Crypto’s Next Big Thing Raises Questions While the Price Surges

Crypto’s Next Big Thing Raises Questions While the Price Surges

(Bloomberg) – The meteoric rise of Cardano over the past three months is catching the attention of some of the savviest investors in cryptocurrencies.

Billionaire Michael Novogratz sought to crowdsource information on the digital token, also known as Ada, on Tuesday, asking for help to explain the more than sixfold surge since the middle of December that briefly made it the third-biggest cryptocurrency by market value after stalwarts Bitcoin and Ethereum.

Novogratz isn’t the only one asking what’s going on with a network that still lacks many functionalities available on its more established rivals. That hasn’t stopped it from developing a loyal following on Reddit, similar to many of the so-called meme stocks that surged at the start of the year. Unlike the likes of GameStop Corp., Cardano has been able to maintain its upward momentum.

Cardano is the brainchild of Charles Hoskinson, a 33-year-old who looks like the PhD student that he was before crypto mania took over his life. He’s now a bit of a crypto rock star, running a YouTube channel with 105,000 subscribers, gets fan mail and even gifts from admirers, such as a letter Albert Einstein wrote and a bronze eagle.

“That’s the most surreal part of all of it,” Hoskinson said in an interview from Longmont, Colorado. “I get recognized at airports.”

While his YouTube videos are being watched by tens of thousands of people, Cardano is still a work in progress. Even after an upgrade that happened in early March, it can’t yet be used to run many of the hottest applications in crypto, such as decentralized-finance projects that let users lend, trade with and borrow money from each other. The so-called smart-contract functionality is expected to come this year.

“I am not aware of a single popular application deployed on Cardano, nor have I seen any enthusiasm for the platform among developers,” said Nic Carter, co-founder of researcher Coin Metrics. “I am truly mystified as to why it is enjoying a resurgence in popularity.”

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Cardano previously peaked in early 2018 during the crypto boom and bust, before crashing badly. This year, Cardano went to a market value of about $34 billion from about $5.6 billion, according to data tracker CoinMarketCap.com.

Perhaps investors are buying Cardano’s promise or just fear missing out on the gains. It’s billed as a better Ethereum, which has emerged as the innovation hub for projects ranging from DeFi to NFTs, efforts to issue digital art on blockchain. With transaction fees on Ethereum high, developers have been looking at alternative networks such as Cardano and rivals Tron and Polkadot.

“We did it right, but it meant we were one of the last ones to get to market,” Hoskinson said. He said he doesn’t know why Cardano’s value suddenly shot up.

“It’s been a wild ride, broke to a billionaire in eight years is pretty crazy,” Hoskinson said.

Hoskinson said Cardano’s blockchain security and governance are superior to Ethereum, and should allow for applications such as voting and supply-chain tracking. He is less interested in decentralized exchanges such as Uniswap and collectible art like digital cats.

“My goal is to run countries on this blockchain,” Hoskinson said. “I don’t care about Uniswap and CryptoKitties and other things. It’s a bubble, and it comes and it goes, like Pet Rocks and Beanie Babies.”

More than 100 companies are “in the pipeline,” looking to shift from Ethereum to Cardano when its functionality matures, he said.

“You can take your DeFi and you can run it on my system for 1/100 to 1/1000 of the cost,” he said.

Hoskinson dove into crypto as a disenfranchised 20-something, who wanted to see heads roll on Wall Street after the financial crisis – and they didn’t. After he stumbled onto the Bitcoin white paper in 2010, he looked at all the references it cited, and concluded that Bitcoin will fail. Still, he started mining the cryptocurrency, most of which he said he gave away or spent.

Hoskinson started the for-profit company IOHK in 2015 to develop Cardano and other cryptocurrency projects. The effort was funded by several large angel investors and through an initial coin offering in Asia that raised about $70 million. IOHK received 8% of the coin supply, plus about $30 million in cash to write code for Cardano over a three-year period, Hoskinson said. IOHK now has about 300 employees and contractors, Hoskinson said.

While 12 companies are working on Cardano development, IONK is the largest, he said. Between 2018 and October 2020, the average number of developers actively working on Cardano has roughly doubled, according to tracker Electric Capital, which calls this growth “modest.”

“My job is to set it all up,” Hoskinson said. “What I can be is a kind of Steve Wozniak to Apple. Pass iPhones at the store.”

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NFTs don’t need crypto, but crypto needs NFTs – TechCrunch

Spending millions for a digital work of art that could be screenshotted feels similar to traipsing around a strip of concrete as a tourist activity. The optics don’t make immediate sense — there’s hardly any appeal in something as accessible as a Google image or street.

That’s my best bet at explaining at least some of the confusion around the explosive rise of NFTs, or nonfungible tokens. The token, minted on the blockchain, can give digital assets a unique signifier. In other words, anyone could screenshot a piece of art, but only one of us will own the true, original piece of art. This context is part of the reason why Beeple, a digital artist, had his artwork sold for $69 million just a few days ago.

The reason this topic is coming up in a Startups Weekly newsletter is because of the impact it could have on the cryptocurrency movement, of which there is a growing tide of early-stage and late-stage startups. The popularization of NFTs, as I argued in Equity this week, could be what makes cryptocurrency finally palpable to the average human — beside the average bitcoin hoarder. Platforms that sell NFTs usually need you to use cryptocurrency (usually Ethereum) to purchase anything. Mix that with the fact that humans have an innate desire to own, protect and immortalize their assets, and you might have the perfect storm. Beeple, a digital artist, made $69 million for his work, and this isn’t just a big financing event, it’s a signal that crypto enthusiasts and crypto assets are getting to an inescapable spot in public dialogue.

Ownership as a way for a decentralized network to become mainstream is its own meta conversation, and I’ll be clear that the blockchain and NFTs have a long way to go before they are truly equitable, accessible and hit their stride. But, it’s hard to not to let your mind wander about the opportunities here.

It’s more than a screenshot, it’s about the potential of pixels having more meaning than they ever did before. And it’s more than a strip of concrete, it’s the Hollywood Walk of Fame. Finding exclusive aspects of accessible things in our lives is compelling to a consumer and could be great for creators.

In the rest of this newsletter, we’ll discuss Coupang’s competitive industrial edge, a startup hoping to be the Nasdaq for revenue and Google’s brains fighting Google itself. As always, you can follow me on Twitter @nmasc_ for my thoughts throughout the week and tech news.

The Amazon of South Korea goes public

Coupang, which some describe as the Amazon of South Korea, priced and started trading this week on the public markets. At one point on Thursday, the company was valued at $92 billion.

Here’s what to know: When Coupang first launched, it found that South Korea had an absence of third-party logistics companies similar to UPS or FedEx in the United States. Now, it wasn’t without competition, but it did have an opportunity to build an end-to-end logistics company that is now worth a boatload of money.

Other IPO news:

The Nasdaq for Revenue

Pipe has a compelling narrative: It’s anti-VC, doesn’t like naming its rounds and says its goal is to be the Nasdaq for revenue. The goal since it started was to give SaaS companies a way to get their revenue upfront by connecting them to investors that would pay a rate for the annual value of those contracts. It turns monthly recurring revenue into annual recurring revenue.

Here’s what to know: The startup raised $50 million in a financing event this week. In the first quarter of 2021, tens of millions of dollars were traded through its platform, reports TechCrunch’s Mary Ann Azevedo.

Can you beat Google with Google’s brains?

In our main Equity show this week, the trio discussed a slew of news that naturally lended itself over to a piece we wrote months ago, Meet the anti-antitrust startup club.

(By the way, if you want a huge discount for Extra Crunch, just use our code, EQUITY, when you sign up to access great articles like this one and most of our analytical work).

Here’s what to know: Neeva, built by a team of ex-Googlers including the guy who built Google’s advertising engine, is one startup to watch. There’s a lot to chew and we do it best during the episode, so take a listen and figure out if you’re team Natasha and Danny, or team Alex.

Other news bits:

‘Blaming the intern’ won’t save your startup from cybersecurity liability

As SolarWinds is showcasing, a company can be liable for the mistakes of its employees via a legal term called “vicarious liability.”

Cybersecurity writer Chandu Gopalakrishnan explains what it means for you and what you can do to stay on the right side of the law.

Around TechCrunch

A few house-keeping things this week:

Here is everything you missed from TC Sessions: Justice. It has recaps, videos and excerpts with embedded notes. Best enjoyed with a dose of reality, truth and coffee.

We are hiring for a head of product, so apply for a chance to join this wacky and fun team.

Check out the incredible speakers we have joining us for Extra Crunch Live this month.

And finally, follow Drew Olanoff, who leads Community for TC, because he’s constantly churning out cool stuff like discount codes, chances to hang and surveys so we serve y’all better.

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