Tech Brew Ride Home - Thu. 03/09 – Silvergate’s Collapse Makes The Crypto Winter Even Colder

Episode Date: March 9, 2023

Silvergate Capital is shutting down, so the crypto winter just got colder. Microsoft says the new Bing has crossed 100 million daily active users. Why TikTok is responsible for the new Spotify redesign. Can police grab your Ring camera footage without your permission, even if you’re not the target of an investigation? And looks like Stripe won’t be going public this year after all. Sponsors: Thuma.co/techmeme Links: Silvergate will liquidate bank, wind down operations (The Block) Microsoft details how it could get Call of Duty: Warzone running on Switch (The Verge) Microsoft’s AI-Powered Bing Search Engine Surpasses 100 Million Daily Active Users (Gizmodo) Spotify’s new design is part TikTok, part Instagram, and part YouTube (The Verge) The privacy loophole in your doorbell (Politico) SCOOP: Stripe Is Raising $6 Billion to Resolve Taxes & Expiring Employee Shares, Delaying Public Listing (Newcomer) Learn more about your ad choices. Visit megaphone.fm/adchoices

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 Thursday, March 9th, 2023. I'm Brian McCullough today. Silvergate Capital is shutting down, so the crypto winter just got even colder. Microsoft says the new Bing has crossed 100 million daily active users,

why TikTok is responsible for the new Spotify redesign. Can police grab your ring camera footage without your permission, even if you're not the target of an investigation? And looks like strike won't be going public this year after all. Here's what you missed today in the world of tech. Silvergate Capital. plans to wind down operations and voluntarily liquidate Silvergate Bank, including full repayment of all deposits. Silvergate basically saw a bank run with customers withdrawing $8.1 billion over the last quarter.

This is notable because Silvergate was one of the pioneers and biggest players in the attempt to bridge the crypto industry with the traditional banking sector. Quoting the block. In light of recent industry and regulatory development, Silvergate believes that an orderly wind down of bank operations on a voluntary liquidation of the bank is the best path forward. The firm said in a securities and exchange commission filing, the bank's wind down and liquidation plan includes full repayment of all deposits. The company is also considering how best to resolve claims and preserve the residual value of its assets, including its proprietary technology and tax assets, and quote. Silvergate's liquidation raises serious questions about how the sector will be regulated in the near term and how crypto firms

will access the banking system, said Alex Moore. Moore, partner at the law firm of Carrington Coleman, Sloeman, and Blumenthal. On the one hand, legitimate questions were raised by lawmakers and litigants about Silvergate's oversight of its banking relationships with crypto clients. To the extent Silvergate had problems with its internal controls that it could not resolve, maybe it's for the best that it's choosing to wind down, Moore said. On the other hand, the crypto community is already hindered by limited access to the U.S. banking system, and Silvergate's demise only makes this problem worse, end quote.

Silvergate's collapse leaves a vacuum for crypto. Quote, there is nothing really stopping a bank from banking a crypto company, but your bank regulator is going to come look at your books more frequently, let's say every six months instead of every 12. And that makes your life more difficult and drives up compliance costs, said Meltem DeMars, CoinShare's chief strategy officer. So unless a crypto firm is a really big revenue generator, the juice isn't worth the squeeze for many banks, end quote. The combination of Silvergate's failure and the general chill on crypto banking services may create challenges for new startups, unknown entities, and folks experimenting on the frontier of crypto. Added Matt Hogan, Bitwise Asset Management Chief Investment Officer. In sum, this is not a good thing for crypto, but it is a good thing for crypto that it's happening now,

and not four or five years ago when crypto's connection to the traditional banking system was even narrower than it is today, end quote. One of the big promises Microsoft has made to try to ease the approval of their Activision acquisition has been to promise to bring Call of Duty to the Nintendo Switch. But a big question left on said there is how exactly they would do that, technically? Well, according to UK-CMA filings, we now have an idea of how you could even attempt to run COD on the Nintendo Switch. Quoting The Verge. Microsoft makes two points to argue that it's possible to bring games like

Call of Duty Warzone and buy-to-play titles like Modern Warfare 2 to Switch. Microsoft says the engine behind Warzone has been optimized to run on a wide range of hardware devices, including the Xbox 1 from 2015, and PCGPUs, quote, released as far back as 2015, which predate the Switch's 2017 launch. In a footnote, Microsoft points out that Activision offers a mobile version of Warzone that, quote, runs natively on mobile phones, which have much lower performance specifications than the Nintendo Switch, end quote. Microsoft also says Activision has, quote, a long history of optimizing game performance for available hardware capabilities, and it's confident that techniques that have made graphically intensive games like Apex Legends,

Doom Eternal, and Fortnite work on Switch could be used for Call of Duty. If you've ever played Fortnite on Switch, you probably know that it looks a lot worse than it does on newer consoles and PC hardware, but it does play generally fine. My wife and I have no troubles squatting up multiple times per week, even though she's on Switch, and I'm on PS5 or Xbox. I imagine Call of Duty games would be similar, meaning they probably won't look as good as on Xbox Series X, but you'll at least be able to play them on a Nintendo platform.

Hopefully Nintendo's rumored next console has better graphics. Sony has been vocally opposed to the acquisition, recently laying out concerns that Microsoft will sabotage Call of Duty for the PlayStation. Microsoft has also offered Sony a 10-year deal for Call of Duty, but Sony hasn't signed it yet, end quote. says Bing crossed 100 million daily active users, and the new Bing preview has millions of active users, of which roughly a third are new to the search engine entirely. Quoting Gizmodo, Yusef Medi, Microsoft's corporate vice president and chief consumer marketing officer,

revealed Bing's stats in a blog post on Wednesday. Notably, Medi pointed out that a third of active users of Bing preview, a limited early bird version of its forthcoming search engine, are new to Bing. He added that the company saw that. The company saw the as validation of its view that search is due for reinvention as well as proof of the appeal of offering search, answers chat, and creation all in one place. That doesn't mean Microsoft can go head to head with Google, which has more than one billion daily active users yet, but it's a good start. Quote, this is a surprisingly notable figure, and yet we are fully aware we remain a small, low, single-digit share player, Medi said in the blog. That said, it feels good to be at

the dance. The Microsoft executive went on to say that users are conducting more searches on Bing, although he didn't reveal specific numbers. Medi explained that there were two factors driving Bing trial and usage. One is its browser, Microsoft Edge, which the company has aggressively pushed onto users with Windows updates and prompts to try to stop people from downloading Google Chrome, as reported by the Verge. Microsoft plans to continue to use Edge to bolster Bing in the future, Medi said. We expect new capabilities like having Bing search and create in the Edge sidebar will bolster further growth, the Microsoft executive stated. Another factor driving growth is Bing's updated core web search ranking, Medi said,

which has increased in relevance and quality thanks to the recent integration of OpenAI's Prometheus model. At a press conference last month, Microsoft said that Prometheus was, quote, more powerful than ChatGPT, the OpenAI chatbot, that has taken the world by storm, end quote. Spotify has redesigned its app's core home screen with album and playlist covers and a TikTok-like vertical scroll of playlist, video podcasts, and more. So everything is TikTok now. Even things not known for, you know, video? Quoting The Verge. The new look which Spotify just announced at its stream on event is clear evidence of the kind of company and product Spotify wants to be. Over the last few years, it has invested heavily into

podcasts, audiobooks, live audio, and more, all in an attempt to be more than just a music app. The company also wants to be a home for creators. Spotify CEO Daniel Eck told the Verge in 2021 that he hoped to have more than 50 million audio creators on the platform. Spotify has also pushed for years to make video podcasts happen and is now largely watching as YouTube pulls it off. Put it all together, and that's a lot of things to shove into a single app called Spotify. Spotify has been on a seemingly relentless quest to nudge people toward content that's more differentiated and more profitable,

which often meant making it harder to listen to music. That's why the app's new design seems to be in part meant to create more dedicated space for all those new kinds of content. Spotify has for years tried to find ways to put podcasts and music and everything else side by side, but seems to be recognizing that the best answer is to give each thing more space to breathe. Going forward, when you open Spotify, you'll still see a bunch of album and playlist covers at the top, but underneath, you might see an auto-playing video podcast, which you can jump into with a tap, or you might see a big Instagram-style photo meant to tell you a little more about a playlist you might like. At the top, if you tap on music or podcast

and shows. You'll be taken to a vertically scrolling feed that looks a lot more like Instagram Stories or TikTok than the Spotify you're used to, dedicated to just that section of Spotify. You can flip through as many as you like, each one auto-playing to give you a sense of what it is, or tap on one to dive in and save or explore it further. There's an obvious tension in the design between Spotify wanting to make the app a calmer and more navigable space while also trying to find new ways to entice people into new things. There's more autoplaying content than ever in the app now and lots of ways to quickly preview songs and playlist without hitting fully diving in. Full-screen vertical scrolling is everywhere now and is an obviously useful tool for discovery.

Billions of users are used to swiping through a dozen things they don't like before landing on one they do, and in this new look, every song or playlist or podcast gets a momentary extra chance to grab you. Spotify is the biggest player in music streaming, but continues to want to own audio in an even bigger way. That's what the new design really shows, that Spotify is no longer a music, app and shouldn't look like one, and hopefully not look like a mish-mashy mess of content either, end quote. Ring apparently turned over footage from inside a user's home and business, after a U.S. judge's search warrant gave police access to investigate a neighbor, raising privacy concerns, you think? Quoting Politico.

The week of last Thanksgiving, Michael Larkin, a business owner in Hamilton, Ohio, picked up his phone and answered a call. It was the local police, and they wanted footage from Larkin's front door camera. Larkin had a ring video doorbell, one of the more than 10 million Americans with the Amazon-owned product installed at their front doors. His doorbell was among 21 ring cameras in and around his home and business, picking up footage of Larkin, neighbors, customers, and anyone else near his house. The police said they were conducting a drug-related investigation on a neighbor, and they wanted videos of suspicious activity between 5 and 7 p.m. one night in October. Larkin cooperated and sent clips of a car that drove by his ring camera more than 12 times in that time frame. he thought that was all the police would need. Instead, it was just the beginning. They asked for more

footage, now from the entire day's worth of records. And a week later, Larkin received a notice from ring itself. The company had received a warrant signed by a local judge. The notice informed him it was obligated to send footage from more than 20 cameras whether or not Larkin was willing to share it himself. Questions of who owns private home security footage and who can have access to it have become a bigger issue in the national debate over digital privacy. And when law enforcement gets involved, even the slim existing legal protections evaporate, it really takes the control out of the hands of the homeowners. And I think that's hugely problematic, said Jennifer Lynch, the surveillance litigation director of the Electronic Frontier Foundation, a digital rights advocacy group. Larkin's case

raises new red flags about law enforcement's ability to get footage inside people's homes, even when it's irrelevant to the investigation in question. If you think about a search of a home, you're limited to the physical space that's inside the home and what can be held there, Lynch said. But in a warrant for electronic data, the account may have a nearly unlimited amount of data associated with it, and we've seen courts struggle with how to limit these warrants, end quote. Larkin was incensed that police were requesting footage from inside his home for an investigation that didn't even involve him, and he wanted to fight the warrant. He estimated that a lawyer would have been too expensive, and he only had about seven days to challenge it before Ring would comply.

He still doesn't understand how a judge could have signed off on a warrant asking for footage from a camera inside his home when the investigation was on his neighbor. That says to me that the cops can go in and subpoena anybody no matter how weak their evidence is, he said, end quote. Apple has unveiled a standalone classical music iPhone app with more than 5 million tracks available for pre-order now as part of Apple Music subscriptions and launching March 28th, quoting TechCrunch. Based on its 2021 acquisition of Amsterdam-based streamer Prime Phonic, the new Apple Music Classical app will offer Apple Music subscribers access to over 5 million classical music tracks, including new releases in high-quality audio, as well as hundreds of curated playlists, thousands of exclusive albums, and other features like Composer Bios and Deep Dives on Key Works, Apple says.

The service was rumored to be nearing completion given its appearance in the latest OS updates, rolled out to developers, but the exact timing of the launch was, yet known. However, while the app is being announced today, it's only available for pre-order on the App Store for now. The release date will be later this month on March 28th. In addition, the app will only support iOS devices running iOS 15.4 or newer at launch. Apple Music Classical will present a simple interface for engaging with classical works. Users will be able to search by composer, work, conductor, or even catalog number to locate recordings. These can be streamed in high-quality audio of up to 192 kilohertz, 24-bit high-res lossless.

And thousands of recordings will be available in Apple's immersive spatial audio as well. The app will also let users dive into the recordings to read editorial notes about the composers and descriptions of their key works. Famous composers will have their own high-resolution digital portraits available, which Apple commissioned from artists. These were designed with color palettes and artistic references from the relevant classical period Apple notes, and more will be added in time. At launch, portraits will be available for Ludwig von Beethoven, Frederick Chopin, and Johann Sebastian Bach. There's no additional charge for Apple Music Classical as it's being shipped as part of the Apple Music subscription. The app will be available to subscribers across plans, including individual, student, family plans, and in Apple One bundles, end quote.

Finally today, Eric Newcomer is reporting that Stripe is raising $6 billion at a $50 billion valuation, so a significant down round of around 50% from Thrive Capital, General Catalyst, A16Z, and Founders Fund, and remember, this is all in an effort to help early employees exercise their RSUs, quoting newcomer. The funding round is one of the largest venture rounds in a private technology startup ever. OpenAI's Microsoft deal, if it ends up totaling $10 billion would be larger, but it's a different sort of animal.

This stripe round is humongous by any standard. The money is going toward helping early straiters. employees exercises their restricted stock units before they expire and then toward organizing a tender offer for employees to sell shares. While the tax bill has been estimated to total about $3.5 billion, much of the excess money will be used to allow employees to sell their Stripe shares. The funding round is not intended for Stripe's corporate coffers. Silicon Valley cocktail parties have spent the last few months debating what exactly Stripe is worth. On the one hand, Stripe is a Silicon Valley Darling, the company's founders, brothers Patrick and

John Collison, just have that founder, je ne se co-a. Many startups have been built up using the company's payments platform. Newcomer notes that his newsletter business receives subscriber payments through Stripe. The company helped kick off a fintech craze. Stripe is writing a massive trend toward digital commerce while always seeming to have another idea up its sleeve. On the other hand, by some metrics, Stripe's business compares unfavorably to publicly traded Adyne, especially after Stripe's headcount ballooned. Stripe's revenue growth has slowed. At $50 billion, Stripe is already extremely valuable, though that's down from a prior funding round that valued it at $95 billion.

That means investors are betting that Stripe can become a $100 or $150 billion company someday if they expect to see big returns on their investment. Stripe's gross revenue grew 27% last year to $14.3 billion, according to a report in the information, Stripe's net revenue, called Transaction Margin before losses totaled $3.2 billion. The information also reported that Stripe burned through $500 million last year, as revenue growth slowed. The four venture firms leading this round, Thrive Capital, General Catalyst, Founders Fund, and Anne Andrescent Horowitz are all already existing investors in Stripe. You could read that as insiders doubling down on a winner or insiders propping up a core piece of their portfolio as they

wait for a friendlier fundraising environment. Stripe has long been expected to go public. Stripe said earlier this year that it would either go public or raise money from the public markets to resolve the employee tax issue. Given the large fundraising hall, it looks like a public listing won't happen this year, end quote. That's all for today. Talk to you tomorrow.