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Deep Dive with Eric Meltzer

Partner @ INB, China's largest blockchain-focused fund. Peking University dropout. 活在未来

posted 1 year ago

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Erik Torenberg
Hey Eric:

What are the biggest misconceptions people have around crypto in China?
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Eric Meltzer
@eriktorenberg 1. That Chinese people are just using crypto to evade capital controls. Like the US, interest varies from having a safe place to store value, to speculative investments, to fun stuff like Cryptokitties and Decentraland. 2. That there's such thing as a "Chinese ethereum" or "Chinese x" of any sort. You know what the Chinese Ethereum is? Ethereum!
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ZINC
Eric, you mentioned your picks for 2018 were privacy preserving coins and tech. What's your thinking behind this? Are you interested in a specific area of privacy tech?
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Eric Meltzer
@_R_Block I think the two things blockchain protocols have proven themselves to be 10x better than alternative at are: storing value in a seizure resistant way, and sending transactions in a private way. There's clear demand for both of those (we've had mostly private transactions for literally millenia, then we stopped having them briefly with the advent of Paypal etc., and now it looks like we're going back to the tried and true way of doing things).

Although I'm politically an extreme leftist, as an investor, especially of other people's money, I'm a shameless conservative and prefer to put my money on things where the demand is clear, even if the implementation is still being figured out.

Another direction I see clear demand for is decentralized exchanges, so I've been making investments in the best projects I see there (mostly 0x for now, with an eye on people building stuff that works with non-ERC20 coins)
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Yale Wang
Hey Eric, I enjoyed your medium post about deep immersion for learning Chinese. Wondering if you have a similar thoughts for learning more about crypto.
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Eric Meltzer
@Yale-Wang Glad to hear it was useful! Cryptocurrencies are a pretty deep topic so without knowing what angle you’re interested in (developing? Investing?) it’s hard to make a useful recommendation. One thing that I think is under-appreciated as a way to get an understanding of how these systems work is to actually use them day to day (eg backup your computer on Sia, pay for something with Zcash, play around with the Decentraland explorer etc.) This will give you a much clearer picture of what stage of development and adoption we’re actually in.
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Yale Wang
@wheatpond I've been mining and investing for a couple of years, but I don't have a core area of focus. In the future, I'd like to get into the space on the business side. Definitely agree with playing around and using products.
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Eric Meltzer
@Yale-Wang I think doing a deep dive into a specific area that interests you (for me, its currencies that have a privacy-preservation aspect like Zcash) and getting to know the people in that community can be hugely rewarding. At the end of the day all these systems are made of people, and if you know the folks working on the most interesting stuff in each sub-field, you'll have a better perspective than most investors do.
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Jason Yannos
Hi Eric, would love you hear your thoughts on tokenizing traditional securities (and assets like commodities and real estate)!
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Eric Meltzer
@Jyannos I think for now it suffers from a selection issue whereby the projects interested in tokenizing themselves typically are doing it because they didn’t have access to other more discerning sources of capital. That said, I think this is very much a short-term issue and long-term every asset will be tokenized because crypto tokens offer some very meaningful advantages over traditional securitization.
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Toby Downton
Hi Eric,

There's one topic people keep mentioning as being really important that I can't get my head round - building decentralised fiat -> crypto on-ramps.

How would a company build such an on-ramp? What would the process look like from a consumer perspective? Would love to know more!

Thanks
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Eric Meltzer
@tobydownton I think anything that touches fiat is inherently somewhat centralized, but platforms like Local Bitcoins are a step in the right direction.
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Calvin Chu
Hey Eric! Always appreciate your commentary on Twitter! I've been following some projects like WABI that help with counterfeiting w/ consumer products. As an American-Born Chinese, we in the US heard about all of the fake baby formula stories, etc. via Chinese media, but couldn't fathom the same kinds of problems here. Are there any other kinds of use cases that may be incredibly no-brainer in China that we, not being in China, don't get the magnitude of the potential problem that could be solved?
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Linda Xie
Hi Eric! What are the biggest differences you've noticed in the US vs Chinese crypto communities?
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Eric Meltzer
@ljxie on the investment side, the Chinese community has a higher percentage of pretty sophisticated investors who got their start day trading stock and have applied those skills to crypto trading. Unfortunately on the dev side, China is still lagging behind the US, but there are definitely some strong projects coming from China now as well.
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Ben Tossell
The recent story in the FT mentioned the pace of startup environment in China is huge compared to that of SV.

What are you seeing in relation to Blockchain startups and the pace in China?
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Eric Meltzer
@bentossell That article got a ton of flak, but I do think that the pace of innovation in Chinese startups is significantly higher than in the US at the moment.
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Soona
Hi Eric, what's the difference between a token and a coin?
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Eric Meltzer
@soonaorlater I think the terminology is shifting a lot, but tokens are typically issued on top of other blockchains and don't contribute any security via PoW to the underlying chain, whereas coins are the cryptocurrency of the base layer.
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Philipp Mayer
Hey Eric,
what are the main requirements you have when you think of investing in a project?
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Eric Meltzer
@Philipp-Mayer I think you'll get the same relatively boring answer out of every professional investor you ask this question of: we look for long term value in projects that are making real technical innovations. I'll go a bit further and say that the reason we don't as a fund invest in ICOs that we think will appreciate a lot in the short term is that from a risk-adjusted perspective, they actually aren't very appealing compared to good projects shipping real code. Another thing I look at is the valuation of a project at the time that we see it, but I put less of an emphasis on this than some other investors in the space because I see a lot of the anxiety around valuation as being akin to worrying about whether you bought Bitcoin at 1$, 10$ or 100$. If something is a good investment, it's a good investment, as long as the valuation isn't ridiculous.
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Soona
Eric, what was the funniest newsletter name suggestion you received?
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Eric Meltzer
@soonaorlater probably "HODL on to your butts" haha.
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Soona
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Ben Tossell
What 5 things do you look at when assessing white papers?
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Eric Meltzer
@bentossell I love the format of the original Bitcoin paper and wish more whitepapers followed its example: concise, no filler, no bombastic marketing claims, and just enough detail that someone could reasonably implement the system after reading the paper. Whenever I read a whitepaper that has that level of pith I get pretty excited. Another thing I look for is an honest explanation of the tradeoffs being made with each decision--if someone is claiming to be 100x better than existing solutions with no tradeoffs, I get suspicious.
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Soona
@bentossell @wheatpond i feel this way EXACTLY
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Ian McCrystal
Hey Eric! I love your POW newsletter. What are some surprising things you’ve learned by collecting regular updates from development teams? Are there any teams that have stood out to you in one way or another?
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Eric Meltzer
@Ian-McCrystal Glad to hear it! Yes, 0x stands out for shipping faster than almost any other project, Zcash for the amount of fundamental research being done on upgrades to the platform, Decred and Sia for having super active communities.. but really all of the projects in PoW were preselected to be pretty impressive 😇
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Val Klump
Hi Eric! When a crypto company announces a partnership in China, how do you judge the quality and impact of that agreement?
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Eric Meltzer
@valdean great question unfortunately no generalizable answer. Many such announcements both in and out of China are simple pilots that are blown way out of proportion for PR purposes. I look closely to see whether the partnership in question involves meaningful investment on both sides, and I look at the team’s record for honest communication.
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Stanley
Excellent Newsletter.
What metrics do you look at in evaluating a project?
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Eric Meltzer
@stanleyhataria Thanks! See answer directly above for what I look for in a project.
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Ben Lang
Hey Eric

Love your newsletter! How do you evaluate new tokens to add to your newsletter?
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Ben Tossell
What's your advice for people who are just starting out in crypto?
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Eric Meltzer
@bentossell If investing, start out with a small amount of money or use software that allows you to simulate a fantasy portfolio. If developing, Jimmy's seminar is an excellent place to start: http://programmingblockchain.com/
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Ben Tossell
How did you get into Bitcoin?
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Eric Meltzer
@bentossell There used to be a couple "bitcoin faucets" where you could get some free BTC. The one I got mine from iirc was run by Gavin Andresen. Thanks Gavin!
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Val Klump
What do you think about VeChain's upcoming shift to a dual coin model (VET and THOR)? Also, what are your thoughts about VeChain in general?
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Eric Meltzer
@valdean Unfortunately enterprise-focused stuff is what I know the absolute least about.
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Val Klump
What are some crypto projects in China that you're excited about? Could be big ones (NEO, QTUM) or small ones that haven't gotten a lot of publicity yet.
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Eric Meltzer
@valdean Super excited about DDEX.io, a project by a chinese team to make a 0x relayer focused on the Asian market. It's an intriguing model with a separate token that actually makes sense, and a super strong team. Also excited about a bunch of projects from large companies that are currently in stealth and will be announced in early Q2--stay tuned!
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Hassan Ahmed
Hi Eric, do you subscribe to the 'fat protocol' investment thesis? When does it make sense for a token to exist versus using the underlying coin (using your definition below)?
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Eric Meltzer
@Hassan_NY I don't know! I'm generally suspicious of conceptual investment theses and prefer to look at things on a case by case basis.
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