Tech Brew Ride Home - Mon. 06/13 – (Another?) Crypto Bank Run

Starting point is 00:00:00 On April 4th, 2023, around 2 in the morning, a man was found stabbed multiple times on a sidewalk in downtown San Francisco. Hey, who did this to you? What happened next turned the story into a political firestorm. Reports have identified the victim as Bob Lee, the founder of Cash App. From Bloomberg Podcasts, this is Foundering, the Killing of Bob Lee, beginning April 16. Welcome to the tech meme right home for Monday, June 13th, 2020. I'm Brian McCullough today. All the crypto is down. Bad. Is Defy lending platform Celsius to blame? More importantly, our margin calls coming for big Bitcoin bagholders, including Tesla. Jack Dorsey's plan to leapfrog all the way

Starting point is 00:00:51 to Web 5 leaked images of the Galaxy Z Flip 4 is your smart TV committing ad fraud. And why, I'm pretty sure that Google AI bot did not become sentient. Here's what you today in the world of tech. So at some point I must have made a Bitcoin price alert in Coinbase. I say at some point because I never knew about it until about a month ago because it had never triggered. But three or four times recently, I've gotten these emails from Coinbase that, you know, Bitcoin up 5%, Bitcoin down 5%. I guess it has a 5% in a 24-hour period window. So this morning, I wake up to a message that Bitcoin was down 9.18%, and I'm like, What Now?

Starting point is 00:01:39 Well, the what now is, I think, DeFi lending platform Celsius. The Celsius token sell fell 70% in one hour after the defy lending giant suspended withdraws, dropping to about 20 cents amid a broader crypto market slump. Celsius has now paused all withdrawals, swaps, and transfers between accounts, citing what it calls extreme market conditions. But here's what I can't figure out because I was offline last night when this was all going down. Was crypto already falling and Celsius is suffering because of that? Or is the fall in the broader crypto market causing a bank run on Celsius

Starting point is 00:02:20 because it's forcing margin calls or forced withdrawals that tumble over to tether and other things? Or what? I don't know, quoting decrypt. On Sunday night with crypto markets already in freefall, controversial crypto lender, Celsius announced it was suddenly pausing all customer withdrawals, swaps, and transfers. We are taking this action today to put Celsius in a better position to honor over time. It's withdrawal obligations, the company wrote in a blog post on Medium. We are taking this necessary action for the benefit of our entire community in order to stabilize liquidity and operations while we take steps to preserve and protect assets.

Starting point is 00:02:57 Furthermore, customers will continue to accrue. rewards during the pause in line with our commitment to our customers, end quote. The company's sell token quickly reacted dropping 70% in one hour from a prior high of 49 cents earlier on Sunday down to 15 cents, according to coin market cap. The rest of the crypto market was not having a good day either on Sunday when Celsius shared its news, though nothing compared to sales dramatic drop. Celsius launched in 2017 and offers customers high yield for crypto deposits, which it lends out to other crypto firms. It shares that business model with BlockFi and NXO among other players, end

Starting point is 00:03:35 quote. So you could see how a project that lends out crypto to earn yield could have an effect on the broader markets if people are pulling their loaned crypto back, or at least attempting to. Bitcoin has dropped around 10 to 15% to below $23,000 and a half dollars at the time of this writing. Bitcoin, by the way, is down 23% just from $3,000.000. Bitcoin, by the way, is down 23% just from $3,000. Thursday afternoon. Ether, dropped by more than 15% to around $1.2,000 per token. Avalanche dropped more than 15% and Solana dropped 15% or more. And it's getting worse as I write this. Binance has temporarily paused BTC withdrawals, citing a stuck transaction and initially giving around a 30-minute time frame for the fix, but no updates have been given for at least 90 minutes. But Brian, how is this,

Starting point is 00:04:28 any of this new. It's another day, another whatever this sort of mess is. And yes, I agree with you. But listen to this. It kind of sounds like a bank run is going on, right? Kind of sounds like Celsius might not be solvent. A real layman situation here. Well, Canada's second largest pension fund was among the investors in a $400 million equity round of financing for Celsius just back in October. And remember, Micro Strategy, that company that at the start of the most recent Crypto Bull Run bought a bunch of Bitcoin, well, Micro Strategy, as of this point, has a $205 million BTC collateralized loan with Silvergate Bank. If BTC drops below $21,000, the company will be forced to hand over uncollateralized BTC to answer any potential margin call. That's what I'm hearing on

Starting point is 00:05:20 Twitter. You know who else bought a lot of BTC? Tesla. Twitter tells me that combined, Tesla and Micro Strategy are currently sitting on an impaired loss of $1.5 billion. So what would happen if Tesla and or Microstrategy were forced to sell their BTC? Oh, and you know who else's current paper losses in Bitcoin are at this point totaling 44%. That would be the sovereign nation of El Salvador. Is this a good time to mention Jack Dorsey's long-gestating Bitcoin project, which we got some more details on? You know, why not? Jack Dorsey's Bitcoin Venture TBD trolled everybody a few days ago by announcing plans to launch

Starting point is 00:06:10 a Web 5 platform using the Ion network focused on decentralized identity and data storage for applications, quoting the block. The web democratized the exchange of information, but it's missing a key layer. identity. We struggle to secure personal data with hundreds of accounts and passwords we can't remember. On the web today, identity and personal data have become the property of third parties. The project's website states, Web5 brings decentralized identity and data storage to your applications. It lets devs focus on creating delightful user experiences while returning ownership of data and identity to individuals, end quote. A presentation made public along with the announcement

Starting point is 00:06:48 explores the different components of the proposed platform, Web 5 notably Udard. utilize ion, a second-layer network built on top of the Bitcoin blockchain, as a protocol for verifiable credentials. This will likely be our most important contribution to the internet, Dorsey said in a tweet, proud of the team, end quote. Our IP Web 3 VCs, Dorsey added in his post, end quote. More details from CoinDesk, quote, appearing at a consensus panel clad in a black and Bitcoin yellow track suit emblazoned with the numeral five, TBD lead Mike Brock explained that that Web 5, in addition to being too better than Web 3, would beat out incumbent models by abandoning their blockchain-centric approaches to a censorship-free identity-focused web experience.

Starting point is 00:07:35 This is really a conversation about what technologies are built to purpose, and I don't think that renting block space in all cases is a really good idea for decentralized applications, Brock said. He continued, I think what we're pushing forward with Web 5, and I admit it's a provocative challenge to a lot of the assumptions about what it means to decentralize the internet really actually is back to basics. We already have technologies that effectively decentralized. I mean, BitTorrent exists, tour exists, et cetera, and quote. Web5's monetary layer will be built on the foundation of Bitcoin. This is unsurprising, given Dorsey's outspoken Bitcoin maximalism. The other technologies underpinning Web5 are borrowed from myriad areas of

Starting point is 00:08:14 cryptography and computer science. Web5, like Web3, will enable users to interact with one another without intermediaries. This, in theory, means no threat from government sensors or centralized service outages, among other supposed advantages. Similar to other attempts to create a decentralized layer on top of the web, Web5 will also aim to provide users with a decentralized identity, allowing them to seamlessly move from application to application without needing to explicitly log in. User data, rather than getting stored with third-party products and services, will be controlled by users and only be exposed with their permission, end quote. Leaked images and a video seem to show a Samsung

Starting point is 00:08:57 Galaxy Z Flip 4 with a similar design to the Flip 3s, but with a shallower and less noticeable display crease, quoting 9 to 5 Google. We got our first look at the Galaxy Z Flip 4 design, ironically exactly a month ago today. CAD-based renders depicted the phone with a virtually identical look to the Galaxy Z Flip 3 with two-tone outer panels, vertical dual camera layout, and the small outer display. Tech Talk TV posted to Twitter a gallery of images, showing the Galaxy Z Flip 4 in the flesh, specifically its black variant. The device has a matte glass top panel with glossy glass over the display portion. The display appears to be roughly the same size, but we can't see the borders in any of these shots. Matt glass in particular wouldn't be

Starting point is 00:09:43 new to the series as the Flip 3's black variant was also matte, as were some other colors. Aside from that, we get a glimpse of the side-mounted fingerprint sensor as well as the hinge. Samsung has been rumored to be adjusting the hinge design, but there doesn't appear to be any changes looking at the side of the device. When it's fully open, though, the two halves of the flip four appear considerably closer. The metal border is also significantly thinner, end quote. I got some answers to my questions about Apple's new buy now pay later service. Sources are telling the Wall Street Journal that Apple plans to use Apple ID data for identity verification and fraud prevention alongside credit reports and FICO scores. Quote, much like a bank, the tech giant will rely on credit reports and FICO scores

Starting point is 00:10:33 to check applicants' financial standing, but it also plans to use its giant store of Apple ID data for identity, verification, and fraud prevention, the people said. The move marks a big change for Apple, which until a couple of years ago had little appetite to become a lender itself. A concern at the company, including for Chief Executive Tim Cook, was the potential reputational risk, according to people familiar with the matter. When it was ready to launch a new credit card, few years ago, Apple tapped Goldman Sachs to approve applicants and fund the loans. The company now feels comfortable becoming a lender in part because of the small dollar amount and short duration of the payment plans. People familiar with the matter said, payment plans per transaction will max out at $1,000,

Starting point is 00:11:13 and the amount for which consumers are approved will depend on their credit reports and scores. Apple also will factor its own information on millions of customers for identity verification and fraud prevention the people said. Applicants whose Apple IDs have been in good standing for a long period and who have no indication of fraud are more likely to get approved. Apple said it would require consumers to link their debit card to its Buy Now Pay Later service. Payments will be deducted from their bank accounts automatically every two weeks unless the consumer opts out. The company said it designed the service with users' financial health and mind, end quote. Among other things that never end, digital ad fraud, or at least something that sounds very

Starting point is 00:11:57 much like ad malfeasance, at least. According to a new study, some streaming devices keep playing content even when TVs are off, leading to around 17% of ads being shown when users can't see them, thereby costing brands more than a billion dollars a year, quoting the Wall Street Journal. Some 17% of ads shown on televisions connected through a streaming device, including streaming boxes, dongles, sticks, and gaming consoles are playing while the TV is off, according to a study by WPP PLC's ad-buying giant Group M and ad measurement firm, Ispot.tv. That is because when a TV set is turned off, it doesn't always send a signal to the streaming device connected to the TV through its HDMI port. Group M said, as a result, the streaming device will continue playing the show and its ads,

Starting point is 00:12:47 unless users had exited or paused the streaming app they were watching before turning off their TV. Due to the nature of the problem, using a smart TV on which streaming apps are loaded, makes it far less likely that ads would be shown while the TV is off, since in this instance, the television and streaming device are just a single piece of hardware. Group M said it found virtually no incidents of the issue on smart TV apps. The study, which included smart TVs, and some hooked up with a streaming device, found that on average between 8 and 10 percent of all streaming ads were shown while the TV was off. The U.S. connected TV ad market has been growing exponentially in recent years, going from $2.6 billion in 2017 to an expected $18.9 billion this year, according to estimates

Starting point is 00:13:30 from insider intelligence. That means that this year alone between $1.5 and $1.9 billion worth of ads are expected to be shown to viewers who can't see them, end quote. Over the weekend, a piece from The Washington Post got picked up basically everywhere about a Google engineer who was placed on paid leave after he became convinced that it's Lambda chat, generator had become sentient. So yes, the headlines and basically every venue over the weekend were that somebody thinks the AI has become sylphil wheel in my attempt at an Arnold Schwarzenegger impression. I will link to the original post piece in the show notes so you can read it if you hadn't. But finally, today I'm going to quote for you from a piece by one-time guest on this

Starting point is 00:14:21 podcast, the AI guru Gary Marcus, who says that he thinks that the notion that Google's Lambda might be sentient is completely ridiculous. Quoting from Gary's substack, neither Lambda nor any of its cousins, GPT3, are remotely intelligent. All they do is match patterns draw from massive statistical databases of human language. The patterns might be cool, but language these systems utter doesn't actually mean anything at all. And it sure as hell doesn't mean that these systems are sentient. To be sentient is to be aware of yourself in the world. Lambda simply isn't. It's just an illusion in the grand history of Eliza, a 1965 piece of software that pretended to be a therapist, managing to fool some humans into thinking it was human, and Eugene Goosman,

Starting point is 00:15:06 a wisecracking 13-year-old boy impersonating a chatbot that won a scaled-down version of the Turing test. None of the hardware in either of those systems has survived in modern efforts at artificial general intelligence, and I'm not sure that Lambda and its cousins will play any important role in the future of AI either. What these systems do, no more and no less, is put together sequences of words, but without any coherent understanding of the world behind them, like foreign language Scrabble players who use English words as point-scoring tools without any clue about what the words mean. I am not saying that no software could ever connect its digital bits to the world,

Starting point is 00:15:42 a la one reading of John Searle's infamous Chinese room thought experiment, turn-by-turn navigation systems, for example, connect their bits to the world just fine. Software like Lambda simply doesn't. It doesn't even try to connect to the world at large. It just tries to be the best version of autocomplete. It can be by predicting what words fit best in a given context. Roger Moore made this point beautifully a couple weeks ago, critiquing systems like Lambda that are known as language models

Starting point is 00:16:08 and making the point that they don't understand language in the sense of relating sentences to the world, but just sequences of words to one another. the AI community have our differences, but pretty much all of us find the notion that Lambda might be sentient completely ridiculous. Stanford economist Eric Bern Folson used this great analogy, quote, foundation models are incredibly effective at stringing together statistically plausible chunks of text in response to prompts, but to claim they are sentient is the modern equivalent of the dog who heard a voice from a gramophone and thought his master was inside, end quote. Hey, everybody. The ride home fun.

Starting point is 00:16:57 is now raising funds for Q4 of our early stage rolling fund. If you've not invested in the fund before, now's a good time to do so. This quarter coming up, I have two of our biggest bets in terms of check sizes and conviction thus far in the fund's life that we're going to make this coming quarter. And look, I've only told you about a half a dozen of the companies we've invested in over the past three quarters. To date, we have actually invested. invested in 20 total companies. We're looking to do in the neighborhood of 20 more investments over

Starting point is 00:17:32 the next four quarters, so why not jump on board now? Learn how to invest by going to ridehomefund.com. And if people want more info, email me at Brian at ridehomefund.com, and I'll share our recent fund memos outlining all the investments we've made and our overall fund strategy so long as you promise to keep it confidential. Talk to you tomorrow.

Tech Brew Ride Home - Mon. 06/13 – (Another?) Crypto Bank Run

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