SWRM Labs Blog

The Future Is Not Linear

Feb 8, 2018 1:20:27 PM / by Robert Binning posted in ICO, Ethereum, Bitcoin, Film, Uncategorized, Blockchain


Photo by Rene Böhmer on  Unsplash

Most strategic plans involve projecting events into the future, often between 3–5 years, or about half of a normal business economic cycle. A few firms in very capital-intensive or regulation-controlled industries might look ten or more years into the future, but these exercises are usually meant to fully account for the business life of a major capital investment or R&D program into a new drug.

Projections for future demand and pricing are almost always simple extrapolations from today’s environment. Often planners will look back a few years, calculate the rate of growth across the history and project that the rate of growth will be sustained into the future. This is momentum planning, and actually works well for short periods. Sales for August should look a lot like sales levels in July.

However, one of the key observations I’ve made over 30 years of building strategic plans is that long term planning has very little to do with near term momentum-based forecasts. Rather, there are two critical factors that should dominate your thoughts.

First, you need to understand the critical uncertainties that will have a huge impact on industry structure and the value chain — the possible events that will change all of the assumptions about supply, demand, prices, share patterns, and competitive behaviors. Peter Schwartz introduced the concept of scenario planning in his book The Art of the Long View (1991); this tool helps leaders explore their core assumptions about industry structure and behavior and describe a number of possible future environments under which the project or firm might operate. There are five major sources of seismic shifts that planners need to explore — social, technological, economic, environmental (or ecological), and political (including regulatory change). These five dimensions may be abbreviated as STEEP, making a useful mnemonic. Usually one or two uncontrollable possibilities will jump out as having a major impact on the desirability of the future opportunity; at that point, the team should look for early signals that might suggest that the future will look like one or another of these “high impact” scenarios.

The second dimension has to do with the will of the team — the decisions that the team leaders take to influence the outcome to happen in one particular way. If a particular political environment is extremely favorable, then what can we do to lobby the decision makers to enable that regulatory environment? If a certain resource is extremely limited, what can be done to either expand the availability of that resource or to maneuver our project so we can take the lion’s share of that resource? Again, a handful of critical decisions and changes can often make a huge difference in the likelihood of success for a particular strategy. Bend the odds to favor the project team.

The StreamSpace project is an entrepreneurial blockchain team with the vision of disrupting the Streaming Video on Demand (SVOD) film industry. Today’s environment favors the largest provider, Netflix, along with the four broadband ISPs that share about 70% of the US market — AT&T, Verizon, Comcast, and Charter Spectrum. The supply side of the film industry is dominated by ten studio/distributors, each with a slightly different target audience and appetite for medium vs large budget investments to promote and merchandize their film offerings. The studios are starting their own consolidation process, with Disney planning to absorb most of Fox’s content businesses over the next year or so. Disney, which already owns 60% of Hulu, plans to launch a competing SVOD platform again Netflix.

Against the expected collision between Disney and Netflix, StreamSpace believes we can work closely with independent filmmakers and bring compelling content to consumers who will be otherwise ignored — those who seek great stories over lavish blockbuster productions.

The StreamSpace scenario challenge involves two dimensions of critical uncertainty — what role the SEC and related regulators in other major countries will take regarding blockchain crowdfunding programs such as ICOs, and the elephant battleground environment that is looming between Disney, Netflix, Amazon, and Google.

Against that backdrop, we are pulling beyond our expected weight by building loyalty to the indie film community, championing regional filmmakers and festivals in our search for great stories. This is a “Moneyball” strategy for the film industry. We are not seeking billion-dollar returns; we are looking to help filmmakers build successful brands and passionate follower communities and grow from project to project profitably.

Come join our community and participate in our project!

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The Wisdom and Herd Behaviors of Crowds

Jan 29, 2018 1:21:14 PM / by Robert Binning posted in ICO, Ethereum, Bitcoin, Cryptocurrency, Uncategorized, Blockchain


Photo by Elijah Hiett on  Unsplash

James Surowiecki, a finance journalist at The New Yorker, wrote the fascinating book The Wisdom of Crowds in 2004. Conventional wisdom suggests that you should listen to experts — titans on Wall Street, business executives, the rich and famous. Surowiecki’s unconventional insight was that regular people often have a better collective sense of what is right. As fans of Who Wants to Be a Millionaire know, “Ask the Audience” was by far the most valuable lifeline on the show. Even if you know a good set of experts, soliciting the advice of a few hundred strangers beat “Phone a Friend” by a whopping 91% versus 65% success rate.

There are limits to this policy, of course: it only works when the crowd providing the answer are truly acting independently without information provided by others. The game show was a perfect test environment — the crowd has just a few seconds to select an answer from four options, and only the final percentages are revealed. When people influence others, the technique fails. Look at stock market boom and busts, mass riots, and other irrational crowd acts that “can similarly be explained as the outcome of a series of mutually reinforcing decisions.” [ref. Skidelsky]

The recent roller coaster of cryptocurrency prices, especially Bitcoin’s explosive rise to $20,000, followed by a 40% drop in five days, is an example of crowd behavior gone awry. Public awareness of bitcoin has grown dramatically over 2017, from a brief mention in a Super Bowl commercial in February to weekly updates on regulatory policies in Spring and Summer to the launch of three bitcoin futures listings in December 2017 after they won approval from the US Commodity Futures Trading Commission regulatory agency. Each step has built awareness of cryptocurrencies, particularly bitcoin, among the general public.

So far, the vast majority of people are aware only of bitcoin, and the most frequently asked questions are “What is it?” and “How do I buy it?” More common awareness of other coins is only just emerging now; there is almost no awareness of coins with lower market capitalizations beyond the top 10. Nonetheless, the term “ICO” has entered mainstream conversation in much the same way that “IPO” became a mainstream term in the 1990s during the dot-com boom phase.

To be sure, there are plenty of “scam ICOs,” projects that exist solely to line the pockets of the founders. One project, called a “Useless Ethereum Token,” took this observation to a satirical level, raising more than $300,000 by telling investors that the funds would only be used to buy a big-screen TV. The Long Island Ice Tea company changed its name to Long Blockchain Corp, and saw its stock value climb by 500% for a while. As Yogi Berra famously said, “It’s déjà vu all over again.” Remember Pets.com?

But beyond the crass promotions and unrealistic promises of outsized investment returns, the blockchain truly is enabling a wholly new wave of entrepreneurs to address market inefficiencies and attack monopolies and cartels. Most of these experiments will fail, just as most venture-backed startups fail, but the winners will truly change our lives. Prepare for a wild ride, similar to the birth of the internet in the early 1990s. And hold on for dear life.


  1. Skidelsky, Edward. “Always ask the audience,” The Telegraph. http://www.telegraph.co.uk/culture/books/3620109/Always-ask-the-audience.html June 28, 2004. Accessed Jan 5, 2018.
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ICOs and Capitalization Trends for 2018

Jan 19, 2018 10:55:36 AM / by Robert Binning posted in ICO, Ethereum, Bitcoin, Cryptocurrency, Uncategorized, Blockchain


Photo by Chris Li on  Unsplash

Initial Coin Offerings have been in the news heavily throughout the past year. Also called Token Sales, ICOs are a method for blockchain projects to raise funds without diluting the equity held by the founding team. There are three kinds of tokens commonly encountered: security tokens, which are assets that represent convertible units of value, meant to be traded through exchanges or redeemed for fiat currency when exiting the service; equity tokens, which represent ownership shares in the project; and utility tokens, assets that have no inherent value but are required to implement the service.

The majority of token types sold over the past couple of years are security tokens, assets meant to be tradeable or redeemable. Some are explicitly stores of value, like Bitcoin, Ripple, or Tether, while others are assets that people buy to use the service, including a number of gambling blockchain sites. While customers may not explicitly seek profits from their investment in these tokens, they do expect that the tokens will at least hold value while they use the service. Gamblers using tokens are hoping for token paybacks that they can redeem for fiat; Tether buyers seek a dollar-equivalence to hold funds between cryptocurrency investment cycles.

From an accounting perspective, utility tokens represent an asset held by the entity, and token sales generate extraordinary income for the business, offsetting accumulated and future operating losses as the project evolves from a pure R&D entity to a business with revenues and expenses.

A historical look at the blockchain industry shows that the industry is rapidly moving away from Bitcoin to embrace a multitude of tokens. A year ago, bitcoin was nearly the only cryptocurrency of note: Bitcoin controlled 85% of the total market capitalization for all cryptocurrencies and was the only currency worth more than $1 billion. Six months later in July, the total industry value had grown by a factor of 4x, and there were six tokens worth more than $1 billion in market capitalization, with Bitcoin holding just under 50% of the total capitalization value.

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How To Avoid Getting Scammed Or Phished In The StreamSpace ICO / Token Sale

Jan 8, 2018 1:58:30 PM / by Robert Binning posted in ICO, Ethereum, Bitcoin, Cryptocurrency, Uncategorized, Blockchain


Photo by Jon Moore on  Unsplash

This post is actually going to teach you how to avoid getting scammed or phished during ANY ICO token sale, but as the StreamSpace launch gains traction and we receive more and more attention, there are inevitably going to be some scammers trying to con you out of your money.

We cannot repeat our advice enough times: the only place you will ever see a contribution address is at the StreamSpace ICO web page, https://www.stream.space/ICO . Even if others say they found the address on our website and post it on Telegram or elsewhere, do not send funds to it.

The address will be displayed here once we open our presale, between January 8 and January 15.

Still, we have a modest hard cap and a lot of growing demand, so it’s possible that people will panic and make mistakes. This post is here to make you aware of the kind of tricks we’ve seen scammers play in other ICOs, so you can be that much more prepared when the Fear of Missing Out (FOMO) kicks in.

Here are some steps you can take to avoid getting scammed.

Step 1: Bookmark https://www.stream.space

By adding it as a bookmark and only visiting us through that bookmark, you’re always going to end up on the correct site. You don’t want to type it in manually, make a typo, and end up on a fake site with a fake contribution address. You’re currently reading this post on our Medium blog page, which is a different URL than the StreamSpace ICO page. Here is the correct link to the ICO offer page: https://www.stream.space/ICO . The link will open in a new tab, so visit it now, add it to your bookmarks, and come back.

Also, if you google “StreamSpace” you may see a scammer with a fake site as well. It could be something like StreamSpace.co or StreanSpace spelled with a lower case n instead of a m or some other minor change.

Always, always double-check any URL you visit, and use the bookmarks, preferably based on emails you receive from us after registering for our ICO sale. See step 2.

Step 2: Check the sender address for any emails you receive

Another common scam is an email where the scammer has said the “From” name is StreamSpace, but in fact it is not us. Any email you receive, make sure it comes from info@stream.space, campaign@stream.space or ico@stream.space (and again, check for spelling errors), and not simply “StreamSpace” with a different sender address. The exception here is if you contact us and a member of our team replies, in which case make sure it comes from an @stream.space address. Even then, we’ll never share a contribution address over email.

It’s also possible, though unlikely, that someone could spoof the email address so it looks like it’s from us when it’s not. This is why we need to mention for the billionth time that we will not share the contribution address over email.

Step 3: Don’t believe anyone who shares an Ethereum or Bitcoin contribution address to you in Telegram, Reddit, Facebook, Twitter, Email, or any other media site.

Even if it looks like it’s coming from a member of the StreamSpace team. Even if it’s in the announcements channel or the public group, and especially if it’s sent via a PM.

See the introduction above; the only place we’ll ever share the contribution address through the StreamSpace ICO web page, https://www.stream.space/ICO .

Step 4: If you’re unsure about anything, ask us!

You can ask us in Telegram or through our BitcoinTalk forum thread, but it’s better to email us at info@stream.space .

As long as you use your head, reference this article, and make sure to verify you are on the right site, everything will be all right. This article is here to make sure silly mistakes don’t happen.

Thank you for joining StreamSpace’s ICO! We look forward to sharing our future blockchain streaming video service with you and the world!

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The Net is Not Neutral

Dec 14, 2017 12:40:36 PM / by Robert Binning posted in ICO, Ethereum, Bitcoin, Cryptocurrency, Uncategorized, Net Neutrality


Today, December 14, 2017, is being treated by many people as the last day for a “free internet,” since it is pretty clear that the FCC chairmen will rule 3:2 and overturn the Open Internet Ruling established in 2015 with its new “Restore Internet Freedom” Order.

The opinions of each of the five chairmen has been clear for months, if not years. The current Chairman, Ajit Pai, and Commissioner Michael O’Reilly each published lengthy dissenting statements as attachments to the 2015 Ruling, outlining their arguments as to why the FCC should not have enlarged its definition of basic (Title II) carrier services to include broadband internet access services.

The third Republican Commissioner, Brendan Carr, has been quite vocal that “the FCC vote is a win for consumers & innovation. Americans will regain online privacy protections they lost two years ago, & we return to the robust legal protections under which the Internet thrived in 2015 & prior 20 years.”

What’s happening, and why have millions of people submitted comments to the FCC?

Back in the dark ages circa 2000, the major local phone companies and the major cable service providers began deploying broadband services as optional enhancements to their basic offerings. The Telecommunications Act of 1996 established a federal priority to enable broadband services to reach all Americans, with special emphasis on the provision of broadband service to elementary and secondary schools and classrooms (Section 706).

For the past 15 years, the FC has published semiannual updates showing the progress in deployment of broadband services on a county-by-county basis. At the same time, the FCC has explored the definition of “broadband,” periodically updating its definition as new services are introduced that test the limits of high speed service access. Today, “broadband” internet means local service with a 25 Mbps downlink and 3 Mbps uplink speed, or multiuser service with 100 Mbps to cover a 1000 user population (common in public secondary schools). About 83% of US households currently have access to at least one qualifying broadband service, but there are thousands of rural counties across the nation where that standard is not possible, and where less than 10% of residents can obtain high speed services.

Three forecasts for the future of broadband services

The top four broadband providers — Verizon, AT&T, Comcast, and Charter Communications — form an oligopoly for residential broadband services, with the two cable companies holding near monopoly positions for fiber-cable service in their respective geographic locations, and AT&T and Verizon sharing over 60% of their respective core telecom markets. Together, the four top companies share 74% of the US broadband industry. The four top companies have each spent most of the pat 20 years buying and integrating competitors and adjacent businesses, cementing their roles as integrated broadband services providers. For each of the past five years, AT&T and Verizon have been the #1 and #2 investors in capital infrastructure among US companies, surpassing ExxonMobil and the other major oil and gas companies as well as the entire population of major internet and tech companies. The only significant acquisition that has been halted during the current administration was the proposed merger of AT&T and Time Warner, which would have combined a huge content owner with one of the major broadband ISPs. It seems very likely that the four top broadband competitors will continue to increase their aggregate market share by acquiring more secondary or regional firms and by continuing to raise the bar on investment in infrastructure in their major service areas.

One of the claims of the pro Net Neutrality forces is that changing the FCC regulatory environment will allow ISPs to either block or charge separately for access to specific popular services, such as Facebook or Netflix. That is not and has never been part of the core strategy for any of the top firms, but it is highly likely that the firms will streamline the deployment of some of these specific high bandwidth services, especially the two named above, and enable preferential treatment for users who choose to pay for premium plans. Instead of just seeing rates that promote 25 Mbps or 50 Mbps, you will see rates for streamlined 4K video service, potentially naming specific content channels. One of the side effects of this policy would be that the top content service providers — Netflix, Disney, Time Warner — would take even more share of the total service market, while specialty stream services (including StreamSpace’s own blockchain film streaming service) might face an uphill battle to be treated as an equal application service.

Lastly, the next generation of commonly-used broadband services will likely be wireless 5G services, more than fiber-based. AT&T and Verizon recognize that the next wave of capital investment will be for 50–100 Mbps wireless broadband infrastructure, aimed to both stationary users (residential wireless) and mobile consumers, including both automobiles and smartphones. The sheer cost of keeping up with AT&T and Verizon will make it more likely that smaller service providers drop out. Sprint and T-Mobile are losing capital support from their major investors, Softbank and Deutsche Telekom, now that the proposed merger between the two Tier 2 competitors failed in late October. No smaller wireless provider has anywhere the level of capital reach necessary to be competitive in 5G outside of highly focused metro service experiments.

But all of these trends have been apparent for the past two decades, from the early days of hybrid fiber-coax and DSL and LTE 3G wireless service. What is changing is the nature of the content that people are expecting to see from their broadband service — more video, much more complex internet websites with continually updated feed content. The most popular websites in the US today are Google, Facebook, YouTube, Amazon, and Verizon’s Yahoo, all companies that date back only 25 years or less. All of these sites have been increasing their share of traffic, enhancing their services with more complex video content and increasing the amount of time and money their users spend on each of their sites.

The future is already here. Innovation still matters, but the major buyers for innovation are becoming more centralized. We see this in the shrinking of the public stock markets even as the value of those markets continues to rise. More and more industries are becoming more concentrated, resulting in higher prices and profits. Moving regulation of the broadband industry from the FCC to the Federal Trade Commission, alongside most other industries, does not bode well for the long term health of the internet, one of the few segments where young innovators have been successful in the past 20 years.

Author note:

Jose Tormo did some lobbying to the FCC and Congress in 1995–6 as an employee of Motorola, one of the inventors of both ADSL silicon and cable modems and the largest provider of wireless communications equipment in the United States.


  1. FCC Report and Order on Remand, Declaratory Ruling, and Order, GN Docket №14–28, Adopted February 26, 2015, Released March 12, 2015. https://apps.fcc.gov/edocs_public/attachmatch/FCC-15-24A1.pdf
  2. Carr, Brendan. https://twitter.com/BrendanCarrFCC/status/940991727648804864 Twitter post, December 13, 2017.
  3. Taglang, Kevin, Benton Foundation. “What Section 706 Means for Net Neutrality, Municipal Networks, and Universal Broadband. https://www.benton.org/blog/what-section-706-means-net-neutrality-municipal-networks-and-universal-broadband , 2015.
  4. Kimmelman, Gene and Cooper, Mark, Washington Center for Equitable Growth. “A communications oligopoly on steroids,” http://equitablegrowth.org/report/a-communications-oligopoly-on-steroids/ , July 18, 2017.
  5. Di Ionni, Michelle and Mandel, Michael, Progressive Policy Institute. “Investment Heroes 2016: Fighting Short-termism. http://www.progressivepolicy.org/wp-content/uploads/2016/10/InvestHeroes_2016.pdf , October 2016.
  6. Photo by Luca Colapinto on Unsplash
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Bubble. Bubble, Toil and Trouble

Nov 29, 2017 3:00:06 PM / by Robert Binning posted in ICO, Ethereum, Bitcoin, Cryptocurrency, Uncategorized, Blockchain


One of the curious facts about economic activity is that it leads to bubbles, which burst, and then more bubbles. The Great Depression led to many structural changes in both governmental oversight of the US and other large economies through national banks or reserve systems and through the private banking industries, but we still experience economic bubbles and crashes every 10 years or so. Like Tolstoy’s observation about happy and unhappy families, the growth phases all look very similar — accelerating supply and demand, leading to more and more investment in similar categories — but the bubbles and the bursts are all unique. We can observe the characteristics of bubbles and draw insights about what made them happen, but it is very hard to use those insights to predict when they might burst or what remnants will survive to become new industry leaders.

There have been three significant bubbles in the past 30 years, after the Savings & Loan crash of 1985–6: the junk bond crash of 1990–91 that led to a minor credit crunch and recession, the dot-com crash of 2000–2002 that had a major impact on the tech industry but did not dramatically affect the US economy, and the housing crisis of 2007–2009 that led to the Great Recession.

The junk bond bubble of 1989–90 was a supply-side crash against strong demand; private equity has changed a lot in the last 25 years, but the demand for high yield corporate debt and mezzanine financing is more than 10x today what it was just before the bubble broke in 1989–90. The junk bond market of the 1980s was largely created by Michael Milken of Drexel Burnham Lambert (DBL). Milken worked with two main customer groups: executives from high growth companies below the Fortune 500 who did not qualify to issue “investment grade” bonds, but who were substantially better prospects than the typical small business that gets its debt funding from commercial banks, and corporate raiders or private equity firms who were looking for large debt packages to enable leveraged buyouts. For almost ten years, DBL and their peers showed that corporations outside the Fortune 500 could afford very high interest bond packages, with typical yields of 14–15% and only 2–3% default rates. Admittedly, a lot of the yield was caused by the steady decline in inflation and expected interest rates for all classes of bonds — many muni bond funds and traditional corporate bond funds showed 10% annual returns or better across the 1980s as well.

DBL had run-ins with the Securities and Exchange Commission (SEC) and the US Department of Justice (DOJ) across much of this period as well, and Michael Milken, one of the top executives with the firm, was famous for bending and breaking SEC rules. In 1988–9, the DOJ threatened DBL with an indictment on RICO (Racketeer Influenced and Corrupt Organization Act) charges. The company settled the charges, technically retaining innocence while admitting the government could prove guilt. The company crashed and dissolved in 1990; Milken spent almost 2 years in prison. The pressure on DBL led by Rudy Giuliani for the DOJ essentially stopped the high yield bond supply in its tracks for two years. New debt issues fell from $29Bn in 1989 to $1 bn in 1990, but they recovered by 1992. Since that time, the high yield market has exploded, with significant resets happening briefly with each economic recession (2000, 2008).

The Dot-com boom ran from 1995 to 2000, followed by the Dot-bomb crash from mid 2000 to 2003. This bubble had two major contributing factors: an explosion in venture capital financing and IPOs especially by internet technology and communications companies that led to irrational firm valuations, far removed from the Price/Earnings or Price/Revenue ranges seen in the past 50 years, coupled with a change in the tax treatment of capital gains vs dividends that again pushed firms to issue equity and expand through mergers & acquisitions instead of paying dividends.

In early 2000, the telecom industry published statistics that showed that the exponential growth forecasts for internet traffic had turned out to be wrong (some companies were citing capacity growth, not actual traffic growth), and people started to realize that the “new economy” actually worked under the same financial rules as the “old economy.” Within months, venture funding slowed dramatically and a number of venture firms closed or refocused their attention on just their existing investment portfolio.

The dot-com bubble led to a loss of $1.7 trillion in stock value, mostly by the tech companies that dominated the NASDAQ index. Total valuation fell by 78% between March 2000 and October 2002; the index did not reach its March 2000 peak again until April, 2015.

Of the hundreds of firms that started during the Dot-com craze, Google / Alphabet, eBay, and Amazon have proven to be huge winners. During the 2000–2002 correction, Amazon struggled with showing the value of its business model of reinvesting profits into new growth segments; its stock price fell from a high of $106 in late 1999 to a low of $7.20 in late 2001; it currently trades for close to $970 per share. New giants like Facebook learned from the survivors that market dominance in a category segment is more important than broad coverage across many segments with low share.

The 2007–10 housing market crash had a supply side factor as well as a demand factor. The story of the Great Recession has been told over and over again, but for this analysis, I’ll refer to the growth of sub-prime mortgages across the 2000s, with the mortgage paper repackaged from the junk status that they truly were to a false claim of AAA risk level.

This graph shows is the percent of US home mortgages that were subprime or Alt-A. Until 2003, the fraction of mortgage paper well outside of prime interest rate band was only 10% of total mortgages; even with the higher default level from this class, mortgage buyers were not very exposed to default risk, and they had a good understanding of return levels over time under normal interest rate fluctuation levels. But in 2004–7, the number of new risky mortgages exploded, with developers and mortgage companies putting packages together to attract buyers no matter how unqualified they might have been. At the time, they believed housing prices were destined to climb faster than the cost of money, so it really didn’t matter whether the buyer could afford to pay the loan. The mortgage holder could foreclose and resell the property for more than the cost of the loan.

This growth and crash was caused by “irrational exuberance” coupled with fraudulent packaging of risky loans masquerading as trustworthy baskets of loans, driven by an unstable demand level by a huge group of unqualified buyers that distorted the entire mortgage market for 4 years. The crash in 2008 led to several bankruptcies and bank mergers, and eventually to a completely different approach to mortgage issuance. Subprime mortgages essentially disappeared by 2009, and even the most qualified buyers had a difficult time finding banks and other finance companies willing to offer home mortgages.

So is bitcoin in the growth stages of a bubble today?

The bitcoin market has undergone several huge price climbs and collapses in the brief eight years that this industry has existed. There have been several flash crashes with at least 20% value decline, and the value once fell by more than 80% from peak to trough (Nov 2013–Jan 2015), similar to the collapse of the NASDAQ index.

Bitcoin Price in US$, August 15, 2017:

One of the more remarkable aspects of bitcoin is how fast price corrections happen and how fast they can recover. The most recent crash in early September with a 35% loss of market capitalization was almost certainly caused by the decision of the China government regulators to ban new ICOs and to close exchanges that deal in cryptocurrencies. Several projects simply shut down, and many others have been forced to refund coins or fiat currency invested, at least by Chinese investors. Regulators from several other countries have also been aggressive in restricting ICOs, including US and Singapore. Other country regulators are issuing warnings to citizens about the dangers of investing in blockchain projects.

I see the bitcoin price increase and corrections as being similar to the Dot-com bubble more than any other financial episode in recent memory. There is a huge degree of Fear of Missing Out, with hundreds of tokens being issued to take advantage of this once-in-a-lifetime opportunity to obtain funding for blockchain projects. Like the Dot-com era, few people are doing research to investigate whether the project has any chance of success (Sock puppets to sell pet food and accessories?), or whether a blockchain might actually add any value to some hypothetical solution. The NASDAQ index hit its peak with a combined P/E ratio of 175, nearly 10x the ratio that most investors are comfortable with. Few of today’s token-backed businesses turn a profit, and it is hard to correlate the value of a token with the actual or expected future profitability of the project.

Like the internet of 1997–1999, there are some winners hiding in the crowd of undifferentiated token issuers. Some recent ICOs have resulted in unicorn-level valuations approaching $1 billion for their projects (OmiseGo, Qtum, Ripple Labs), and there are a few mega-project consortiums that oversee dozens of blockchain projects, like ConsenSys.

A new wave of corporate innovators are pursuing blockchain projects as well. While Jamie Dimon of JPMorgan Chase recently disparaged bitcoin as a worthless investment, the firm has been pursuing its own blockchain program called Quorum to enable private but secure transactions among enterprises. Many other large tech companies have similar projects under investigation. It is likely that many of the thousands of projects that are being funded today will disappear within 2–4 years, just as most startups die or are acquired and integrated into other solutions. And it is likely that a handful of blockchain concepts will become category winners and lead to new billion dollar businesses. It’s just a little hard to predict which ones will be the winners right now.

Reference citations:

  1. Wikipedia. Drexel Burnham Lambert — Wikipedia.
  2. Sober Look. High yield debt issuance in 2012 hits an all-time record
  3. Credit Slips. QM Impact on the Mortgage Market
  4. Economist (2000). From dot.com to dot.bomb
  5. Business insider. Here’s Why The Dot Com Bubble Began And Why It Popped
  6. NewsBTC. Bitcoin Price Watch; Here’s How We’re Playing The Correction — NEWSBTC
  7. JPMorgan Chase. Quorum | J.P. Morgan.
  8. Photo by Alexandre Perotto on Unsplash
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Ethical ICO

Nov 22, 2017 11:09:00 AM / by Robert Binning posted in ICO, Ethereum, Bitcoin, Cryptocurrency, Uncategorized, Blockchain


Way back in the dark ages of the early 1980s, when dinosaurs roamed the earth (at least, according to my daughter, now 19), I took an ethics class in business school. Business ethics is the study of proper business policy and practices with respect to controversial issues. Some are rather clear-cut examples of stopping people from behaving illegally — bribery, discrimination, insider trading. Others involve juggling the conflicting rights and interests of different constituencies — corporate social responsibility, corporate governance, fiduciary responsibilities of executives and board members.

There have been several examples of unethical behavior in the news lately, with Harvey Weinstein as the most recent outrageous example of unethical behavior on the part of business executives that should have known something very wrong was happening under their noses. The tech industry is not immune from unethical behavior either; Uber is facing some heavy headwinds as a result of the behavior demonstrated by its co-founder and ex-CEO, Travis Kalanick.

The blockchain industry has an unfortunate reputation for scams, and for good reason. Up to one-third of the ICOs held in the past year have been little more than donations to the project founders to line their pockets. More than a few ICOs have been hacked, with large fractions of the offered funds siphoned off by hackers. As a result, financial regulators around the world have issued guidelines to restrict either the issuance of new tokens or the participation of residents in new ICOs. And these challenges affect both small and large ICOs. CoinDash lost over $7.5 million in July to hackers in much the same manner that the DAO lost $50 million a year earlier. Tezos, one of the largest token offerings with $232 million raised and now valued at $400 million thanks to the recent appreciation of Bitcoin and Ethereum, is crashing as two leadership factions vie for control over the project.

Protocol Labs took a bold step to create a certified and ethical ICO for its Filecoin token offering, working with Cooley LLP to create a new registration process for funds raising called a Simple Agreement for Future Tokens (SAFT), based on Y Combinator’s Discount/No-Cap SAFE equity fundraising process, balancing benefits to the purchaser based on the higher risk associated with a project stake in lieu of traditional equity with advantages to a broader community that will be using and mining the tokens. The investors or donors guarantee they will hold the tokens for a period of one to three years, and they register by name and tax ID, certifying that they are accredited investors with a high income and net worth, aware of the high likelihood of loss when participating in the ICO. About a half dozen other projects have also issued SAFT agreements to support their ICOs, but this remains a rare and potentially complex legal process that befits some types of projects better than others.

StreamSpace is preparing to conduct its ICO in early 2018; we are engaged in a token pre-sale today. We are doing everything we can to show that we are conducting an ethical ICO, showcasing our founders and other team members, with links to our bios and LinkedIn resumes, a detailed white paper, extensive details about the fundraising process that we are using with price tiers based on the amount raised over specific time periods from the first 6 hours to 48 hour segments over the 28 day ICO period. We have been active in engaging our primary market, independent filmmakers, across several industry conference events and other sponsorships and speaking engagements. We published our project architecture and target development timetable, showing the progress toward beta and commercial offerings over the next year. We are building our industry credentials with help from executives with deep roots in the film and television industry. We are also building website resiliency to help make the ICO harder for hackers to attack us, either hijacking the site or hitting us with a DDoS attack. While no network is ever completely safe, we feel we are prepared for all of the likely points of attack.

If there is any doubt, please feel free to call or engage us directly through other means. We are here to make a difference in the world, and we are starting now. Come join us in Austin if you can.

Peace to you all.

Photo Credit: Annie Spratt from Unsplash

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The Binary Chain

Oct 4, 2017 4:02:15 PM / by Robert Binning posted in Token Sale, ICO, Ethereum, Bitcoin, Uncategorized, Blockchain


StreamSpace is developing a novel Streaming Video on Demand platform that uses a blockchain-enabled storage and distribution network. The storage network aspect of the StreamSpace solution resembles Protocol Labs’ Interplanetary File System (IPFS) and Storj’s cloud storage platform, with a couple of proprietary differences that make StreamSpace’s platform ideal for the SVOD application. Like Storj and similar blockchain-enabled storage network cloud services, StreamSpace uses tokens, called SpaceCredits, to track the actual data storage across the cloud and to compensate “Curators,” who provide storage fragments, through a Proof of Work Time fragment (PoWTf) algorithm.

There is also a transaction management aspect to the StreamSpace platform, a marketplace for filmmakers and film aficionados to discover each other, to find exciting content, and to engage in commerce. The filmmaker sets a price for someone to view the content, along with the terms for the viewing rights — one time, limited views in a day, unlimited views over a multi-day period, etc. The film viewer agrees to the terms, paying for the transaction from their account, via credit card, Paypal, or bank transfer, or by deducting the amount to be transferred from their StreamShares wallet. The amount of the transaction, in local fiat currency, is converted to some equivalent amount of StreamShares, based on an average price across the exchanges that will support StreamShares. The filmmakers can hold StreamShares in their wallets or convert to fiat currency.

StreamSpace will support an internal exchange between StreamShares, for which an ICO has been planned for Fall of 2017, and SpaceCredits, for which there will be no public token offering.

Why implement a complex two-token policy? Ironically, the two-token method is actually simpler and more efficient than trying to support one token with either a Proof of Stake or Proof of Work reward algorithm and mis-applying the reward to participants who do not deserve it. Initially, we contemplated using a simpler Proof of Stake Time fragment (PoSTf) policy to reward participants. The people that provided storage would be compensated via an algorithm that accounted for the amount of storage, the time that storage was in use, and the popularity of each file fragment, a surrogate for the transaction velocity occurring across the network. However, there was no way to account for different pricing structures that filmmakers might want to support — one filmmaker getting started might want to set a very low price for a modest documentary film, while a more established filmmaker might set a high price tag to reflect higher costs, great special effects, and high name recognition for the cast and crew.

There is one previous case of a successful binary coin implementation for a blockchain network service offering, Vericoin and Verium. StreamSpace’s CTO, Steve Woods, was one of the co-inventors of Vericoin and helped to architect their innovative service, which involves a “gold standard” cryptocurrency that processes transactions much more quickly than bitcoin while supporting a much higher system capacity.

One of the interesting dilemmas of all tokens is the conflict that exists between miners and customers. Miners want to hoard the tokens they are creating, restricting the supply of the tokens in the marketplace and thereby ensuring increasing prices for the scarce assets. In an ideal state for the miners, the network would have slow transactions and high fees, increasing their power on the blockchain. Customers want the opposite — ample supply of tokens so transactions flow smoothly. Customers are not looking at the token market as an investment, just a medium for network transactions. In their ideal state, network transactions happen very quickly and with minimal overhead and fees. The dual token strategy is a way of resolving this challenge, satisfying both the miners providing the underlying cloud storage network and the film communities that use the network to enable commerce. The SpaceCredits side of the StreamSpace platform rewards the miners for enabling the storage network, with rewards based on allocated storage volume and time; the StreamShares side of the StreamSpace platform rewards rapid transaction behavior with its Proof of Stake Time algorithm.

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Tokens vs Cryptocurrencies

Sep 20, 2017 2:23:59 PM / by Robert Binning posted in ICO, Ethereum, Bitcoin, Cryptocurrency, Uncategorized, Blockchain


People ask me frequently about investing in the blockchain ecosystem and which investments I would recommend. Most have heard of Bitcoin and Ethereum, and they might have read an article that promoted a new coin, promising to be a phenomenal investment. In the past few weeks, the US Securities and Exchange Commission has become more vocal about regulating many new Initial Coin Offerings or ICOs, claiming that most represent securities; non-security “asset” offerings would still be permitted, but it can be difficult to show whether your offering qualifies for added oversight. The first category is called a cryptocurrency or coin; the second category is called a token or digital asset.

On first glance, the hundreds of coins available seem overwhelming, the equivalent of opening up the stock pages in the Wall Street Journal. And also at first glance, all of these coins appear to be very similar. But there are some important differences between currencies and tokens, and it is important to examine the two classes differently.

First, let’s take a look at cryptocurrencies. The oldest and largest of these is Bitcoin, launched in January 2009. Currently, there are 16.5 million of these coins in circulation, and the price of a bitcoin has fluctuated between $4000 and $5000 over the past month, for a total market value of about $70 billion as I write this post. Ethereum is the second most important cryptocurrency, with 94.5 million coins in circulation and a market price of about $300, for a total market capitalization of about 28 billion. There are nine other coins with market values over $1 billion, 23 more worth between $100 million and $1 billion, plus several hundred more with lower capitalization levels.

The key attributes of a currency include:

  • The currency is tied to an open and publicly accessible blockchain.
  • Anyone can send, receive, and earn (mine) coins or fragments of coins through participation in the blockchain.
  • The owner has full control at all times, helped by a public and private key system tied to the cryptocurrency wallets.

Since the primary purpose of a coin is to enable commerce, it is logical that there is a strong network effect driving bitcoin to higher market valuation and eventually higher market share. The more people accept a specific coin, the more popular that coin becomes, creating a virtuous cycle of growth. Most of the popular alternatives to bitcoin emphasize different characteristics that make them useful for people with secondary objectives: Monero features transaction anonymity and privacy beyond bitcoin. Dash provides transaction privacy and is accepted by over 80 online merchants around the world. IOTA emphasizes a new ecosystem concept of Internet of Things interactivity; in this ecosystem, billions of sensors will communicate with each other and with controllers with a new standard based on micropayments without relying on today’s centralized network owners. Ethereum’s primary purpose is to enable smart contracts and distributed applications (or dapps), rather than a traditional commerce ecosystem; an ecosystem of dapps can be considered a commerce solution at a more abstract level. Waves is a platform for issuing, trading, and managing digital assets securely and easily; more than 4,000 tokens have been issued based on the Waves platform. Ripple emphasizes transaction utility and is used by several dozen banks and nonbank financial institutions (although Ripple has some unusual properties and is centrally managed).

In the past year, dozens of organizations have created new coins as part of managed cryptocurrency investment funds. These range in value from $1 million to $500 million or more. The funds are focused on the blockchain ecosystem, taking advantage of the recent explosion of new projects that approach the magnitude of the level of traditional venture investment.

In contrast, a token is a digital asset for dapps within a blockchain ecosystem, usually Ethereum or Waves. The tokens have no inherent value by themselves, but represent the value of the dapp. Unlike currencies, tokens are held inside the project network. Also, where many currencies have been capped at some fixed number of coins or loosely fixed with a small inflation factor associated with the reward system for that coin, there is nothing preventing an organization from issuing more tokens.

Tokens, like currencies, exist in binary form and are stored on digital appliances like computers and smartphones, but the control for access and exchange of these assets is not on a public blockchain but rather on private ledgers maintained by individual companies or project teams. For example, BurgerKing Russia launched a new token called the Whoppercoin. Consumers who purchase Whopper sandwiches in certain restaurants receive one token for every ruble spent; they can redeem 1700 tokens (earned after purchasing five or six burgers) for one free Whopper. There is no public exchange for Whoppercoins; the value varies only with the price of the hamburger, and the token will cease to have any value whenever BK Russia decides to cancel the “frequent buyer” promotion.

Initial Coin Offerings or ICOs for cryptocurrencies and digital asset tokens have exploded in the last year, as shown in this chart from Smith & Crown (published September 8, 2017):

Note: Smith & Crown considers all blockchain offerings to be “tokens,” regardless of the intent for monetization of the project asset.

It seems likely that the industry will slow down over the next several months as projects come to grips with the recent decisions by regulators in the US, China, and many other countries to rein in the excesses and scams that make this segment look like Florida land investment schemes from the 1920s or silver mines in the 1880s.

Our own project, StreamSpace, features two blockchains. StreamShares are the currency used for transactions on the network. They are a currency for which we are planning an ICO, launching October 23rd, 2017. The other blockchain, called SpaceCredits, rewards contributors to the cloud storage network. These tokens will be issued and mined, but there will not be a financial event where the project attempts to raise money to support this aspect of the network. Still, we would consider these to be currencies as well, and it is possible that the coins could be traded for other currencies through one or more exchanges.

The blockchain industry is evolving rapidly, and there will be new ideas and business models that may change the conventional industry structure assumptions within another year or two. The Waves platform has opened up distributed blockchain applications to thousands of project teams that would never have considered launching their own coins or tokens in the past. And hundreds of large technology companies are experimenting with blockchain development projects under Ethereum and other protocols; these will be centralized applications under the control of the parent tech company, with the tokens acting as tools to support the application rather than as funding mechanisms in their own right.


Downes, Brant, Smith + Crown. “Trends in Token Sale Proposals,” https://www.smithandcrown.com/trends-token-sale-proposals/. Published September 8, 2017. Accessed September 11, 2017.

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Business Risk and Cryptocurrencies

Sep 11, 2017 1:35:56 PM / by Robert Binning posted in ICO, Ethereum, Bitcoin, Cryptocurrency, Uncategorized, Blockchain


One of the questions people ask about our blockchain project is “Why are you building your small company using blockchain? Isn’t it risky?” That got me thinking about different dimensions of business risk and the behaviors we have adopted to address these risks.

Platform risk:

The ERC20 standard interface has been around for just 20 months and is the basis for more than 100 currencies, including 81% of the top 100 value asset tokens (i.e., not currencies, like bitcoin). That is an amazingly rapid penetration for a new technology, showing the power of this standard in enabling distributed applications (“dapps”). There are a few usage areas that still need to be addressed, such as transferring tokens to a token’s contract, and there are likely some scale efficiencies that will need to be addressed as the smart contract databases grow over time. All standards evolve over time, and eventually someone will come up with a scheme that works better, faster, or more efficiently. There are challenges associated with blockchain overhead compared with traditional centralized databases, but these issues are well recognized and are being addressed by many development teams.

Asset market risk:

One of the interesting characteristics of tokens is that they nearly all become traded commodities on one or more public exchanges within a week or two after an Initial Coin Offering (ICO). The market for most tokens fluctuates with the main cryptocurrencies, Bitcoin and Ethereum, which make up 2/3 of the total capitalization of all cryptocurrencies. The Bitcoin, Ethereum, and Litecoin volatility indices tend to fluctuate between 4–8%, or 3–7X the price volatility of gold (1.2%). As a comparison, most major fiat currencies have volatility indices of 0.5–1%. Since most tokens are traded much less frequently than bitcoin, the volatility index for tokens will be even higher. Financial planners usually recommend that a high net worth individual might place between 1–5% of assets in more volatile investments, but I have never met a corporate investment manager who ever recommended holding company liquid assets in anything riskier than money market funds. Corporate venture funds are treated differently, but they too are limited to a tiny fraction of overall assets. My answer here is to limit the amount of bitcoin or Ether retained by the company to just the volume needed to deal with suppliers and customers that engage with those currencies, about 1–2 weeks of “coin flow.” That way, no hedge is necessary against the inherent volatility of cryptocurrencies.

Black hat risk:

Cryptocurrency ICOs are a magnet for hackers and thieves. There are dozens of examples of token offerings that have been hijacked, with some agent replacing the official ICO website with one that appears genuine but with a token address that points somewhere else, defrauding the investors. Other cases involve theft from a company’s wallet during the sale period, draining funds from the newly funded project. It is now common for the principals of new companies to change all of their passwords to protect identities, because personal identity is often a weak point in a small company’s security profile. All you can do is to be extraordinarily diligent and aware.

Development schedule risk:

There is nothing fundamentally different about software development on the blockchain versus any other platform architecture. New innovation development is always extremely risky, with many false paths that need exploring until the chief architect is satisfied that the plan of record can be accomplished. Yes, there is a dearth of skilled developers, and we face manpower shortages on almost all of our development projects, but almost all highly innovative small companies are in the same boat. All a good leader can do is to set a vision that attracts and retains the top talent and make sure the culture celebrates and rewards creative advances and getting the job done.

Market risk:

To date, it seems that half of the blockchain projects address fintech applications, competing with traditional financial clearinghouses with a distributed peer-to-peer model by using cryptographic trust factors instead of relying on the reputation of the central entity in today’s typical corporate business model. The other half include a large number of projects that aim to use this distributed marketplace model to serve a huge range of potential marketplaces, including the Internet of Things (IOTA), patient electronic health records (Patientory), personal genome data (Encrypgen), and cloud storage (Sia and Storj). It is easy to see the direct financial advantages associated with a fintech transaction on the blockchain, with visibly faster transaction turnaround times and lower fees associated with the transaction. Very few of the non-financial applications have achieved traction with real customers, but as mentioned above, this industry is less than two years old, and it takes time to find and close sales with the early adopter segments.

Regulatory risk:

In late July, the US Securities and Exchange Commission issued a ruling that suggested they would take an active role in evaluating larger ICOs, over $1 million, since many appeared to have characteristics of private securities. This has forced several projects to delay their offerings and scramble to ensure they comply with US law, and it has forced many projects to stay away from US investors; almost one third of all current ICOs listed by Smith & Crown do not allow US residents to invest. This is a challenge for blockchain companies, but has made very little impact on the pace of new token offerings.

All of these challenges are things that we in the blockchain industry have accepted as part of the cost of doing business in this exciting industry. There is so much potential to disrupt today’s accepted industry value chains, applying a new decentralized business model against traditional “winner take all” centralized profit pools. We see the opportunity to dramatically expand hundreds of markets and change today’s accepted business rules. This is Schumpeterian activity at its greatest, and I am excited to play a part in making it all happen.

Photo by Tony Webster on Unsplash

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