When I heard of a new crypto play to earn game, I instantly thought of Axie Infinity.
A game that has established itself as a legitimate way to earn money, Axie Infinity gained popularity in places like Pakistan and the token increased in value by over 100X.
While we haven’t missed the boat with Sunflower Farmers, unfortunately, its unplayable right now due to game maintenance by the developers.
More on that later, but I’m still super bullish on the game overall and I do believe it will be a big deal at some point in the future, once they get some of the technical difficulties figured out.
Here’s why I’m optimistic on Sunflower Farmers.
Why I’m Bullish on Sunflower Farmers
Community: The support on Twitter and Discord appears quite positive.
Although the project does not have a ton of followers on Twitter, the engagement is solid. A lot of comments, a lot of discussion on each Tweet they post, etc. Same thing for discord.
The thing about crypto business world nowadays is that it is all about kindness, empathy, sharing, and community.
These principles are held in high regard in some of the most prominent communities such as Bored Ape Yacht Club and Crypto Punks, with everyone saying gm to each other, maintaining the mentality that “we all gonna make it”.
From my initial research, I feel that the Sunflower Farmers community embodies these characteristics.
Vision of the Developers / Team: The team behind the game is very vocal about the fact that the developers don’t control the token.
For example, there is apparently no pre-mine, and the game will be launched for free for the community – only requirement to play was a donation. A noble vision, as long as it works!
The game is also OpenSource and decentralized, and has had about 8 developers on GitHub help build it.
Initial Buzz: SF made headlines on crypto Twitter on January 6th and 7th, 2022 after it overwhelmed the entire Polygon blockchain due to its popularity, increasing transaction fees to around $0.50.
Twitch – this is absolutely a game that could get big on Twitch. Although known for high-paced first person shooter games, there are plenty of creators on Twitch who have a solid niche following that play games with a silly, fun, and relaxing vibe.
Similarity to Farmville: The game’s playability looks similar to Farmville.
For those that remember, Farmville was a popular gaming app on Facebook during Facebook’s early days, around 2010 or earlier. It was a pretty big deal for a period of time.
SF seems to be positioning itself well, giving itself the potential to go as viral as something like Farmville did. Now that crypto is very much a real thing, there’s no reason that a silly and simple game like farmville couldn’t allow players to earn money.
Paired with play to earn and tokenization, SF seems to be enabling players to earn money in a unique way.
Sunflower Farmers is all about planting seeds, and harvesting crops. Crops are worth more than seeds. So you essentially spend money on seeds, which will then provide greater returns once the seeds grow into crops. It gets more complex, and I’d recommend reading about tokenization in the developer docs.
Gamework: Think about farming which, in real life, is difficult, back breaking labor.
We have a game that is simulating this difficult job that very few people would enjoy doing, and yet, people are playing this game largely for fun.
The processes in the game are all about simulating work that would be done in real life.
So, is it a game, or is it work? Difficult to say, but there are other games like this.
Animal Crossing, for example, is a game that gained a ton of popularity, especially as people were staying at home during the pandemic, etc. Animal Crossing is a game that has been described by some as simply “gamework”.
Gamework is a somewhat surprising and interesting phenomena – but these types of games often become extremely popular.
More on gamework the video below.
Anyways, back to Sunflower Farmers…
The game had a malicious attacker and is in maintenance mode
Unfortunately, when I logged back onto their website, sunflower-farmers.com, I was disappointed to see that the game was down.
Not only that, there was a message on the website that described how there was a malicious user who tried to corrupt the game, and so the developers had decided to move the game into “maintenance mode”.
This was extremely disappointing. According to discord, building a fix may take 4-6 weeks.
To play the game, apparently all you needed to do was simply go to the website and login by linking your Metamask wallet.
Perhaps the time to build and develop the game will give the team time to build hype for the game, so that they’re even more ready for re-launch when that time comes.
The game uses $SFF token and will apparently also offer NFTs.
According to the gaming docs, “the aim is to reward farmers who are early to the game and drive scarcity.” 
The Tokenomics documentation goes on to describe that “the earlier you start farming, the more you will be rewarded as the supply increases.” 
Basically, you plant seeds and can harvest those plants for more money than the seeds were initially worth.
In game strategy is somewhat complex, in this case, when you choose to plant is important. If a halvening event happens, or supply increases, this will affect the price and rewards you get for harvesting plants.
No mobile option?
I did notice, before my lunch break, that the game did not have a way for users to play on their mobile devices.
A mobile option is a MUST, and I will be sharing a few thoughts on this in the ideas section of the SF discord channel. Look for me in there, say what’s up if you see me in discord! I use the handle Espressoinsight everywhere.
The reason mobile is important is that more people use mobile devices than anything else…
In 2022, mobile is a must for any application, especially games.
Everyone carries their mobile device with them everywhere. And with the planting / harvest system of the game, I feel like the the gameplay itself lends itself to checking the game frequently, multiple times per day.
It is perfect model for a mobile game, similar to an idle oriented game like Clash of Clans.
The game has a Twitter account… If you’re reading this, tweet at them and tell them we need a mobile option.
What’s Next for Sunflower Farmers?
Hearing about another potential Play to Earn game in the cryptosphere, reading about it on the website and instantly became excited to play.
I know it will take time for the developers to work out everything, but I can’t wait for the game to finally be ready.
Given that this blog has such a low visitor count, I doubt anything I post here will have any impact on the hype of a project at all. But let this post serve as a flag in the ground – Sunflower Farmers will be HUGE.
Solar panels are more effective in colder weather.
Yes, really. But first, the basics…
How latitude affects efficiency of solar panels
Solar energy is not equally distributed across the Earth.
Although plenty of northern regions get a lot of sun, it would seem that in general, solar panels are less effective the further north you go.
Why is this?
Angle of solar impact
The Southern Hemisphere receives more energy during December (southern summer) than the Northern Hemisphere does in June (northern summer) because Earth’s orbit is tilted. 
One factor influencing solar radiation intensity is the angle of impact. For harvesting solar energy from cells, the optimal angular impact is 90 degrees perpendicular.
In northern latitudes, because because the angle of impact is less direct than it is at the equator, it is spread over a greater surface area and therefore you get a less concentrated energy output per unit area.
And unfortunately, this also means that solar panels are less effective during the months that Earth is tilted away from the Sun, during the winter months.
To make up for this, solar panels are often tilted based on the location on Earth as well as time of year.
The angular tilt of solar panels to maximize efficiency is greater the further north you go as well.
In addition to the sun’s rays being spread over a wider surface area, there is a second factor that latitude influences.
Absorption scattering of UV rays
As we see in Figure 1 below, the distance that solar radiation must travel through the atmosphere is further.
A wider band of atmosphere through which the rays pass means there is more absorption scattering of sunlight in the atmosphere.
UV rays comes into contact with the nitrogen, oxygen, carbon dioxide, and other gases in the atmosphere over a wider area, so more is absorbed.
Because a large amount of UV rays have been scattered and absorbed, they are less intense once they reach Earth’s surface
The combination of absorption scattering in the atmosphere as well as the angle of impact suggest that in general, we would expect solar panels to be less efficient during the winter time in each respective hemisphere.
However, as mentioned at the beginning of this post, there is a third factor that influences solar panel efficiency – temperature.
Solar panel efficiency in cold temperatures
Yes, cold weather does increase the efficiency of solar cells, if everything else is constant. 
This means that cold weather (with sunshine) are the ideal conditions for solar cells.
The reason is that low temperatures decrease the solar cells’ internal energy leakage.
In cold temperatures, electrons are less active. At higher temperatures, electrons are more active.
With lower electron activity, energy can be stored and moved across wires and batteries more efficiently. 
According to phys.org, solar cell efficiency decreases by 0.3% for each temperature degree increased. 
This means that a warmer region, while perhaps sunnier, is not necessarily going to be an optimum place for solar energy generation.
This is good news for the northern regions of Earth.
While northern latitudes may be at a disadvantage for reasons based on the first two factors mentioned the earlier section of this post, we can make the case for solar energy in cold, sunny places!
Of course, snow and ice can be a problem for solar panels, and attempting to scrape it off could damage or break the components.
If the ice is translucent, the solar panels may be able to generate a continued output of energy.
Solar in Germany
Germany is the leading country in Europe for solar deployments.
Germany is further North than most people realize. Berlin, Germany occupies the latitudinal region of 52 degrees N (Berlin).
By comparison, the latitude of Calgary, Canada is around 51 degrees N.
It is inspiring to see a country as far north as Germany have so much success with solar, and Germany should perhaps serve as a model for other nations.
If a northern, Temperate country like Germany can prove the viability of solar, surely countries further south can too, with even greater ease.
Still, we’re not at 100% sustainable energy yet.
In order to meet 100% of its electricity needs with solar, Germany would need to significantly increase its solar photovoltaic capacity to between 303 GW and 446 GW.
Given the three factors covered above that impact solar panel efficiency, equatorial areas are not necessarily going to be the only places (or even the best) where solar will work.
Eventually, the world will need to transition to 100% sustainable energy. We cannot survive off of fossil fuels and coal forever, as these reserves will eventually run out.
This post isn’t meant to provide a more realistic approach and help people understand how solar can help while supplementing other energy sources in order to maximize the amount of sustainable energy for the grid. It should be mentioned that wind, nuclear energy, hydroelectric, and more could also help transition the world to sustainable energy.
For example, as solar is added to the grid, it reduces the net demand for electricity in the middle part of the day (when the sun is most radiant).
And if we assume there is no storage of excess energy during peak hours, solar output during the night is pretty much zero.
Perhaps off-grid regions of the world, such as research bases in Antarctica or remote areas of Alaska, could fulfill their own power demands via solar systems during the summer. 
For now, perhaps solar energy could be a viable way to reduce diesel, at least during the daytime.
With improvements in battery technology paired with a greater number of solar panels across the globe, perhaps humans can one day capture and store enough solar energy that we can sustain our energy requirements all hours of the day and night.
And if land is abundant, as it is in the United States, perhaps the most reasonable way to increase the percentage of renewable energy that we consume is to simply build more solar panels.
Across every industry, investing in platforms and infrastructure is a proven area for substantial, secure returns.
Here’s what that looks like:
What to we mean by platform, infrastructure, and application?
Infrastructure: Infrastructure is like tools and equipment. Infrastructure tools are what enable more things to happen, or be built.
During westward expansion and the California gold rush, infrastructure companies – those that made the picks and the gear – were the most profitable entity.
Think about the companies building the mining gear and equipment, transportation such as railroads, and those that laid the groundwork.
Although individual applications may fail, infrastructure create economies and positive feedback loops, lowering costs of those tools so that more people can do the thing or embark on the journey and hence enable them to thrive.
Infrastructure doesn’t go away in the near-term.
Although it may become less popular (and can be quite un-sexy), infrastructure continues to exist long after the applications taken root.
Infrastructure continues to thrive, as well as evolve with the industry.
Platform: the platform is the base of which something is built.
In software, this hardware and software architecture that acts as foundation or base upon which other applications, processes, or technologies are developed. 
Similar to infrastructure, platforms tend to survive for the long term.
Think about it – the foundation of buildings like those at Gobekli Tepe from over 11,000 years ago still exist.
While the remains of everything else is gone, the platforms on which buildings, homes, and churches were built has not been demolished.
Application: applications are businesses that use both tools and existing foundations. Whereas platforms and infrastructure serves application developers, applications serve the end consumer, the individual.
Application businesses can be wildly successful too, no doubt.
The best and most long-term successful application businesses transition into being a platform and infrastructure business.
Because applications are more risky, the most successful companies search for any opportunity to pivot and become a long-term monolithic, ossified entity in the industry.
Infrastructure can be compared with the analogy of a garden. The dirt, the fertilizer, the water, all the tools and equipment used to build, grow, and maintain a garden.
The applications are like seeds… in an ideal world, every seed will grow to become a mature plant or a bush or a tree.
And as we know, not all seeds will grow to become flowers.
Some seedlings will die, just like some applications never make it big time. This is why applications are riskier than infrastructure… just look at how many apps there are in the iOS app store.
The apps we hear about are the successful ones – but there are millions that never survive and their story is all but forgotten.
As the few seedlings become flowers, the garden grows stronger and more valuable.
WHY platform and infrastructure products make great businesses:
As we covered, infrastructure is the tools that enable future products to be created.
These tools can often be sold or licensed to other businesses.
Businesses that sell products or services business products tend to make great companies because their customers (other successful businesses) typically have a large budget and are willing to pay a lot for a good product or service.
As more products are created, the infrastructure becomes fine tuned and improves over time to better need the needs of application developers, gardeners, etc.
The infrastructure is what leads the direction of the industry as it evolves into the future. New types of infrastructure allow innovation to happen.
The infrastructure defines what can be done, how cheap it will be, etc. It is the launchpad and defines the starting point for future apps.
Sooner or later, many companies and projects depend upon this infrastructure to meet their needs. In the best case, people simply can’t survive without it.
Examples of Platforms and Infrastructure in Businesses
Platforms for Mobile Apps:
We’ve talked about the Apple App Store so let’s dive deeper.
Apple knows and understand that what they built was first and foremost a tool and a platform.
Apple fights tooth and nail to try to maintain their position as the defacto industry platform for apps.
Apple makes a significant portion of revenue from its App Store serving as the platform from which iOS apps are built.
Google Play exhibits a similar model, as does Facebook with their robust suite of apps built into their website.
Regardless of the debates on whether or not this is an ethical practice (yes, debates exist, and result in many lawsuits).
The fact that developers are willing to build applications in these places is telling of the value that platforms bring.
Another example of infrastructure is a programming language.
Oracle owns the open-source programming language called Java. Although its old today, at one time it was the hottest thing.
But Oracle couldn’t directly sell the rights to use the programming language… aside from being counter productive, it would also
What Oracle did was build on top of Java. Oracle built platforms and tools that use Java so that developers and businesspeople that are already familiar with the Java language would be more likely to want to purchase Oracle software.
Marketplace platforms enable thousands of people with products or service to reach prospective customers.
However, these platforms are more profitable and generate more revenue than even the highest earning individual on any given marketplace.
Take OpenSea, for example.
NFTs are the hottest thing recently in the world of Blockchain and web3. But the companies and individuals making the real money are the ones that power the NFT craze.
OpenSea is the #1 website where people can buy and list NFTs for sale. The owners of OpenSea make a percentage of every single NFT that sells.
And given that any single product could have up to hundreds of ETH worth of NFTs traded over the span of a few days, OpenSea is likely SUPER profitable.
We can also look at more traditional internet companies to use as examples.
Etsy enables artists to list their creations online and sell them.
Ebay lets people sell used goods and collectible items (usually non-new stuff or collectibles).
Amazon started out as a book marketplace, but now anyone can sell pretty much anything.
Airbnb lets people list their house or apartment for rent.
Do you think the users on these platforms are making a lot of money? Perhaps some of them are.
But I guarantee you that Etsy, Ebay, Amazon, and Airbnb make way more money than any individual seller makes.
This is the platform effect.
While these platforms likely sustain hundreds and thousands of individual sells and allow them to make a respectable income, the platform that is the marketplace itself is the single most profitable entity in the entire picture.
The robotic factories that build the cars are infrastructure that the company will one day be able to license out to others manufacturing companies.
The manufacturing platform that Tesla has built is arguably their most valuable asset. The tools and technology and the skillset needed to build electric cars at scale are more difficult to build than the car itself.
But the value of building this infrastructure around the product itself means that the company doesn’t have to focus as much on every single car that it makes… the robots do 80% of it for them.
The company can then dedicate resources to working ON the business, instead of IN the business. This enables Tesla to focus on the end-to-end electrical power grid.
This includes installing charging stations across the world so that future customers have a way to easily charge their car in any city or town.
It includes developing the dojo supercomputer to enable artificial intelligence and neural network training and data costs to drop dramatically.
The underlying problem: cost of housing seems extremely high in many places.
Data taken over 400 years (since the year 1620) show that housing prices are in fact extremely high right now.
The price data has been adjusted for inflation, which means it is calibrated so that the value of 1 dollar is absolute across the 400 year dataset.
Although the study is focused on real estate prices in Amsterdam, Netherlands, I will primarily focus on home prices in the United States, and perhaps this should be viewed as a shortcoming of this blog post.
The current state, factors affecting housing:
Record low mortgage rates mean more people are incentivized to purchase homes. Those of us that have purchased homes today are locking in a 30-year rate around 3%, which is good. If the Fed raises rates, then home prices may come down naturally, but the total amount that consumers pay per month (principle + interest) won’t change much.
Migration out of metropolitan areas, to tier 2 and tier 3 cities – due to the COVID-19 pandemic as well as the trend towards remote work means that housing cost in cities should go down, while prices in suburbs should go up.
However, people are starting to move back to the cities. Millenials that moved in with their parents during covid may be ready to leave, etc.
Long-term trends include:
more people renting homes
lower testosterone in males and thus lower fertility rate
women are more career oriented so having few kids
ultimately people are getting married later, which means they are having even fewer kids.
moving more and less stable
So what’s causing higher home costs?
I’m not sure what the ultimate cause is, but here are a few possible explanations. This of course may be wrong… but I’m going to give it a go. Feedback is encouraged.
The graph in Figure 1 above is adjusted for inflation, so I actually don’t believe inflation is the cause of house prices increasing. Nor do I think inflation will really impact the housing market directly over the foreseeable future.
The ones most harmed by inflation seem to be people who hold large amounts of cash, and this is a separate matter.
What about deflation?
While not directly related to housing, discussing inflationary risk should be combined with the possibility of deflationary risk as well.
There are of course people like Cathie Wood that actual think deflation is a greater risk than inflation, and that’s a whole nother story.
Ms. Wood’s reasoning behind deflationary risk is the rapid acceleration of emerging technologies which she believes will drive costs lower. She certainly makes a solid argument.
Is there a housing shortage?
Some say that a housing shortage is driving costs skyward. Based on simple rules of supply and demand, this is worth looking into further.
However, given the free-market economy in which we live (both US and Netherlands), would this not incentivize more homes to be built?
Wouldn’t construction companies be having a ball in this world?
The answer is maybe, but it is complicated.
The cause behind the housing shortage, that I’ve read, is that construction sharply declined after the 2008-2009 financial crisis, which has resulted in a lagging long-term housing shortage, although construction rates have increased since then.
Notice the low rate of construction between 2007 and 2014 in the graph above. This period of low home construction may be the origin of the lag, which could be partially responsible for today’s shortage.
And while there is technically a shortage of inventory, I’m not so sure the shortage is as dramatic as everyone says. While the inventory shortage may be real, I do not believe that the severity of inventory shortage is the primary cause for the current state of housing market.
I’m not convinced that new home construction and increasing inventory will really solve the underlying problem.
As explained in this blog post on this MathBabe blog post, increases in inventory don’t necessarily mean that more people get their own house. Vacant homes are a real risk here, as stated regarding the 2008-2009 financial crisis: “the boom in housing supply gave way to a boom in foreclosures, leading many empty houses to be held by banks for years.”
Is population increase making the housing shortage worse?
The argument that population is continuing to increase which is causing a housing shortage is 100% false.
Population growth (at least in the United States – see link here) is severely stagnating and risk of population collapse over the next few generations is not out of the question. But again, this is
Given these facts, I do not believe housing prices are going up due to housing shortage.
However, the blog post linked above suggests prices might decline a bit, on the basis that the Case-Shiller house price index (based on the ratio of income to house price) is somewhat inflated right now, as it was before the financial crisis of 2008-2009.
I feel the arguments presented in the Calculated Risk blog post are well presented and credible, and that we are not in a bubble right now.
I will not duplicate what the post explains, but I do recommend reading it.
I believe we have a situation where wealthier individuals who own a home have realized the savvy financial play that landlording brings, and have purchased their second or third or even fourth homes – whether for vacation or as rental property, or some combination of the two (i.e. Airbnb).
There are a few reasons for this. Financially, it is generally smarter to own than to rent, so people that can afford to will usually choose to own.
Second, given the high cost of capital gains taxes, homeowners are disincentivized from ever selling real estate once they acquire it. They may transfer equity to another property, but by and large people who buy a home tend to remain homeowners forever.
Once you’re a homeowner, people usually never go back to renting for the rest of their lives.
One might wonder how lowering the capital gains tax rate would affect this, but regardless – that would not solve the underlying problem.
Anyways, we have a trend where wealthier people, maybe the top 20% or 30% of people in terms of net worth, own more than one house, while poorer people do not own houses and cannot afford to buy a house. The most severe manifestation of this problem is when poor people also cannot afford to rent.
starrygordon from mathbabe.org (link) June 4, 2021 at 11:37 am It has been the practice of the Federal government for many years to, in effect, print money and give it to rich people. Since ‘money’ is now actually credit, and since credit is denied to the not-rich, not too much inflation has occurred in the ‘real’ (not-rich-people’s) economy; instead, the new funny money has gone to inflate rich people’s asset prices — stock market, collectibles, luxury goods, credentializing education, politicians and political influence, and so on. The two worlds could get along in parallel as long as the not-rich ate their potatoes in silence. However, there is a cross-over point: real estate. The rich like real estate as an asset, an abstract form of wealth, but even the not-rich have to live somewhere, hence, as rich people’s assets inflate, they drive up not-rich people’s house and rental prices. The not-rich get a little of the funny money through lowered mortgage rates, but that’s about all. As a result, we observe a shortage of, not housing, but affordable housing, and an increase in homelessness. The conditions will continue until the present arrangement is changed or collapses.
The picture painted by starrygordon seems pretty close to reality, in my opinion. Starrygordon explains it quite well when they say that we’re not seeing a housing shortage, but a shortage of affordable housing.
However, there are alternate ideas and quite convincing data that might signal otherwise…
The infamous moniker “you’ll own nothing and be happy” published by the World economic forum, while dystopian, may actually have some merit.
And while the scenario of wealth inequality painted above is related to Monopolistic Ownership, there are a few differences.
The key worry is for me is that, imagine if a single company just bought all the land in a city.
I’m talking every single parcel. Look at the picture of Manhattan in the photo on the right and imagine every square centimeter of land in Manhattan was owned by a single person or company.
A business or organization that did this could undoubtedly control the price of rent, and more.
Thus, they could charge whatever they knew people could afford.
Not what people are happy paying – but MORE than people want to pay, just at the edge of unaffordability to the point where people can technically afford to live there, but just barely scrape to get by.
As Peter Thiel has described in his book Zero to One, great businesses should try to create monopolies for themselves.
Although monopolies are bad for society (and technically illegal), a business is incentivized to try to get as close to a monopoly as possible.
And this is exactly what large investment companies seem to be doing.
If we price out all the land in the United States at that estimate, multiply 2.43 billion by $3160 per acre, then we get an estimate for how much all the rural non-city land is worth in the United States.
Based on the number estimates, this is around $7.6 trillion, or $7,678,800,000,000.
Given that there are companies in the US with a market cap over $1 trillion, (Apple, for example coming in at a whopping $2.91 T) it is certainly plausible that a large company could begin to buy up more and more and more rural land, or even control portions of the United States real estate market.
This wouldn’t only to impact Manhattan real estate and beachfront property. This could result in some type of dystopian price fixing outside of cities, expanding into the countryside as well.
While the issue is complicated, I do not believe the solution is greater government intervention. I think too much government involvement tends to do more long term harm than good, and we want to avoid this as a free society.
Governments should continue to do what they do best, and act like referees on the playing field. Keeping the game fair, preventing monopolies, keeping the country safe, etc.
As explained in the Gold Observer’s blog post, long term effects of too much government intervention tend to be negative, regardless of how helpful it might seem over the short term:
“In response to the crisis governments came to the rescue to bail out banks and support the economy—which increased government debt. The housing bubble was not allowed to fully deflate.” – Gold Observer post
It is unfortunate that we can’t simply let the free market economy run through the natural up and down cycles that will inevitably happen.
The government unfortunately always seems to get involved, bail out the banks, stimulate the economy, etc.
The short term effects of these practices might seem ok or even good to some people, but the long term effects mean that the United States has ended up worse off in the end.
Another example is economic stimulus during the COVID-19 pandemic. Printing so much money is causing long term inflation which unfortunately seems to do more long term damage.
Conclusion – will home prices rise forever?
Will house prices continue to go up, or will we see prices eventually start to go down?
As covered in this post, I think it is a combination of things. I don’t have the answer and don’t claim to. Please think about some of the data points I’ve presented, and consider what some solutions might be and how the future is likely to play out.
What I will say is that construction is increasing. Inventory will soon mean that the economies of supply and demand are better matched so that the people that need homes can purchase them.
While this may do some good, I do not believe this will completely solve the problem.
Wealth inequality is certainly the main cause for concern. For example, as inventory rises, what’s stopping wealthy people from acquiring a 2nd, 3rd, or 4th home, and then renting it out to lower-income individuals?
This is a scenario that might play out, which wouldn’t help the housing costs go down at all.
Only time will tell.
If you took the time to read this, please reach out to me on Twitter – I almost always respond and I’d love to hear what other people think.
Since I’ve met a lot of new people on Twitter recently, I figured I share a few of my considerations for investing in emerging tech.
It goes without saying, but this is not investing advice 🙂
What to think about when long-term investing in exponential technologies
Here are a few things that I look for when deciding to buy a cryptocurrency or “growth stocks”.
Because I’m not an accredited investor (yet), I’ve never purchased equity in a private company as of yet. There are, however, ways to do this, but we will save that for another post.
This type of investing means that we are betting on what will happen in the future.
None of us has a crystal ball, yet for those of us that love thinking and forming hypothesis about the future, these are a few principles I try to keep in mind.
This is a running list and will be changed / updated.
Embrace a long-term mindset
Focus on long-term fundamentals. Yes this is vague, but the rest of this list essentially focuses on those “fundamentals”.
What do we mean by “long term”? — invest with a 10-year time horizon (at a minimum).
There are many short-term investors out there. Unfortunately, I don’t have insight into the day to day or even quarter over quarter changes in market conditions. Because of this, trading and short term investing is not and never will be a strategy that I follow.
With emerging technologies, quarter over quarter performance is not important. The company’s potential to impact the future is what matters.
Tools and tractors come before skyscrapers
Before applications of a new technology can thrive, the infrastructure and platforms must be in place. All good buildings start with a great foundation.
Invest in the platforms and infrastructure. In computer technology of the 90’s, this looks like data centers, servers, and hardware. In bitcoin and blockchain, this looks like Ethereum, Tezos, or perhaps anything that enables the creation of decentralized applications (dapps).
Curate your own information
Some people call this “do your own research” aka DYOR. The point is, no one can tell you where to invest. You have to figure that out for yourself. Before we dive into this section, I’d like to share a quote I’ve saved:
“Nobody knows the way. Try to figure it out. Forget school and experts. Figure it out yourself.”
Follow ideas from the smartest people in the world. This means following the developers, engineers, and the people that are actually building emerging technologies.
Search for information from these people that is not mainstream. Dig into developer forums, comment sections, infrequently viewed threads, niche podcasts, etc. Ask this question: Where are the users? Where is the innovation?
You can find developer communities on Reddit, Discord, Twitter, and more.
Find the influential minds without a lot of followers.
In addition, follow the big, influential people in our society that are known to be contrarian thinkers. For example, here are a few of the people I follow. (meaning, read their blogs, podcast appearances, interviews, etc.)
Elon Musk, Michael Burry, Cathie Wood, Peter Thiel, Vitalik Buterin, Warren Buffet, Charlie Munger, Ray Dalio, Tim Ferriss, Mark Zuckerberg, Kevin Rose.
Yes, you are becoming a bit of a tech-culture anthropologist.
Focus on a profitable industry.
Invest in founders-led companies that also have a long-term vision, and plan on running the company for the coming decades.
If the founder of the company is still the CEO, that is a good sign.
Form qualitative hypotheses based on every data point that you can find.
I say qualitative because its impossible to know how big when dealing with exponential potential.
Investing in the future is more qualitative than quantitative. Both types of data have their place. I haven’t found a good way to use quantitative data to form quantitative predictions yet. Quantitative data serves the role of predicting where things are headed. You can more accurately predict directional movements, buts it is almost impossible to know when and how far.
Traditional investors tend to look to the past to determine chances of future success. When investing in emerging tech companies that have 1000X potential, ignore this strategy. Focus on whether or not the team will be able to deliver on their mission, and whether or not their hypothesis is correct.
Ignore news related to regulation, laws, data privacy, etc. Although a relevant cause for concern, these problems are all very much solvable and do not hinder the company’s ability to grow and remain profitable.
Dollar cost averaging is overrated. On truly exceptional investments we’re looking for, the earlier, the better.
The value of encouraging people to “dollar cost average” is if they only have so much to invest at any given time, like in the case of getting paid a salary every two weeks and investing 10% of it in your retirement accounts.
Swing seldom, swing heavy.
Although making a big swing early on is the goal, don’t be afraid to buy the dip. On those truly great investments… buying on the upward trend can never hurt.
Yes, this is slightly against what I said about dollar cost averaging.
Examples: Ethereum between 2016 – 2021, or Tesla between 2018-2021
Listen to everyone’s opinion, but be careful which ideas you subscribe to.
Is the company investing in growing the business, or are hoarding cash? For public companies, look on the 10-k annual report, compare net change in cash over time.
When investing in exponential technologies, one of the biggest mistakes you can make is selling too early. Reasons to sell include – fundamentals changing or re-allocation to better opportunities. Additionally, if you end up deciding to sell an investment, consider keeping 10% of the holdings as a “just in case is 1000X’s” bet.
Vanilla and general wisdom:
Don’t ever lose money. Always follow rule number 1.
Only invest what you can afford to lose.
Be willing to watch your investment go to zero.
Only invest in things that you understand.
Understand the utility of tax-favorable retirement accounts, and use them to your advantage. That’s why they were invented – for you to benefit from as a citizen. HSA, Roth IRA, 401K, etc.
A person only needs 1 or 2 big wins in their lifetime to be set for life.
Don’t be afraid to wait. The money isn’t made in the buying
Borrow ideas from everyone that is smarter than you. Some investing advice contradicts itself. Become comfortable with the mental eustress of cognitive dissonance.
As Polynya describes on the linked Medium article, in order to ensure decentralization, it is important for a significant number of average users to be able to run a validator node.
A validator node is a someone with a computer within a peer-to-peer network that ensures consensus and validates transactions on the blockchain network. This prevents falsification and fraudulent activity, ensuring the blockchain remains trustworthy and tamper-proof.
To increase decentralization, blockchains must not create barriers or restrict / limit anyone’s ability to serve the community as a validator node.
Blockchains also need a way to incentivize users to become validator nodes. Today, ethereum does this by something called “proof of stake”, where validator nodes earn interest for their work.
And while validator nodes on ethereum technically require 32 ETH, users can join a staking pool to participate with a small group.
How is a decentralized community of validator nodes structured?
To ensure that ethereum continues to have as many validator nodes as possible, it needs to be easy for people to serve as nodes.
Users with consumer laptops/hardware and novice technical acumen should be able to participate in the community as a validator.
Compare the two possible blockchain architectures below and how they might affect the average person’s ability to serve as a node:
Scenario A: Low computing power is required for validation. Someone with a regular laptop (the kind you can buy from best buy or costco or apple) is able to run a node on the network and act as a validator.
Scenario B: High computing power is required for validation. A network full of a high-performance servers, or million-dollar supercomputers acting as nodes.
The model described above in Scenario A is decentralized because there can be a LOT of validators and nodes ensuring that no bad actors try to take over.
In Scenario A, while maintaining decentralization, the tradeoff with having a culture of small validator nodes means the blockchain is unfortunately inefficient and less scalable than a centralized system can be.
Scenario B is way more centralized because there are fewer people that will be able to serve as a node on the network.
The small number of nodes in Scenario B could in theory work together to take advantage of some portion of users at any given time.
Although Scenario B will be highly scalable, lower cost, and will enable the network to run faster, having such a structure defeats the purpose because the whole reason blockchains are valuable in the first place is to enable decentralization.
Scenario B could be less-favorable for end users because you cannot trust the few large-scale validator nodes from acting out of self interest.
To maximize decentralization, as many people as possible should be able to serve as a validator node on the network.
With present technology, true decentralized systems are great for establishing trust and avoiding but not so great for scalability.
The good news is that Ethereum will release data sharding which will increase scalability, but the risk is that, by Polynya’s estimates, it may take until 2023.
This is the world we’re living in today with Ethereum.
As Polynya describes below, based on the current state of the internet, I’m not so sure whether or not users truly do care about decentralization.
“there’s plenty of evidence from the web2 world, where the most adopted services are the ones that are most convenient, despite their overwhelming problems with privacy.” Polynya on Medium
Polynya on Medium
Perhaps some people simply want to use the most convenient blockchain with the lowest fees.
However, this partially misses the point.
In traditional models, as in Apple’s app-store, users experience fees on the backend, where the centralized entity takes a percentage cut of all app-generated revenue.
This idea came from BelugaWilliams’ tweet below.
The advantage of decentralized cryptocurrencies, albeit stressed with high-gas fees, is that creators and developers can maintain ownership of whatever they create.
What does this mean for ethereum?
Given that some users inarguably do prefer networks with lower fees, one possible outcome is that ethereum is overtaken by another, more centralized blockchain.
Although this may feel unlikely, it would be naive to ignore it as a hypothetical future scenario.
Today, ethereum does feels like the dominant chain.
More projects are built on top of ethereum than anything else.
Ethereum has created a rapidly growing application ecosystem.
From NFTs to layer 2 blockchains to lending and borrowing apps, as of right now Ethereum has more developer usage and user adoption than any other blockchain.
NFT’s, for example, while largely containing hype infused projects, also contain projects building a genuine community for their members. Surf Punks NFT, for example, is a community centered around surfing, and is even throwing a few wave pool surfing events.
Decentralized apps like Sorare enable enable fantasy futbol, powered by ethereum. What’s amazing is that all fees, transactions, and blockchain jargon is abstracted behind the scenes, so that all people experience is a user friendly fantasy sports game with their friends.
Ethereum’s current state is not without risks. The fact that sharding will take until 2023 to implement means that scalability will continue to be a challenge, although layer 2 chains may help segway some of the demand off-chain.
Given Ethereum’s strength, an unknown and unforeseen up-and-coming chain is unlikely to takeover without anyone realizing.
Sure, it is technically possible, but probably unlikely as the network effects of ethereum are growing rapidly.
However, while the new dapp ecosystem is focused on Ethereum, perhaps someone in the world is working to build a true Ethereum killer that will arise from out of nowhere and take us all by surprise.
Crowdfunding platform Kickstarter announced their plans to build a new decentralized crowdfunding platform that utilizes cryptocurrency and blockchain.
As the cryptocurrency market cap has been trending upwards for months, blockchain’s current popularity means that Kickstarter will undoubtedly benefit from the hype associated with riding the crypto wave.
Kickstarter has been around since 2009. As a company looking to innovate, its not surprising that they’ve chosen to build upon blockchain and crypto.
It is surprising to hear that the new platform will enable Kickstarter to function as an independent organization.
Significance of building a protocol
Kickstarter is not simple re-building their company on top of blockchain technology. The company is building a protocol, on which many future projects and companies may be hosted. This company is 100% distinct and separate from Kickstarter; however, given the affiliation between Kickstarter and their new protocol, Kickstarter will be the FIRST project built on top of the new protocol.
The exciting thing is that once completed, other companies may leverage the same protocol to enable crowdfunding.
Over the history of the internet, many researchers that have innovated and created some of the net’s most impactful protocols have received little if any financial gain from their work (HTTP or TCP/IP, for example).
The problem with this lack of incentive is that it discourages researchers from innovating on existing web protocols and making the internet better. With blockchain, this incentive structure changes.
Tokenization of protocols enables these researchers and creators to maintain direct financial ownership, incentivizing them to continue building and improving upon them.
Kickstarter selects Celo Blockchain
Kickstarter reportedly selected Celo blockchain because it is “carbon neutral”, and more environmentally friendly.
Celo enables the creation of decentralized applications, or dapps.
Celo blockchain is built on top of the ERC-20 technical standard, and leverages the Solidity programming language. This means that Celo runs on Ethereum.
Our take on Celo: With Ethereum’s strength in security and decentralization, Celo effectively borrows these components from Ethereum, while building on top of it and optimizing for scalability and carbon neutrality.
How is Celo a carbon neutral blockchain?
The criticism of some blockchains like bitcoin and ethereum include the fact that the servers that verify the transactions use a lot of energy, which is supplied by coal-burning power plants via the traditional power grid.
This is no different than the electricity used in homes across the United States, or the servers at an Oracle data center. As a society, we still largely use non-green sources of energy.
Its always exciting to see companies that dedicate themselves to building while ensuring environmental sustainability.
I’m not 100% sure how Celo ensures their energy is green, but a few possible ways might be to ensure the energy is produced by solar, wind, hydro, or nuclear. Other possible ways include purchasing carbon credits, or planting trees.
Backlash from users
Somewhat surprisingly, the responses on Twitter from users and self-reported “backers” have not been positive.
With over 1000 replies on Twitter, many user comments on their post are concerned that the majority of value associated with a crypto-based crowdfunding platform will go to investors, rather than creators.
It will be important for Kickstarter to demonstrate their commitment to ensuring the actual creators are able to capture significant value, not just crypto investors.
What’s next for Celo and Kickstarter?
Kickstarter plans to launch a whitepaper in the coming weeks to describe the technology and plans for the decentralized protocol that they will build.