Block.One Fundraising

Dear Readers,

Hope you had a good weekend. Blackrock is apparently exploring cryptocurrencies. On to the daily update. I will try to have a few columns tomorrow. It's been a busy day!


Block.One Fundraising


Block.One, the publisher behind the EOS blockchain protocol, has raised additional funding from Peter Thiel, BitMain, and other investors. I have been critical of EOS in the past. No company should raise $4B in a seed round. It creates perverse incentives for the team. Instead of trying to build a successful startup, the company can overspend on salaries and other perks. The founders get rich while the investors lose money. 20 years from now, the company can announce they ran out of money, but Dan Larimer (founder of EOS) and company will have already cashed out. As Notorious BIG said, "Mo Money Mo Problems." 

Many people might think, "why does a company need to raise money after raising $4B?" The $4B was raised in a token sale, and this current fundraising round is for the equity component of Block.One. This fundraising is interesting for a few reasons. One, the investors could be getting special rights that make the investment attractive. Secondly, the investors could be looking to hedge against other cryptocurrencies like Bitcoin. Thirdly, there is an ideological aspect at play. Block.One writes on their site, "Block.one designs free market systems to secure life, liberty, and property." This quote aligns perfectly with the Libertarian-leaning, Peter Thiel. 

Back from the conspiracy theories. Here is the likely reason behind the investment. Bitmain creates mining machines for cryptocurrencies. Bitmain also mines cryptocurrencies. This reasoning makes Bitmain the ideal candidate to be a block producer. The equity investors will earn a consistent income from being a block producer. Their equity stake in Block.One creates an incentive for Block.One to encourage holders to vote for Bitmain's block producer. I'm not saying this is happening, but it makes sense. Bitmain can milk the network for the next few years. If it succeeds, it's a new revenue source and the downside is minimal. 


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