investors pile money into non-revenue producing startups in hopes that something will return 1000x. Now rates are up and the smart money is moving elsewhere.
> Now rates are up and the smart money is moving elsewhere.
That would only explain drops in future investments, but we're seeing profitable companies with astronomical revenues from their cash cows diving into a massive firing spiral.
More importantly, growing interest rates is not exactly the definition of a downturn.
That would only explain drops in future investments, but we're seeing profitable companies with astronomical revenues from their cash cows diving into a massive firing spiral.
More importantly, growing interest rates is not exactly the definition of a downturn.
Interest rates go up, future revenue becomes less valuable, companies lay people off to add to their margins to preserve their valuations.
> Interest rates go up, future revenue becomes less valuable (...)
I don't think this is true at all. Central banks hike interest rates to limit and reign in inflation. It's the exact opposite of what you claimed.
I don't think this is true at all. Central banks hike interest rates to limit and reign in inflation. It's the exact opposite of what you claimed.
In terms of people deciding to invest in a company, high interest rates definitely make future revenue less valuable in terms of discounted cash flow models.
Growing interest rates propagate throughout the economy. The goal of higher interest rates (aside from debt & borrowing becoming substantially more expensive) is to bring down demand and slow the economy.
Alphabet: 34% decline in profit. Fourth consecutive quarter of declining profit.
> Alphabet: 34% decline in revenue. Fourth consecutive quarter of declining revenues.
That does not sound factual at all. Where did you picked that up? According to Variety, Alphabet's revenue on Q4 2022 was $76.05 billion and up 1% in spite of a 8% ad revenue drop.
https://variety.com/2023/digital/news/alphabet-google-q4-202...
Are 1% increases in a massive revenue of $76.05 billion now passed off as bad results?
That does not sound factual at all. Where did you picked that up? According to Variety, Alphabet's revenue on Q4 2022 was $76.05 billion and up 1% in spite of a 8% ad revenue drop.
https://variety.com/2023/digital/news/alphabet-google-q4-202...
Are 1% increases in a massive revenue of $76.05 billion now passed off as bad results?
I meant profit, not revenue. https://www.nytimes.com/2023/02/02/technology/alphabet-earni...
> I meant profit, not revenue
Honest mistake. Happens to the best of us.
Still, regarding profit, I'm not sure that firing people in profitable companies effectively contributes to higher profits. Sure, you pay fewer salaries. However, that comes at a cost, such as supposedly cutting programs the company deemed valuable and eroding the company's ability to conduct their business.
Also, it seems Google's reaction to drops in profit was to fire 6% of their staff. Does that even register in Google's accounting? I mean, payroll is typically 20-30% of a healthy company's expenditure.
And would a hiring freeze not reach the same goal without causing any disruption? I mean, apparently Google is still hiring and has a large volume of job openings. If the amount of people in their payroll is too much as is then why are they hiring even more?
https://careers.google.com/jobs/results/
Honest mistake. Happens to the best of us.
Still, regarding profit, I'm not sure that firing people in profitable companies effectively contributes to higher profits. Sure, you pay fewer salaries. However, that comes at a cost, such as supposedly cutting programs the company deemed valuable and eroding the company's ability to conduct their business.
Also, it seems Google's reaction to drops in profit was to fire 6% of their staff. Does that even register in Google's accounting? I mean, payroll is typically 20-30% of a healthy company's expenditure.
And would a hiring freeze not reach the same goal without causing any disruption? I mean, apparently Google is still hiring and has a large volume of job openings. If the amount of people in their payroll is too much as is then why are they hiring even more?
https://careers.google.com/jobs/results/
And you do realize profit will go down if you increase stock buybacks right?
revenue != profit
https://www.macrotrends.net/stocks/charts/GOOG/alphabet/ebit...
I think OP changed their initial post, lol
Do you have any figures on real usage? Neither seem to have much traction and with interest rates rising I’d expect investors are putting more pressure on them to demonstrate real profits rather than the paper valuations which have characterized web3 so far. The biggest thing I’d expect to see for IPFS is profitably selling storage at competitive prices. If you can’t match S3 or Dropbox it’s unclear what market they could possibly have to justify even the reduced headcount.
IPFS is an open protocol à la BitTorrent and not about selling storage; Filecoin is about selling storage.
There are S3/Dropbox-like solutions on top of Filecoin. I’ve not deeply researched the economics of them, but some of them have competitive or better prices
There are S3/Dropbox-like solutions on top of Filecoin. I’ve not deeply researched the economics of them, but some of them have competitive or better prices
Yes, I’m aware of what IPFS is - the point being that it’s been around for 8 years but seems to have rather little impact. For a company which has raised a quarter of a billion in real dollars and has a coin ostensibly valued over $2B, you’d expect to see some serious ongoing revenue from people paying for services because they do something better than the alternatives.
When you look at services using IPFS, be sure to look for hard statements about reliability. One of the recurring weird aspects about IPFS is that people talk like it guarantees durable storage without needing to pay for redundant copies.
When you look at services using IPFS, be sure to look for hard statements about reliability. One of the recurring weird aspects about IPFS is that people talk like it guarantees durable storage without needing to pay for redundant copies.
> ipfs and filecoin are extremely successful
Every discussion that I can find about IPFS on Hacker News has revolved around it not being useful.
In March 2020, Filecoin was trading around $185. Today it’s under $6.
I don’t see either of those as extremely successful.
Moreover, I doubt there is enough buyer interest in Filecoin to support funding developer salaries with “Filecoin treasury.” I suspect that any significant sale of Filecoin would tank the coin’s value.
Every discussion that I can find about IPFS on Hacker News has revolved around it not being useful.
In March 2020, Filecoin was trading around $185. Today it’s under $6.
I don’t see either of those as extremely successful.
Moreover, I doubt there is enough buyer interest in Filecoin to support funding developer salaries with “Filecoin treasury.” I suspect that any significant sale of Filecoin would tank the coin’s value.
I don't think your first sentence is true.
What is your metric of success for Filecoin?
Sorry to hear that :( we’re hiring people at O(1) Labs and we actually are using or looking at protocols that came from protocol labs. Hit me up at [email protected] if you’re interested in any open roles (https://o1labs.org/)
Does PL have product-market fit for anything?
Not surprised here at all. Crypto companies have completely no use case at all and no reason to exist other than to try and justify spurious price speculation of fictitious tokens created out of thin air.
A solution perpetually and eternally locked in search of a problem.
We shall see more of these companies in the crypto sector shedding headcount and inevitably going bust.
If history is any indicator of past bubbles (South Sea Bubble, Tulip Mania, Beanie Babies), it is by fate that this will happen to crypto.
A solution perpetually and eternally locked in search of a problem.
We shall see more of these companies in the crypto sector shedding headcount and inevitably going bust.
If history is any indicator of past bubbles (South Sea Bubble, Tulip Mania, Beanie Babies), it is by fate that this will happen to crypto.
Many crypto companies might have no use case, but ipfs and filecoin (built by protocol labs) are not among them. Content-addressed data distribution is an excellent idea that has proven to be valuable and pragmatic. And a public network to sell storage that's served over the content-addressed network has proven useful and valuable.
IPFS is a great spiritual successor to BitTorrent and I think gets unfairly lumped in with crypto projects.
Content-based addressing has already been shoehorned into traditional web architecture (e.g. hashing your dependencies for CDN compatibility), so it’s refreshing to see tech built with it as a first class citizen.
Filecoin definitely seems like more of a moonshot, but compared to e.g. NFT marketplaces, it seems like a web3 project with a lot more substance
Content-based addressing has already been shoehorned into traditional web architecture (e.g. hashing your dependencies for CDN compatibility), so it’s refreshing to see tech built with it as a first class citizen.
Filecoin definitely seems like more of a moonshot, but compared to e.g. NFT marketplaces, it seems like a web3 project with a lot more substance
ChatGPT gained more daily active users than any web3 company ever will, and the year isn't even over yet.
This is THE crowning example of why web3 has no usecase even though they have been 'building' and it is 'early days' for almost 15 years.
I don't know anyone using filecoin, but I can bet $100K the person next to me knows or has used ChatGPT.
This is THE crowning example of why web3 has no usecase even though they have been 'building' and it is 'early days' for almost 15 years.
I don't know anyone using filecoin, but I can bet $100K the person next to me knows or has used ChatGPT.
While I don't disagree with your stance on cryptocurrency companies, comparing them with ChatGPT, the latest sensation, is a clear example of survivorship bias. There will always be a super successful company at the top of the market.
Bitcoin was allegedly all the rage in 2010s and almost nobody uses it for payments at all and at scale.
It failed.
It failed.
A solid half the random convenience stores and gas stations I visit have a bitcoin vending machine. Of everything in crypto, it has failed the least.
Have you ever in your life seen someone use them, though? That seems like this generation’s CueCat but I at least used mine to inventory my books and CDs.
Thanks for letting me know I’ll stop using it now
Active users doing what?
It’s trendy sure, but sparkling autocomplete has a limited number of use cases, and zero shipped products.
It’s trendy sure, but sparkling autocomplete has a limited number of use cases, and zero shipped products.
Copilot is a shipped GPT product with paying customers.
Who go so far as to never shut up about it.
And make me sit and watch them fumble with it for minutes in screen sharing codepair sessions as they construct lengthy prose descriptions of trivial code snippets to coerce it into being "helpful".
Who go so far as to never shut up about it.
And make me sit and watch them fumble with it for minutes in screen sharing codepair sessions as they construct lengthy prose descriptions of trivial code snippets to coerce it into being "helpful".
GitHub copilot has (likely) more than 400k subscribers. $4m/month isn't too bad.
Given that ChatGPT has one of the fastest growing user bases of any piece of tech ever (there’s been an infographic floating round of it compared to iPhone, Spotify, etc), it’s hardly a fair yardstick to measure popularity against
It is a fair comparison.
Even if we go back to other AI projects: (DALL-E, Stable Diffusion, GPT-3, LensaAI, etc) all of these projects have been used by hundreds of millions of real people, in a short space of time.
I have never seen a crypto project with a clear usecase ever go mainstream and we are still waiting for it.
Even if we go back to other AI projects: (DALL-E, Stable Diffusion, GPT-3, LensaAI, etc) all of these projects have been used by hundreds of millions of real people, in a short space of time.
I have never seen a crypto project with a clear usecase ever go mainstream and we are still waiting for it.
100s of millions is a stretch for sure.
15 years is early days when the technology is completely novel. For reference: the internet started in 1969. It took 30 years for it to see mass adoption.
Ethereum is extremely primitive at the moment. You reveal your address, and all of your transactions, to the entire world, when you use it. Scalability of L1 is limited to 30 transactions per second, while L2 is still in beta, with centralized coordinators.
With more development, people can conduct transactions while maintaining total privacy, and the public blockchain can, with the use of temporary data layers (EIP-4444 in Ethereum), sharding and Rollups, process 100,000 transactions per second while maintaining the decentralization, tamper-resistance and permissionless-ness characteristic of blockchains.
Ethereum is extremely primitive at the moment. You reveal your address, and all of your transactions, to the entire world, when you use it. Scalability of L1 is limited to 30 transactions per second, while L2 is still in beta, with centralized coordinators.
With more development, people can conduct transactions while maintaining total privacy, and the public blockchain can, with the use of temporary data layers (EIP-4444 in Ethereum), sharding and Rollups, process 100,000 transactions per second while maintaining the decentralization, tamper-resistance and permissionless-ness characteristic of blockchains.
The difference is that the internet was immediately useful to people whose jobs weren’t selling it, and adoption was held back by severe constraints (computers and networks were slow, limited, and very expensive) until the mid-90s. Despite that, the web started changing the world within a couple years of the first release.
Ethereum’s had more time where it’s had global availability at much lower prices but it’s hard far less impact because it doesn’t solve problems almost any people have.
Ethereum’s had more time where it’s had global availability at much lower prices but it’s hard far less impact because it doesn’t solve problems almost any people have.
Ethereum is a financial platform, so its uses are going to be different than the internet's. So far, it has been used by the Ukrainian government to do fundraising:
https://futurism.com/the-byte/ukraine-selling-nft-military
And to buy weapons/medical-supplies:
https://twitter.com/nicksvyaznoy/status/1605248783192887298
It's used by artists to make a living:
https://www.cnbc.com/2022/02/02/this-36-year-old-made-over-1...
And it's used to transact with over a hundred billion dollars worth of stablecoins, in countries like Argentina where the currency is unreliable:
https://cryptonews.com/news/stablecoins-lead-charge-as-crypt...
And this is when it's in a primitive state, with very limited scalability, and zero privacy. Once the technology is more developed, to allow something substantially greater than 30 transactions to be processed per second, and to allow people to conduct transactions on the blockchain without revealing their financial assets and activity to the world, it will likely gain more adoption, especially in the realm of stablecoins.
https://futurism.com/the-byte/ukraine-selling-nft-military
And to buy weapons/medical-supplies:
https://twitter.com/nicksvyaznoy/status/1605248783192887298
It's used by artists to make a living:
https://www.cnbc.com/2022/02/02/this-36-year-old-made-over-1...
And it's used to transact with over a hundred billion dollars worth of stablecoins, in countries like Argentina where the currency is unreliable:
https://cryptonews.com/news/stablecoins-lead-charge-as-crypt...
And this is when it's in a primitive state, with very limited scalability, and zero privacy. Once the technology is more developed, to allow something substantially greater than 30 transactions to be processed per second, and to allow people to conduct transactions on the blockchain without revealing their financial assets and activity to the world, it will likely gain more adoption, especially in the realm of stablecoins.
Yes, I’m aware there’s been some niche usage but it’s still quite limited because it doesn’t outperform the alternatives on almost any task - yes, it’s cool that Ukraine gets so money but it’s a tiny fraction of the total. The real question is how much margin you can save: anyone can transfer money, the question is whether you’re cheaper, safer, etc. If the pitch is “like PayPal but 10% cheaper” that really caps the total growth potential.
Similarly, the privacy things are both a huge change and something only needed due to having built the system on the wrong architecture. Solving that problem means very expensively reaching the point where its competitors started.
Similarly, the privacy things are both a huge change and something only needed due to having built the system on the wrong architecture. Solving that problem means very expensively reaching the point where its competitors started.
>>Solving that problem means very expensively reaching the point where its competitors started.
Adding privacy makes transactions on the order of 4X more computationally expensive.
Once Ethereum has EIP-4844 and EIP-4444, such a transaction would cost less than a penny in fees on a Rollup. Stablecoin payments would be substantially better than centralized e-wallet payments for many mainstream use-cases if Ethereum developers pull off these upgrades and if crypto advocates manage to convince the major powers to legalize the zk-proof cryptographic methods needed to provide blockchain transactions with privacy.
Adding privacy makes transactions on the order of 4X more computationally expensive.
Once Ethereum has EIP-4844 and EIP-4444, such a transaction would cost less than a penny in fees on a Rollup. Stablecoin payments would be substantially better than centralized e-wallet payments for many mainstream use-cases if Ethereum developers pull off these upgrades and if crypto advocates manage to convince the major powers to legalize the zk-proof cryptographic methods needed to provide blockchain transactions with privacy.
Yet most modern AI tools and any modern technology took a shorter time to reach critical mass.
We are not in the 1960's anymore, 15 years for something that was made in 2008 and isn't used for its intended use case is not early days at all.
It is a failure.
We are not in the 1960's anymore, 15 years for something that was made in 2008 and isn't used for its intended use case is not early days at all.
It is a failure.
AI, a field that’s almost as old as computer science?
cryptography, a field that's so old that evidence of its start is lost to time, but at least 3900 years.
As a cryptographer, I can confidently tell you that cryptography the science only became a thing in the early 80s. The caesar cipher is irrelevant to modern day crypto.
AI has been in development for decades. Practical artificial neural networks have been in development for 40 years.
“Proven” would imply consistent non-trivial usage. IPFS seems to still be in an earlier prototype stage, with its notorious scaling problems still to be solved for any general usage. At the very least, you’d expect to see open source software distribution using it.
Agreed. Made a comment in the thread above, but happy to know I'm not alone: it's ethnically blind, morally wrong, and just plain short sighted to blame macro economic "winters" for layoffs when the folks making these decisions should own up to the fact that they were playing with folks lives by over-hiring in a useless industry.
What's maybe a little surprising is they are only laying off 21%.
Their products are pretty useful. Do you have an axe to grind with crypto companies in some way?
Besides Libgen which, as far as I can tell, is mostly keeping data on IPFS via centralized servers paid for by ICO money, what are the most used products of PL?
Libgen is not related to PL and is powered by volunteers/donations
Perhaps you mean libp2p?
So strange, I literally just learned about this company yesterday and was looking at their products thinking what a cool place to work.
I had no idea Protocol Labs had so many employees!
Why the .ai TLD? It appears to be a crypto(storage)/p2p/nft infrastructure company.
Because if you can have two buzzwords when talking to investors, why only have one?
Perhaps there's a correlation between this insight and the headline.
[deleted]
Can’t believe 500 people are working at one company in this worthless sector
For others some will scramble to get acquired in an M&A / acqu-hire frenzy to try and save being wiped out completely. Investors here are usually just looking to make back some of their investment to avoid a total loss. Many other startups will simply implode and turn into total losses for investors.
The M&A scenario is where you hear about a startup getting acquired for a billion $ and employees are popping corks only to find out that they get nothing (despite all those options/shares) and are now an employee of some other shop that has them on a short list to be axed to realize “synergies” created by the deal.
Companies are scrambling to extend runways via these layoffs, but for those in that position this is at best a temporary patch on a gaping hole. The above options become inevitable unless something drastically changes with the company’s product, market adoption and financial fundamentals.