Block Or Not?

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As marketers, we’re constantly being inundated with the next big marketing tactic. We’re lured in by the promise of reach, potential, relevance and the ever-elusive “cool factor” to capture the slippery attention of our evolving audience. We are duped into believing that without the latest technology or platform, our products will lack impact and lose importance. Our entire careers are now determined by our ability to leverage bleeding edge tactics (and often times, gimmicks) so that we can sell our brands, and keep our jobs. Of course, none of this is mandated.

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Marketing Tactics That Work

I hear my dad, Michael Loeb, say all the time that the same marketing tactics that worked in the Mad Men era still work today, it’s just the format that marketers need to adjust to. Meaning, the conversations, the segmentation, the communication has not changed, and never will. What will change is where those conversations take place, how we segment users, how the communication looks. The advent of data and technology has spurred this pivot, but any good marketer will be experienced enough not to panic in the face of these changes – rather, keen to learn how they could benefit from them.

This is a fine line that only few can tread. Marketers are destined to the overwhelming fate of sifting through too-many flashy options and having others tell them what is right for their own brands, making it impossible to distinguish the real from the fluff. Which is why Loeb NYC paired up with our partner and friend Bonin Bough to offer a course-correction opportunity through our event series, The Or Not Experience.

The Or Not Experience

The series is designed to focus on the trendiest marketing tactics, the ones shrouded in pomp and frill, in order to demystify them for brand marketers, creating a safe space where they can ask the questions they may have been too intimidated to ask in a formal setting. This year’s subject: Blockchain. The title? Block Or Not.

The audience was split between Brand Marketers and crypto pioneers – two groups who have rarely ever overlapped, now together bonding under one roof. The idea was to bring together these two dichotomous camps to have conversations about how one can benefit from the other and more importantly introduce themselves and their missions in a setting where they can let down their guard.loeb nyc quote block or not marketing experience We expected a few connections to be made. We thought a couple of follow up meetings would be scheduled. But in reality, we were stunned by the results. We saw meaningful relationships form and deals born. I’ve even watched partnerships germinate between entities in our own portfolio and some of the blockchain networks we met. Collaborations and new career paths were forged that day – all out of the simple necessity for honest and accurate information.

For that reason, The Or Not Experience is becoming a staple event marketing brand between Loeb NYC and Bonin ventures. Each year, we plan to host dinners and activations at major conferences like SXSW and CES, and of course, our curate our own flagship event in Southampton, NY. And while each year the theme will change, the requirement for empowerment via information will never change. As we’ve already seen, the juice is worth the squeeze.

What Did The Experts Say About Blockchain?

Babs Rangaiah, Exec. Partner, Global Marketing, IBM:

“Blockchain is going to be a truly transformative technology. In fact, our CEO [Ginni Rometty] said that blockchain will do for transactions what the internet did for communications. Think about how big of a statement that is.”

Ryan Singer, Co-Founder, President Chia Network Inc.:

“I’ve been surprised by the utopianism” around blockchain technology. They’re taking a technology that very much was broken in a different industry and pretending it can fix the things that are broken in their industry, just because they’re looking for an opportunity to change.”

Douglas Rushkoff, Media Theorist:

“My main message is the blockchain a lot of them are wishing on, it’s not only that it’s a pyramid scheme that is going to crash for 99% of the people who are involved in it, it’s not just that. I would say 0.1% of the applications that people are envisioning for blockchain could actually work.”

Sam Cassatt, Chief Strategy Officer, Consensys:

“What is really is, is a new type of trusted database technology, that can allow parties that don’t trust each other to share the same source of information.”

“This is like a global computer that’s trustable because no one owns it.”

Does Blockchain Technology Fit with Your Brand and Marketing?

Shelly Palmer, CEO Palmer Group:

“Blockchain technology is open source and free to use by any developer who is competent. What is not in any way commoditized is domain expertise. That’s what you bring to any project.”

Bob Lord, Chief Digital Officer, IBM:

“My objective was to have them specifically understand that blockchain can be a tool for marketers to use. But more importantly, how do you use blockchain technology to enhance your brand?” 

“With a trusted transaction system, I can create a value exchange with a customer in ways I’ve never been able to do before. I can get it down to their mobile devices, I can have it that one to one exchange which we all have been dreaming about.”

Loeb NYC Speakers Series: Cryptocurrencies with Alyse Killeen

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Around the Loeb.NYC offices, I’ve noticed chatter about cryptocurrencies and blockchain. Given the nascent, confusing, and somewhat mysterious nature of the technology and its ecosystem, I suggested that we host Alyse Killeen for the monthly Loeb NYC Speakers Series. Alyse is a Los Angeles-based venture capital investor who focuses on data science, network infrastructure, fintech, e-commerce, and blockchain. She has contributed to two books on cryptocurrencies: “The Handbook of Digital Currency” (2015) and “The Handbook of Digital Banking” (2017).

The Bitcoin Surge and Decentralization

When I first met Alyse at Michael Loeb’s Founders & Funders event in 2014, the price of a Bitcoin was around $400. Now, in late November 2017, Bitcoin’s price is approaching $10,000. With this massive surge in price (+2,400% in just three years), Bitcoin has generated major interest from the mainstream. As talent and capital have poured into the space, it’s become clear that Bitcoin and other cryptocurrencies are here to stay. One of the goals of the Loeb NYC Speaker Series is to promote company-wide understanding and discussion of new ideas. Given the amount of buzz in the space right now, hosting Alyse to explain Bitcoin, blockchain, and its implications going forward was a no-brainer.

Above: Fintech Silicon Valley interview with Alyse Killeen on what drew her to the blockchain, and on inclusivity.

For Alyse, the importance of blockchain technology can be boiled down to its power to decentralize structures and institutions that are traditionally relied upon to establish trust between multiple parties.

Alyse explained that Bitcoin emerged in the wake of the 2008 financial crisis, partly in response to eroding trust in financial institutions and governments. She explained that Bitcoin users can choose to transact on their own terms without the consent of any intermediary. As more people earn, buy, and use the currency, its price increases. While rampant speculation has obviously contributed to Bitcoin’s rapid price increase, adoption and usage has grown substantially as well.

Alyse explained that instead of a central institution like a bank maintaining a ledger of balances, the Bitcoin blockchain is maintained by a worldwide network of financially-incentivized “miners” — people who have set up computing hardware to verify Bitcoin transactions. Miners earn Bitcoin rewards in exchange for their participation in the network. Mining is intentionally expensive, requiring high-powered computers and substantial electricity consumption. Thus, miners have begun to set up shop in regions like China and Venezuela where electricity is relatively inexpensive.

Alyse Killeen signs the wall at Loeb NYC Speakers Series Decentralize all the things
Alyse Killeen signs the wall at Loeb NYC Speakers Series

How does Bitcoin Mining Work?

The system is designed to work as follows: as Bitcoin’s price increases, more miners will participate in the network. As more miners join in, the faster and more secure the network becomes, ideally creating a virtuous cycle that allows for seamless, borderless, and secure exchanges of value without the need for any centralized intermediary. This is particularly important in nations without the institutional stability that we tend to take for granted in the US. In a country like Venezuela that has experienced hyperinflation, Bitcoin has become a viable alternative to its national currency. For those interested in investing in Bitcoin, Alyse had a few recommendations: only invest what you’re willing/able to lose and store your cryptocurrency in a hardware wallet like the Trezor or Ledger.

Initial Coin Offerings

Another subject that came up was the recent Initial Coin Offering (ICO) craze. Alyse warned that a lot of these ICOs are scams but believes this financing model will ultimately democratize access to capital. To briefly explain an ICO, companies seeking venture funding can create and issue their own token as a means of financing rather than traditional equity or debt deals. Presumably, as the company grows, the value of its token will increase. Token holders are immediately liquid, unlike with traditional venture capital or angel investments. Alyse recommends doing serious diligence on ICOs before investing, as one should with any investment.

It is an exciting time in the world of cryptocurrencies. There is a lot to learn and sometimes answers to the questions you have may not even exist. From all of us at Loeb, we’d like to say thank you to Alyse! For more information about Alyse, visit her website and follow her on Twitter.

Adam Rice

Adam is a Venture Associate at Loeb NYC, where he sources, evaluates, and pursues new business and investment opportunities. He is currently focused on fintech and blockchain. Prior to joining Loeb.NYC in 2014, Adam received his BA from the University of Michigan.

Things You Didn't Know About Bitcoin's Blockchain

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Once a speculation point among those involved in startups, finance, or investing, Bitcoin, Initial Coin Offerings (ICO’s), and Blockchain have entered the broader cultural lexicon. You probably have a good idea of the basics and are aware of the social, philosophical, and economic issues, but what follows is a list of things you may not have known about how Bitcoin’s Blockchain actually works.

A slew of Silicon Valley startups and opportunists (some with legitimate intentions, other with get-rich-quick agendas) are raising capital to launch ICO’s on the back of newly invented tokens and cryptocurrencies. A report published by “Bitcoin.com” in February 2018 and cited by Forbes indicated that, “46% of startups that raised capital via initial coin offerings (ICO) are “dead already…despite raising over $104 million.” and that “The failure rate for ICOs is nearly double that of the one-year failure rate for an average startup going the traditional route of venture capital.” You can read more about inflated Silicon Valley valuations in this blog piece by Loeb.NYC CEO, Michael Loeb.

Despite wild volatility and steep trading peaks and valleys, people are still asking “is Bitcoin still a good investment?” Let’s go back to some basics about the Bitcoin blockchain to gain a better understanding of its underlying technology (which I predict is here to stay, no matter what happens with the value of the coin itself).

1: The Bitcoin Blockchain is a public ledger

Anyone can inspect every transaction that has ever occurred

Here is the very first block #0 in the chain, and here is block #492435. Within each block there are many individual transactions, and the flow of value in a transaction can be explored visually, using tools like this one where we can click through any orange circle that represents a spent value. Because everyone can see every transaction, anyone can confirm that the flow is valid – such that the receiver of value always comes from sources that have sufficient unspent value.

2. Transactions are not from one sender’s address to a recipient’s address

The inputs to each bitcoin transaction in the blockchain are the outputs of previous unspent transactions. So, if Alice wants to send Bob 50 BTC (Bitcoin units of currency), she would do so by specifying one or more of her previous transactions where the total output is more than 50 BTC. This is a subtle but important difference from using Alice’s Chase or Paypal account as transaction deposits are not aggregated into a single identifiable account, and they remain anonymous.

3. Transactions spend all the inputs

In order to efficiently verify transactions, every transaction uses the total value of the inputs and will create a new output address for any change. So for example, if Alice wants to send 50 BTC to Bob and she has 3 prior transactions where she received 25, 20, and 15 BTC, her bitcoin client or wallet software would use all three prior transactions to send 50 BTC to Bob and would result in 10 BTC to a new address as change, and all three prior transactions would be marked as spent and no longer usable.

 

4. The Bitcoin Blockchain Ledger stores every transaction and is currently ~140GB with over 11k copies in nodes distributed globally

Anyone can start a node, download the ledger, and start verifying and confirming transactions. This makes Blockchain highly resilient to data loss or central control. Natural disasters or individual or company failures will have no adverse effect as long as there are sufficient copies running.

The “Game” of Blockchain…

5. Confirming a block of transactions is a 10-minute guessing game

In order to prevent Alice from using the same coins more than once, all the nodes need to agree on the order of transactions so that once a previous output is used, it can’t be used again.  This is achieved by setting up a difficult guessing game designed to take approximately 10 minutes to win so that a single order of transactions is accepted.

Each player puts together a block of valid transactions that have occurred since the last confirmed block, including the hash of the last successful block, a special transaction to deposit winnings to the player, and a number the player can change called the nonce. The player then runs a hash function over the data and tries to win by producing a hash that is less than a certain target number known as the difficulty. If the hash result is higher than the difficulty, they change the value of the nonce and try again. When a winner succeeds, that block is confirmed and broadcast to everyone, and the game begins again with the next block containing the hash of the last one, hence the name, blockchain.

6. It generally takes a mind-boggling number of guesses to win each game

The process of confirming a block is called mining, and the players are called miners. The combined guessing rate, or hash rate, of all the miners, was approximately 11 million TH/s at the end of October 2017, where 1TH/s is 1 billion hashes per second. At the current difficulty level, this means that it takes an average of approximately 6 billion (10^18) guesses. That’s:

 

6,000,000,000,000,000,000

 

7. The difficulty of the game adjusts every 2 weeks

Since the purpose of the game is to demonstrate Proof of Work and is designed to take 10 minutes to solve, the difficulty of the game is adjusted every 2016 blocks (approximately 2 weeks based on 10 mins per block) in order to keep the length of each game close to 10 minutes. This is done by adjusting the target difficulty number to be higher (easier) or lower (harder) proportional to the amount of time it took to complete the last 2016 blocks being greater or less than 2 weeks.

8. The winner gets rewarded in Bitcoin until the entire 21M prize pool finishes by the year 2140

The first transaction in a newly confirmed block is the reward the miner awarded themselves according to the rules and is called the coinbase. The reward started at 50 BTC per confirmed block and is halved every 210,000 blocks or approximately 4 years. You can see this yourself by looking at block 209999, and then block 210000. This mechanism results in a total supply of 21M BTC awarded, after which there will be no more new BTC entered into circulation. At this point, miners will be paid by transaction fees for their work to confirm new transactions in a block.

9. Confirmed transactions are irreversible

By design, once a transaction is confirmed and added to the blockchain, every subsequently confirmed block creates an increasingly long chain making it virtually impossible to rewrite history and undo the transaction. This results in low transactions costs because similar to paying in cash, there is no need to account for chargebacks.  

10. Proof of Work currently costs more than $1.1B annually, using more electricity than many countries

While the blockchain mechanism is effective in its objectives, it has drawn criticism for the increased use of electricity and resources consumed by an activity that is an artificial means for introducing difficulty and effort. Several alternative mechanisms such as Proof of Storage and Proof of Stake are intended to address this.

If you learned something interesting and would like more information about the inner workings of the Bitcoin Blockchain, I recommend watching this excellent Khan Academy series hosted by cryptographer Zulfikar Ramzan.

Michael Yoon CTO, Investor, Advisor

Michael is Principal and Founder of Yono Consulting where he provides product, strategy and technology consulting services and helps companies like THNKS to design, implement, and scale their products and technology. He is an experienced product management and technology executive with a track record of success in top-tier financial, consumer and technology companies.

THNKS

We are a team of sales and client service professionals who wanted a better way to say “thank you” to our clients. Our mission is to strengthen business relationships with instant, relevant and meaningful gestures of appreciation while increasing efficiency and control around gifting for compliance, legal and finance teams.