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21INC.ANDTHFUTUROFITCOIN
Wedneda,Ma27,2015

Iteemlikenoonehaeentalkingaoutitcoin,atleatforquiteawhile.Thatiwhathappenwhenthe
priceofaeeminglmagicalcurrencplummetfromahighof$1,242inDecemer,2013toamere$238aI
writethi,adropof81%.Thatmeanthetotalitcoinmarketcapiaout$3.4illionfarmorethan
perhapmanexpectedevenafewearago,utatinnumerinthegrandchemeofthing(fortheake
ofcomparion,Appleold$3.9illionworthofiPhoneeverweeklatholidaquarter).

ThatwhmanwerehockedackinMarchwhen21Inc.,aitcoin-focuedtartupco-founded
AndreeenHorowitzoardpartneralajiSrinivaan,announcedthatithadraiedahockingllarge$116
millioninfundingforwell,nooneknewexactl.Srinivaanco-founderMatthewPaukeraidatthetime,
accordingtotheWallStreetJournal:

itcoinigoingtochangethewathatpeopleanduineeandevenmachineinteractwitheachother,
hea.utforitcointorealizethatviionweneedmaadoption.ItcantjuteforSiliconValle.

Indeed.Perhaptheingleiggetotaclefacingitcoinithatmotfolkdontreallundertandexactl
whatiti,orwhitointereting.

ITCOININTHRULLTPOINTS
Heremetattempttoexplainitcoininthreeulletpoint:

Uingcrptographicke,IcanconvetoouXamountofitcoin(fractionormultiple).Thiicool
ecaueImtranferringomethingdigitallnoreal-worldanalog(andaociatedclearinghoue,likea
ank)required.
Ourtranactioniumittedtoagloalpeer-to-peernetwork,whichverifiethetranactionandenter
itintoapulicrecord(thelockchain).ecauethelockchainialedgerofeveritcoinevermade,
anoneitcoin,orfractionthereof,canonlevereownedoneperon.Thiicoolecaueit
preventmefromdoule-pendingtranferringomethingmultipletime.Inotherword,itcoin
makedigitalgoodrivalrouuncopale.
Thatgloalpeer-to-peernetworkintverifingtranactionoutofthegoodneofitheart;rather,ou
maknowofthiverificationproceadifferentname:mining.Aoutevertenminuteoneofthe
verifingcomputeriawardedwith25itcoinforiteffort(acurrentvalueof$5,950).Thiicool
ecaueitmeanitcoiniaelf-upportingtem:tranactionareverifiedwithaolutecertaintfor
free.
Notethatonlthethirdulletpointrealleemtohaveanthingtodowithmone:whatimotexciting
aoutitcoin,atleatfrommperpective,arethefirttwopointthatitcoinpecificall,andthe
applicationenaledthelockchainroadl,aredigital(withallitattendantadvantage,including
worldwideintantaneoutranferailit,diviiilit,tracking,etc.)etcarceintarkcontratto
everthingontheInternetthatcanecopiedatnocot,muchtothedetrimentofcontentproducerin
particular.Thimeanitcoincouldtheoreticalleuedforallortoftranaction,includingmeage,
contract,identitverification,etc.,and,ofcoure,monetarone,wheretodadigitalapplicationjut
dontwork.

MININGANDMONY
Itimonetartranactionthatdominatedicuionofitcoin,notonlecauethatapplicationithe
eaiettoundertand,utaloecauemoneithedrivingforceehindmining.Whileminingfirttook
placeonperonalPC,thefactitianemarrainglparallelcomputationalprolemmeantitwa
well-uitedtographiccard.Soon,though,athepriceofitcoinincreaed,minereganinvetingin
Application-SpecificIntegratedCircuit(ASIC),chipcutom-uiltforitcoinandplacingthemin
data-centerwhereverelectricitwacheap.

WhileASICrepreentthefixedcotofitcoinmining,theexpeneofelectricitithemarginalcot;
indeed,itcoini,forallintentandpurpoe,thedigitalrepreentationofelectricit.Thipreenta
downideofitcoinitifreeinpartecauemanoftheexternalitieofitproductionareorne
ocietroadlintheformofpollutionutalohighlightthatevenwhenitcometominingmonei
onltangential.Wereitcointogoto$1thevatmajoritofminerintheworldwouldtopproduction
tomorrow,etitcointheprotocolwouldcontinue,automaticallchangingthedifficultofitalgorithmto
keepuptheameteadpaceoftranactionverificationonwhateverproceingwaavailaletothe
network.

Letmeeexplicitonthipoint:itcoininherentlhanothingtodowithmone,allofitrepreentationa
adigitalcurrenctothecontrar.Rather,itiaprotocolthatenalerivalrou(non-copale)digitalgood.

21ANDMININGVRYWHR
Latweek21Inc.finallannouncedexactlwhatthewereworkingon.Well,notexactl,utatleatthe
aidomething.HereSrinivaanonMedium:1

21inowofficiallopenforuineanduinedevelopment.Aftermuchhardwork,wevecreatedan
emeddaleminingchipwhichwecalltheitSharethatcomeinavarietofformfactor.The21itShare
caneemeddedintoaninternet-connecteddeviceaatandalonechiporintegratedintoanexiting
chipetaalockofIPtogenerateacontinuoutreamofdigitalcurrencforueinawidevarietof
application.Youcanrequetadevkitigninguponourweitetogettarted.
Thatright,withtheitSharechip,ourInternet-of-Thingtoatercanmineitcoin,alongwithourcell-
phone,andourrefrigerator,and,well,ourUScharger,which21Inc.itartingwith.2Srinivaan
litawholehotofpotentialenefitfromthifreerevenuetream,includingmicropamentfroma
freerevenueource,3uidizeddevice,evenuidizedchipwith21Inc.IP.

Frankl,IthinkSrinivaanmaivelovertatehicaewiththeeexampletheeconomicfor
conumerimpldontaddup,fornow:4

AingleitSharechip,givenitminuculeproceingcapailitie,wouldneedaround93eartowina
itcoinaward
Thu,21Inc.willoperatealloftheitSharechipitellaapool:itcoinincomewilleharedacroall
itShare-intalleddevice,utonlome21Inc.willkeep75%oftherevenue
Meanwhile,rememerwhatitcoinidigitalelectricit.Andtheconumerwhoownallofthoe
itShare-enaleddevicewillepaing100%ofthecotofthatelectricit

Indeed,itmakefar,farmoreeneforconumertoimpluitcointhathaeenharvetedthe
ortofindutrialminingoperationItalkedaoutaoveontheopenmarket.

utthatringufullcircle:whatconumer,andwh?ReadthatPaukerquoteagain:

itcoinigoingtochangethewathatpeopleanduineeandevenmachineinteractwitheachother,
hea.utforitcointorealizethatviionweneedmaadoption.ItcantjuteforSiliconValle.

Indeed,alltheenefitofitcoinarerightnowmotltheoretical:makingitrealrequireamaivejourne
fromheretothere,toaworldwhereeveroneueitcoinjutatheuetheInternet,andIthink21Inc.i
etundertoodaamaiveridge-uildingprojectfromtodapeculativecurioittotomorrow
eentialtrutnetwork.

A(DIGITAL)WALLTINVRYDVIC
When21Inc.firteganin2013,itwaaatraditionalminingoperation:theroughtonchipdeignerand
uiltatleattwogenerationofminingchip,earning5,700itcoinin2013,and69,000itcoinin2014.
WhileitpoilethecompanipivotingtoitSharechip,Idontthinko;rather,21Inc.traditional
miningpoolgiveitflexiilitinmakingSrinivaanpromiearealit.Thecompanwillactuallhave
ufficientitcointoguaranteeanOMthatthewillgetacertainreturnforhavingplacedaitSharechipin
thehardwaretheuild,longefore21Inc.achievetheortofcaleneceartoevenfantaizeaout
meaningfulreturn.21Inc.couldaloenureconumerarecompenatedfortheelectricittheue,
althoughImaitkepticalaoutthiIthinktheplaiprimarilfocuedongettingmanufactureron
oardandhopingthatfuturecaleeventuallenureconumergettheirfairhare.

Thatmaeduiouethicall,utthepaoffcouldehuge:thednamicofitcoinanditapplicationfor
avarietoftrutedtranferhifttremendoulwheneveronehamultiplehardware-aeddigitalwallet
whethertheknowitornot!Forexample,ifourphonehaahardware-aeddigitalwallet,application
fortrutedmeagingorcontractigningorawholehotofapplicationnoonehaetthoughtofecome
approachalenotonlforthoecapaleofettingupaitcoinwalletutalothoealetoimpl
downloadanapp.Identificationdependnotonuernameorpawordutonuniquedigitalignature.
Thepoiilitieareendle,and,Ithink,goodandtheonlrelonaingleSatohi(0.00000001
itcoin,themalletamountthatcanetranferred).

ThiiwhatIthinkSrinivaanmeanwhenheaweareleconcernedwithitcoinaafinancial
intrumentandmoreinteretedinitcoinaaprotocolandthatemeddedminingwillultimatel
etalihitcoinaafundamentaltemreourceonparwithCPU,andwidth,harddrivepace,and
RAM.Itturnoutlotofpeoplearewillingtopendelectricitforeentialfunctionalit:nearlallofu
runrouter24/7,whetherweareuingthemornot,ecaueintantaccetotheInternetiworththe
electricalcot.AmoreextremeexampleareDVR:ouret-topoxearetheiggetpowerdrainin
ourhoue,coting$3illionannuallinelectricitintheU.S.alonenearltheentireworthofitcoin!
allintheerviceofmakingwatchingTVjutalittleitmoreconvenient.Whwouldntweeventualle
okwithuingjutaitofelectricitnotforprofitutforminingtheSatohiweneedtoueanentirel
newclaofapp?

ITCOINTHNTWORK
Thi,then,itheridgeIelieve21Inc.iuilding,andwhthepecificallanditcoinroadldeerve
moreattention:itcoinataconceptuallevelinotaoutmone,andneitheri21Inc.,atleatnotdirectl.5
Itaoutdiperedtrutanddigitalcarcit,andthemaivenumerofnewapplicationthatcaneuilt
onuchconceptothimilaretwildldifferentfromwhatienaledtodaInternet.And,whileman
ofthoeapplicationareunimaginalejutaFaceookandGooglewereunimaginaleattheirthof
theInternetwhativermuchcertainithatteponeigettingeverone,omehow,connected.A
Coindekreported,21Inc.ieekingtolearnfromtheet:

TheAOLCDofitcoin,thedocumentcalledthetrateg.Giveeveruerafreetrialofitcoinatnear-zero
marginalcot.Aprovenmodeltoonoardmillion.

etkeepaneeonourmailoxandelectricitmeter.

DicuthiArticleontheStratecherForum(memer-onl)

1.HaMediumreplacedTumlrforthedefaulttartuplog?[ ]
2.Thatialidefromthe21Inc.pitchdeck;itquiteold(notethereferenceto21e6,21Inc.originalname),andpoilnot
accurate[ ]
3.Journalimunicorn[ ]
4.Unleotherwiecited,21Inc.factandfigurecomefromthireportfromCoindek[ ]
 5.Indeed,anunder-appreciatedpartof21Inc.approachithatalloftheeemeddedchipwillveriftranactionwithoutthe
incentiveofmonetarreward,allowingitcointheprotocoltourviveevenwhenthereinomoreitcointomine[ ]

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