My Perspective on Hot Topics in Venture Part 1 – Bitcoin

At the beginning of every day, I usually spend an hour or so reading a variety of different newsletters, articles, and blogs on the latest and greatest happenings in venture capital. It’s been a great way to stay current and keep a steady pulse on things. In the line of work I’m in, knowing what’s going on at all times is important for maintaining credibility and for staying abreast of potential investment opportunities.

However, I think there’s a fundamental difference between simply knowing what’s happening in the news versus having an opinion about what’s happening in the news. I’ve noticed lately in recent meetings with our investors, nearly all of them want to know what our opinion is about certain things happening in the market. For example, we’ve been asked about China, Bitcoin, artificial intelligence, autonomous driving, blockchain, valuations, IPOs, and much more. These are popular and relevant topics so I think it’s natural for people to ask about them. I also think that because things are changing so quickly these days, it seems like people are eager to learn as much as they can from anyone who’s willing to put forth an opinion.

The future is unpredictable and the only certainty is uncertainty. With that being said, I thought I’d take a moment to share my opinion on a few hot topics. Let’s start with Bitcoin and blockchain. I am by no means an expert on bitcoin or cryptocurrency, but like most people in venture, I know enough to talk intelligently about it. I think the idea of using cryptocurrency for virtual transactions is novel and has the potential to transform the way transactions are made around the world. Like any new technology in a hype cycle, there are issues with bitcoin that cannot be overlooked. First, there is no way to regulate transactions – anyone can buy or sell anything with full anonymity. Second, there is no central bank to stabilize the currency. Some say the lack of formal controls is a good thing, but I think having some form of oversight would add credibility to the platform and make it more universally acceptable as a standard form of payment.

The true value of Bitcoin lies in the underlying technology that drives the entire platform  – blockchain. According the CB Insights, “Blockchain technology offers a way for untrusted parties to reach agreement (consensus) on a common digital history. A common digital history is important because digital assets and transactions are in theory easily faked and/or duplicated. Blockchain technology solves this problem without using a trusted intermediary.” At a certain point in the future, blockchain technology will be more widely accepted and used for tracking ownership in a wide variety of areas including real estate, automobiles, jewelry, stock, and pretty much anything else where the issue of provenance is involved. There are several start-up companies including BitPesa, Provenance, and Storj, that are helping companies and individuals apply blockchain for tracking ownership of assets, payments, and storing data in the cloud.

There are some naysayers out there who don’t fully believe in blockchain technology. There are two reasons for this: 1). They don’t think the platform is capable of being used in a broad, scalable manner (such as would be needed for a stock exchange or the like), and 2). There is current quantum computing technology in development that could pose problems for blockchain. The underlying technology that makes blockchain secure is called RSA, which is short for Rivest, Shamir, and Adelman (the inventors of the technique). The RSA  algorithm  is based on the fact that there is no efficient way to factor very large numbers. Deducing an RSA key, therefore, requires an extraordinary amount of computer processing power and time; hence the need for a quantum computer. Blockchain may have its flaws and limitations, but over time these things will eventually be ironed out.

Just in case you were wondering, I personally don’t own Bitcoin. It’s not because I don’t think it’s useful; I just think it’s too volatile right now to be considered a prudent investment. Literally just this week, the value of Bitcoin shot up 400% to $17,000/coin. As of this very moment, it is now at $15,176/coin. It’s likely to have another swing in value before I hit “publish” on this blog post.

If you’re interested in purchasing cryptocurrency, you can easily do so online – it’s very easy. I’m not going to list a specific site for you to visit because I do not want to appear as though I’m endorsing one over another. But like any investment, please make sure you do your due diligence before making a decision. Cheers – KM

P.S Next week I’ll be talking about my perspective on Artificial Intelligence. Stay tuned!



Photo by Pawel Janiak on Unsplash

RSA Algorithm:


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