Most of my guides so far have been written for people who are new to Bitcoin but haven't been targeted towards any particular segment of the population. I'd like to correct that. This guide is going to be a suggestion for the proper way to get into Bitcoin if you are the rare breed of Silicon Valley king who has been doing this combination of business stuff and technology stuff for decades, not that it wouldn't be useful for other people. Most people interested in getting into Bitcoin could benefit from this guide.
Fuck it. Let's just call this a guide on how Paul Graham can get started with Bitcoin. Now why does he need a guide? Paul Graham has this YCombinator thing which incubates startups.1 Generally how this startup business works is people spread a lot of money over a lot of different startups hoping one or two can grow to the point they can convince other people to pay them enough for their stake in the "successes" to cover the failures they funded and provide funding for further rounds of incubation. The process largely resembles greater fool games and the hot potato BTC gem games that reached popularity with certain crowds earlier this year before being forgotten.
Paul Graham's thing has even funded some Bitcoin startups, but the sum of these efforts has lead to much of anything. Most have amounted to a lot of nothing, unable to sustain anything they set out to do for longer than a few months before swiftly moving their focus to doing something entirely different.2 One, exactly one, of their Bitcoin Startups does part of what they purport to do reliably. This gem of the batch is Coinbase which is capable of turning small amounts of Bitcoin into small US Dollar deposits to US checking accounts, and is known to be unreliable and unsuitable for the other purposes it advertises itself.3 CoinBase has been noted many times (( Consult a search engine of your choice for reports on this matter. They are numerous and have been rolling in for quite some time now. )) to be an unreliable way to trade fiat for Bitcoin, and the era of webwallets is over. It is time to take Old Yeller out behind the barn on this broken idea of a web wallet being a Bitcoin wallet in any meaningful sense.
So if you are Paul Graham or another staple of the Silicon Valley VC circuit you might be wondering if there is another way to go about things. The answer is yes Paul Graham, there is indeed a better way. I, your bearded Bitcoin Santa Claus will outline steps you can take to begin your path of discovery to finding ways to more successfully approach this Bitcoin Business.
Step One - Taking inventory
Count up the things you are doing in Bitcoin and then take a look at what they are doing. CoinLab4 for example for its entire existence has done nothing but bleed money measure in both Bitcoins and in US Dollars. CoinBase has found some kind of niche albeit a small one, but CoinBase seems to have horrific trouble accommodating volatility in the Bitcoin to US Dollar exchange rate.
For most people reading this, the ones who aren't actually Paul Graham what this step involves is asking yourself questions like:
- Do I keep losing money on mining "investments" for which I have no right to the physical delivery of mining equipment?
- How many times have I kept money in the care of services that insolvent either through management incompetence or malice? Have I been scammed?
- How often do I get scammed?
- If I have a Bitcoin denominated balance in the care of other parties how long would it take to convert than balance into Bitcoins assigned to an address I control?
- Do I keep getting suckered into greater fools traps like pump and dumps for altcoins or "momentum trading" securities that at their outset smell strongly of scam.
- Are services I use operated by people who have been notoriously unreliable in the past?
Once you have an inventory of your assets and your past failures you can begin to contemplate moving forward. If you haven't identified any failures yet, come up with more questions until you find the ones that start uncovering your past failures.
To be continued in Part 2 Part 2 is Available here
- As far as I understand what incubating a start up, apparently it is some lottery alternative for people who have managed to sell one or more startups already for enough money to buy their lottery ticket incubator. [↩]
- CoinLab is the exemplar of this class having moved from some sort of "protected" mining venture to the people who were going to buy Gox's North American orderbooks, to finally settling into being the people suing Mt Gox for being Mt Gox. [↩]
- On another note, I've never played with any other Bitcoin service that seems to have worked so hard to obscure your own deposit address. The whole design suggests that either they do nothing but Dogfood their horrific interface to the point they have forgotten that addresses are what most people want to send coins to or from. Alternately like some other startups they may have embraced the spammy idea of pushing people to invite people to their unnecessary and questionable wallet service. [↩]
- Note that I'm not entirely sure if CoinLab is a Ycombinator thing. I can read and be sure CoinBase is. This whole Coinlab versus CoinBase issue confuses a lot of people. That might be one thing to work on. [↩]