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I’ve decided to take more time to help tell the stories of people who I admire, both within the Initialized community and the world of startups at large. This is my first stab at it. I shot and edited everything myself and know there are a thousand more things I need to get right next time. 

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My resolution: Write more.

“The sole purpose of human existence is to kindle a light in the darkness of mere being.” —Carl Jung

My one professional resolution for the year is to actually write more. The written word is the one way we can leave something behind - it’s a signpost for others, in distilled form. Edited. Reduced. Great writing lets you skip ahead, to absorb that which others had to learn the hard way. 

Two things kept me from writing more in the past years, and I figured the best way to unblock the blockers is to name them directly in my first post of the year. 

Vulnerability

Writing is about writing the truth, or at least the truth as you see it. These days it’s clear sharing that truth makes you incredibly vulnerable. 

“I, myself, have found that if I examine something, it’s less scary. We always had this theory that theory that if you kept a snake in your eye-line, the snake wasn’t going to bite you. That’s kind of the way I feel about confronting pain. I want to know where it is.” —Joan Didion

Vulnerability is about saying the things left unsaid. The loss. The mistakes. The tragedies. The unheralded wins. Let’s talk about the snake, because if we don’t, how are we ever going to keep people from being bitten? Let’s keep it in our eye line. 

Novelty

One counterintuitive truth I’ve found is that you sometimes find yourself writing the obvious. What is obvious to you, and your direct community, is often not what is obvious to the people out there. One thing I know I need to do is acknowledge that I am in a community of incredibly smart people, but I cannot begin to hope to write things that are that novel. I think it’s easy to fall into a trap where you think you have to be the Velvet Underground: the new vanguard. 

There is more to write than just that which will be impressive to the insiders. In fact, properly accessible writing may well involve a good amount of review for those insiders, and help place that which might be novel in the right context.

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I’m looking forward to this year. Bring it on 2019. I will try to write my truth, and I welcome your advice, feedback, and hearty discussion in the months to come. 

I invite you to read my writing by following me on Twitter or clicking the Subscribe link below to join my Posthaven email list.

One crypto strategy that might work: A basket of low market cap Proof-of-Stake coins

I've been spending some time trying to think through where the proverbial hockey puck will be going in cryptocurrency, and here's one idea I think might work. 

Right now, if you put $100 in a savings account, you'd be lucky to get even $2 per year. But with this shift in cryptocurrencies to Proof of Stake, the right pick could net you $50 to $80 per year for that initial $100 investment. 

Moving from Proof of Work to Proof of Stake is one big experiment happening now

The dominant cryptocurrencies like Bitcoin and Ethereum operate on proof of work. Miners have to do fairly complicated math problems to figure out what the next step in the blockchain will be. In return, they get a mining reward, which is the primary form of inflation for most currencies. 

Proof of stake is different. Instead of expensive GPU-based or ASIC-based mining rigs, you just run a normal, non-computationally-intensive piece of software on any kind of computer, and attach your "stake" — some amount of the cryptocurrency that you are putting up as proof that you are running the right software and won't try to cheat the system. If you are caught cheating, you lose the amount you put up for stake. This is important in that now normal people who just hold the currency can actually get an interest rate on holding it. 

Generating yield is a big deal

This turns crypto from a negative carry asset (like gold, or putting money in your mattress) into one that actually generates yield.

The world's capital is desperate for yield these days, which is why the stock market is so overheated, why negative or near zero interest rate lending now exists, and why people are so worried about asset price bubbles broadly. People want to grow their capital and it has never been harder to find consistent ways to get it. 

For instance, look at the eye-popping 11% rate of return you would get on CD's back in 1984! 

The days of risk-less return were our parents' generation, and not ours. But cryptocurrencies that use proof of stake for consensus have the promise of a consistent 3% to 8% annual yield, because rather than give that to miners to run the network, they can just share them with holders who are willing to stake. 

One strategy with asymmetric upside: A basket of low market cap Proof-of-Stake coins

Proof of Stake hasn't been proven to work at the kind of scale that Bitcoin or Ethereum have had yet. Crypto experts have pretty divergent opinions on whether it will work at scale over time, which is a risk that is preventing adoption now. 

But as with anything new, it has to start somewhere, and that's where coins like Decred and Navcoin are leading the way in the attempt. Navcoin (at the time of writing) is around $100M market cap, and Decred is around $220M. If either of them can get to top 10 cryptocurrencies, that's a 10X in value from here. Obviously these things are always an absurdly big if, but I like it as a bet with highly asymmetric upside.

Navcoin yields about 5% per year, but Decred yields up to 31% compounded per year. That's pretty amazing. But if the coin itself can 10X in value, you're looking at 50% to 80% annual yield on the initial fiat you might use to buy in. I like a one-time 50% increase in value, but what's even better than that is a a 50% to 310% yield every year into the future. Those yields stack as you increase your holdings in each cryptocurrency as well, which is another nice compounding effect similar to automatically re-investing dividends into a stock. 

The list of PoS coins is actually relatively long, and an exhaustive review of them is left as an exercise to the reader. An incomplete list of more popular ones in addition to the ones above include Peercoin (one of the first to do it), Lisk (largest by market cap), Nxt, and many others. I've also found browsing coin subreddits to be pretty valuable— these coins tend to live or die by developer and community interest, and you can get a great gauge on these things through their forums and subreddits. 

Proof of Stake is not the only way you can get yield from these coins. NEO is another coin (dubbed the Ethereum of China) that gives NEO wallet holders another coin called GAS, which at current time yields about 4.8%

The great thing is if you are an early holder of Ethereum, you'll already get this effect massively, if/when the Casper upgrade to Proof of Stake enters the picture next year. 

Finally, I would recommend small amounts (perhaps with a dollar cost average strategy) that you wouldn't be upset about losing, and as a part of a portfolio such that if one Proof of Stake cryptocurrency doesn't work out (and be prepared for most to stagnate or fail) you have a decent shot at owning the eventual winner. The best thing about asymmetric upside is that you can at most lose 1X, but have the potential for a lot more on the flipside. 

Consumer, SaaS, or Enterprise?

Early founders often ask whether the classifications of startups (consumer, SaaS, or Enterprise) matter a ton in terms of what kind of startup they should try to start. Is there a such thing as "founder market fit" when it comes to these stages? Unless you're an ex-Oracle sales manager founding a company, probably not. 

It's backwards to rely on the consumer/SaaS/Enterprise distinction early on because that's tactics, only after you've picked a problem to solve. In a nutshell:

  • Consumer — lots of people (tens of millions or more) have the problem, and the problem is medium to severe
  • SaaS — fewer people (hundreds of thousands or more)  have the problem, but the problem is severe
  • Enterprise — a few people (as few as dozens) have the problem, but the problem is extremely severe

Start with what problem to solve, and then choose your tactical approach given what you know about that problem. That'll help you get to where you want to be, and let you optimize for solving a real thing that you actually want to do. 

Finding good startup ideas is hard enough. You don't want to complicate it by setting constraints at the wrong level of a if you can help it.