One name that consistently shows up in any meaningful discussion we have about tokens, ICOs, decentralized business models and cryptocurrency careers is Linda Xie: Former Coinbase PM, writer of excellent beginner guides and advisor to the 0x project — the only thing missing from her stellar crypto CV was a crypto-focused investment fund. So when we were told that she was setting out to do exactly that, we couldn’t wait to interview her about her career, opinions on the token space and setting up a fund.
From skepticism to defining moments
“Interest in crypto can explode to unprecedented levels in a matter of days”
Q: How did you first discover Bitcoin and what convinced you to start a career in the space?
A: I first discovered Bitcoin in 2011 when my classmate and I were researching topics to write about for our Economics class. We ended up writing a research paper on Bitcoin but our outlook wasn’t very positive at the time. My initial reaction was that it was fascinating technology but I did not think it would ever become mainstream because very few people had heard of it, the primary association was darknet markets, and there wasn’t a trusted or easy place to buy it.
The defining moment for me to start a career in the space was when Coinbase onboarded Overstock as a merchant to start accepting bitcoin as a form of payment in 2014. I was excited to see such a prominent company publicly show their support for bitcoin with a legitimate digital currency startup leading the charge. This event actually led me to apply to Coinbase.
Q: During your last year at Coinbase, you witnessed exponential user growth and the incredible price change in Ethereum. What is your biggest lesson about scaling a cryptocurrency focused company?
A: One of the surprising things that we witnessed at Coinbase is that interest in crypto can explode to unprecedented levels in a matter of days. While there had been a steady increase in new Coinbase customers, during the run-up in Ethereum market cap in May 2017 we had a day where 40,000 new users signed up. It’s important to create infrastructure that can dynamically scale at these rates.
Q: For cryptocurrencies to go ‘mainstream’ and/or to make it more attractive for institutional investors what are the types of companies that are missing and the critical problems that need to be solved?
A: Some of the obvious problems that need to be solved are the blockchain scaling issues. We need sufficiently decentralized blockchains that can actually support mainstream adoption today. Another one is the extreme volatility of cryptocurrencies, which can be inconvenient for people that are getting paid in digital currency. Having a reliable stable coin will be a critical ingredient for mainstream adoption of digital currencies. I’d like to see more companies focused on publishing educational materials for non-technical folks and easy ways to store and exchange crypto in every country, as well as financial instruments such as ETFs for institutions (e.g. pension funds, university endowments, etc.) to invest in.
The Token Take
“if you were to replace the token with Ether, would it operate in the exact same way?”
Q: We can imagine that you get approached 24/7 by token sales to become an advisor for token sales/ICO’s. Why did you pick 0x?
A: I strongly believe in the 0x vision that the world is becoming tokenized and everything from fiat currencies to stocks to digital game items will eventually end up represented as digital assets on an open financial network. Naturally there will need to be a low-friction method of exchange on this new open financial system. I am confident that the 0x co-founders, Will and Amir, are able to execute on this vision given their technical expertise around smart contracts, research, and trading as well as their passion for the technology.
Q: Having worked for both the most successful centralized exchange and a decentralized trading protocol, how do you see centralized and decentralized trading platforms co-exist in the future?
A: I see trusted centralized platforms such as Coinbase and GDAX as the bridge between finance 1.0 and 2.0 providing the fiat rails to crypto. Institutional investors might be more attracted to centralized platforms because they offer high performance trading, advanced tools, and are legally accountable should any issues arise. Non-technical people might find it easier to use centralized exchanges because they don’t need to worry about storing their own private keys.
Decentralized exchanges are great for those that are more comfortable storing their own private keys and are necessary for trading assets that aren’t readily available on existing centralized exchanges. In addition, not everyone will have access to a centralized exchange but anyone with an internet connection can access a decentralized exchange.
Q: What’s your view on the current ICO boom? Moreover, if this initial growth slows down — or put more bluntly, when the ICO bubble pops — which types of projects are the ones to survive?
A: I think the projects that survive will be the ones that have a clear need for a token. A key question to ask — if you were to replace the token with Ether, would it operate in the exact same way? If so, then I don’t necessarily see the value in the token besides an easy funding mechanism. Of the countless projects selling tokens over the past year, I believe most will go to zero. Especially the pre-product teams that put a heavy emphasis on marketing.
Q: Given the successful completion of the 0x token sale both in terms of capital raised and wide distribution of holders, what best practices would you advise other projects to follow?
A: I’d like to see projects raise only the amount of funds they need. Many projects set their fundraising target to maximize the amount of capital that the market will provide, but they won’t necessarily be able to responsibility allocate this capital. I do not support the notion that whales should be able to buy up a majority of the tokens, so I hope to see more projects include a process like 0x in creating a wide distribution. Only pick advisors that will truly add value to your project rather than as a way to gain credibility by association. Ideally the project has a working product before the token sale. For projects raising funds from US investors, they should work closely with a legal firm to minimize the risk that their token will be considered a security. Focus on building a strong community of token holders. This can be accomplished with little to no marketing.
There’s many other best practices to follow and I plan on co-publishing a more detailed post on this soon.
Q: Other than 0x, what are interesting token projects that you follow?
A: There are so many interesting projects. As I mentioned earlier, stable coins are critical to the crypto space so I’m paying close attention to projects working on this problem. I’m following prediction market platforms like Augur closely because I’m particularly interested in seeing how they may impact insurance markets and later on even governance models through futarchy.
Starting a fund
“For the past couple years I found myself spending all of my free time reading technical whitepapers”
Q: You recently announced that you’re starting a crypto focused fund together with Jordan Clifford (ex-Coinbase). Why did you want to make this move and what will you focus on?
A: For the past couple years I found myself spending all of my free time reading technical whitepapers and talking to other passionate people in the space. I am excited to fund and advise promising crypto projects full time. The focus will be giving our investors broad exposure to cryptocurrencies that we believe in long term. We will invest in everything from existing protocols to early stage projects, however, we won’t be actively trading as we believe our main value add will be picking out long term winners.
Q: The outperformance of crypto as an asset class and the ICO hype have led to a large interest from institutional investors. As a result, dozens of new crypto focused funds have popped up in the past quarter. What do you think about this development, and what will be your fund’s competitive edge?
A: Jordan and I have been involved in the crypto space since early on, we understand and believe in the technology and want to see it succeed for the right reasons. We’ve experienced the ups and downs; ultimately we see the path forward for the technology long term. In the current highly speculative environment we feel comfortable differentiating the truly innovative technologies from the projects that are attempting to take advantage of unsophisticated speculators. Jordan has one of the sharpest technical minds in the space, and he is able to dive deep into a codebase to find technical flaws and assess code quality.
Q: We saw an investing mantra from Stanley Druckenmiller on your twitter last week. As you make the transition to the institutional investment side of crypto, what are the main challenges you face and who do you go to for advice?
While the markets are very volatile, we want LPs to be able to confidently ride out the ups and downs with us. Recently, I’ve been getting invaluable advice from some friends in the venture capital space since they have a similar challenge in getting others to see the long term vision in their investments. That’s the main challenge to overcome and the excitement for us: getting institutional investors to understand cryptocurrencies and be excited by the grand vision.
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*Disclaimer: The TokenData team participated in the 0x token sale (general public, not presale)
Interview with the team behind Enigma about building a community, token sale best practices and how to deal with the aftermath of a security breach.
Who? : Enigma (https://www.enigma.co/)
What? : Decentralized data marketplace (Enigma) and platform to create cryptocurrency trading strategies (Enigma Catalyst)
When? : September 11th 2017
Why interview? (Official reason): Because at TokenData.io we’re as obsessed with data and analytics as the Enigma team, and because the team has been transparent about how it handled a security breach.
Why interview? (Unofficial reason): Because all members of TokenData applied for MIT but were denied admission…
Part 1: The full Enigma download
Q: What are Enigma and Enigma Catalyst?
A: Enigma is building a decentralized, open, secure data marketplace using ENG, our native token. Right now the long tail of data is not being effectively captured by major data aggregators. Meanwhile other data is being hoarded and exploited by large corporations. We want to change how data is shared, aggregated and monetized in a way that maximizes collaboration.
Catalyst is Enigma’s first product built on top of this marketplace. Catalyst matches financial data consumers (quantitative traders and investors) who want to create smarter crypto investment strategies with financial data curators who license their data to the Catalyst community. The platform also provides backtesting and research tools for traders to create strategies, greatly reducing the typical time and expense of strategy creation.
Q: Rumors are that Enigma is run by a group of MIT wunderkinds who could make Will Hunting’s math look like a 5-year old’s table-scratch. Can you shed some light on the history of your team?
A: Our team has all studied at MIT. We are entrepreneurs with years of experience in the fields of finance, data science, technology, trading, and FinTech. Our co-founders are Guy Zyskind and Can Kisagun, who met at MIT.
Our advisors include Prof. Sandy Pentland of the MIT Media Lab, Justin Lent of Quantopian, Bill Barhydt of Abra, and many others with decades of experience in relevant fields. We believe our team and advisors are one of the strongest aspects of our project and will allow us to achieve our vision for the future of data.
Q: There are at least 15,061 PhD students writing their dissertations on blockchain projects and analyzing the footnotes of Satoshi’s original whitepaper. How did Enigma evolve from an academic research project at MIT to its current form?
A: A decentralized data marketplace was one of the first things proposed in our whitepaper in 2015. The ethos of the MIT Media Lab is “Deploy or Die” — meaning we are not content to keep our interest purely academic. Getting working products into the hands of our community has always been our goal. As the space has evolved, the time is finally right for products like Catalyst and Enigma to thrive.
Part 2: If you build it, they will come
“We believe creating adoption around a usable product is the right approach, and one that is often overlooked in the crypto space.”
Q: Catalyst is designed to be the application layer on top of the Enigma decentralized database protocol. Are you planning to launch Catalyst before Enigma’s database protocol is ready? If so, how do you foresee a transition as the underlying protocol gets ready to launch.
A: Yes. We believe creating adoption around a usable product is the right approach, and one that is often overlooked in the crypto space. The first iteration of Catalyst would include a centralized data marketplace for crypto data, where we will host our own data sets, as well as those contributed by members of the community, in return for ENG bounties. The transition to the data marketplace protocol would be gradual.
At first, we will release a client that allows data curators to host their data sets on their own servers, but data subscription would still be done centrally through our servers. Later on, after a sufficient period of testing, we will bootstrap the decentralized data marketplace protocol with all the existing data-sets to date, at which point, Enigma would become just another node in the network.
Part 3: The comps
Q: According to our dataset, there are a number of projects out there who are launching token sales to fund either a decentralized database and/or algorithmic cryptocurrency trading platforms. What differentiates Enigma?
A: The Enigma team has been researching the idea of a data marketplace for several years now, with the original Enigma whitepaper being one of the most downloaded and cited papers in the blockchain space. Very few of the current projects (if any) that work around decentralized computation and storage have worked through the required technical hurdles. In that sense, our team is well suited to address that challenge. In terms of an algorithmic cryptocurrency trading platform, our alpha has already seen thousands of sign ups in the few weeks since its launch. Our biggest strength may be the growth in our community. As a platform, we rely on having an engaged community to succeed and grow. With 9000+ users already in our Slack channel, we’re confident in our strong momentum.
Q: How does Enigma Catalyst compare to Numerai, another high-profile blockchain platform which incentivizes cryptocurrency investors to develop and implement algorithmic cryptocurrency trading strategies. Is there room for both projects and tokens?
A: The main difference is that Numerai is a fund, while we are a platform. Numerai uses predictions from the community to make their own investments. We give community the tools to allow our users make their investments and hence capture their own upside. Also, the long-term vision of Enigma is much broader than that of Numerai.
Part 4: Token Sale Best Practices
On the token sale front, we like what 0x and Civic did — ensuring access to the community, as well as a large distribution of tokens.”
Q: Your token sale is planned for Sep 11. Can you describe the team’s vesting rights and how you plan to get a wide distribution of token holders.
A: The team’s ENG tokens vest over multiple years, with all of the team committed to holding their tokens through the first year. Since we are a platform that depends on its users to be successful, we are committed to a broad crowd sale with a focus on our core community. We also have a significant portion of our created ENG tokens allocated to our community through incentives.
Q: You recently announced and started the Catalyst Contests in which people can test strategies and earn ENG tokens. Can you tell us more about some of the results you’ve seen so far and the feedback from early users?
A: Catalyst Contests are our newest creation, with our first content currently running right now, so it’s a bit early to remark on results. The best strategies are eligible to win ENG tokens for beating the crypto markets. So far our early users have been essential in helping us refine the Catalyst product and make more accessible to our community. We’re working closely with professional quants to ensure we’re building a powerful product that is still usable by anyone.
Q: What are cryptocurrency projects/ICOs/token sales that Enigma looks at as a good example for running a project and token sale?
A: On the token sale front, we like what 0x and Civic did — ensuring access to the community, as well as a large distribution of tokens. We believe communities are what wins the game. On the project side, we like Ethereum and Filecoin — both have done a tremendous job in popularizing complicated tech and making it accessible for developers.
Q: What is your view on the recent SEC ruling, and if/how it affects your project and more specifically, the ENG token and the statement that “Catalyst allows anyone to build their own crypto hedge fund.”
A: According to the legal advice from our excellent lawyers, ENG is a utility token and it does not constitute a security. We have complied and intend to comply with all guidance from regulatory bodies. For more information refer to our lawyer Marco Santori’s tweets on utility tokens.
Part 5: Phishing Attack Aftermath
“First and foremost, always educate your community.”
Q: Last Sunday, there was a security breach of the Enigma website and Slack channel that resulted in a phishing attack and fake pre-sale announcement. How long did it take the team to notice that something was wrong, and what were your first actions?
A: The Slack community first brought the attack to our attention almost immediately. Our first action was to take the website down and change all passwords to any critical systems. That is likely what mitigated most of the attack, as at that point people in the community were aware that this was a phishing attempt. All e-mails were sent from a fake account that didn’t belong to the company. Our community was instrumental in handling Slack and warning people of the phishing attack, and we are grateful for their help in containing the impact.
Q: What actions and security measures have you taken in response to the hack?
A: Enigma announced that it has taken responsibility and will restore funds to everyone that lost money in this recent scam attempt after the token sale concludes. We are deeply sorry for the pain experienced by those who lost funds to the scam attempt, and we want to make sure that no one in our community that was a victim to this well-coordinated phishing attack is financially hurt. We’re very thankful that our community has stood by us and continues to support our project.
Here are the announced measures we’ve taken:
- Strong, different, random passwords for each account — whether held by an employee or official communication channels for the company
- 2FA for all such accounts
- Weekly password rotation, and daily rotation in the week leading to the token sale
- Proper access control management and compartmentalization
We are taking additional security steps that we are not making public at this time. We’re also working with law enforcement, exchanges, token sale companies, and our community to continue to pursue the lost funds and the scammers. We hope to have more announcements on this matter soon.
Q: Given the amount of token sales that are slated to take place after yours, how can other token sales learn from your mistakes and what would you recommend them to do?
A: First and foremost, always educate your community. We made multiple announcements prior to the scam attempt that no money should be sent to anyone for any reason prior to our crowdsale date, and we provided guidance for identifying phishing attempts. Token sales should take every security precaution from day 1, including those we mentioned here, and you should ask that your community do the same. We’re currently working with other token sales, both previous and upcoming, to establish clear best practices and share our learnings.
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Special thanks to Tor Bair from the Enigma team for co-ordinating the interview. Any comments & questions are welcome at email@example.com.
DISCLAIMER: The interview with Enigma is not sponsored content and TokenData.io is not getting compensated by the Enigma team in any form whatsoever. This interview is for informational purposes only and does not constitute any solicitation or endorsement of investment. Any token purchases you make are at your own risk and discretion. The contents of this interview are the property of TokenData.io — All rights reserved.