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It’s effectively July 2017 in the world of decentralized finance (DeFi), and as in the heady days of the initial coin offering (ICO) boom, the numbers are only trending up.
According to DeFi Pulse, there is $1.9 billion in crypto assets locked in DeFi right now. According to the CoinDesk ICO Tracker, the ICO market started chugging past $1 billion in July 2017, just a few months before token sales started getting talked about on TV.
Debate juxtaposing these numbers if you like, but what no one can question is this: Crypto users are putting more and more value to work in DeFi applications, driven largely by the introduction of a whole new yield-generating pasture, Compound’s COMP governance token.
Governance tokens enable users to vote on the future of decentralized protocols, sure, but they also present fresh ways for DeFi founders to entice assets onto their platforms.
That said, it’s the crypto liquidity providers who are the stars of the present moment. They even have a meme-worthy name: yield farmers.

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Where it started

Ethereum-based credit market Compound started distributing its governance token, COMP, to the protocol’s users this past June 15. Demand for the token (heightened by the way its automatic distribution was structured) kicked off the present craze and moved Compound into the leading position in DeFi.
The hot new term in crypto is “yield farming,” a shorthand for clever strategies where putting crypto temporarily at the disposal of some startup’s application earns its owner more cryptocurrency.
Another term floating about is “liquidity mining.”
The buzz around these concepts has evolved into a low rumble as more and more people get interested.
The casual crypto observer who only pops into the market when activity heats up might be starting to get faint vibes that something is happening right now. Take our word for it: Yield farming is the source of those vibes.
But if all these terms (“DeFi,” “liquidity mining,” “yield farming”) are so much Greek to you, fear not. We’re here to catch you up. We’ll get into all of them.
We’re going to go from very basic to more advanced, so feel free to skip ahead.

What are tokens?

Most CoinDesk readers probably know this, but just in case: Tokens are like the money video-game players earn while fighting monsters, money they can use to buy gear or weapons in the universe of their favorite game.
But with blockchains, tokens aren’t limited to only one massively multiplayer online money game. They can be earned in one and used in lots of others. They usually represent either ownership in something (like a piece of a Uniswap liquidity pool, which we will get into later) or access to some service. For example, in the Brave browser, ads can only be bought using basic attention token (BAT).
If tokens are worth money, then you can bank with them or at least do things that look very much like banking. Thus: decentralized finance.
Tokens proved to be the big use case for Ethereum, the second-biggest blockchain in the world. The term of art here is “ERC-20 tokens,” which refers to a software standard that allows token creators to write rules for them. Tokens can be used a few ways. Often, they are used as a form of money within a set of applications. So the idea for Kin was to create a token that web users could spend with each other at such tiny amounts that it would almost feel like they weren’t spending anything; that is, money for the internet.
Governance tokens are different. They are not like a token at a video-game arcade, as so many tokens were described in the past. They work more like certificates to serve in an ever-changing legislature in that they give holders the right to vote on changes to a protocol.
So on the platform that proved DeFi could fly, MakerDAO, holders of its governance token, MKR, vote almost every week on small changes to parameters that govern how much it costs to borrow and how much savers earn, and so on.
Read more: Why DeFi’s Billion-Dollar Milestone Matters
One thing all crypto tokens have in common, though, is they are tradable and they have a price. So, if tokens are worth money, then you can bank with them or at least do things that look very much like banking. Thus: decentralized finance.

What is DeFi?

Fair question. For folks who tuned out for a bit in 2018, we used to call this “open finance.” That construction seems to have faded, though, and “DeFi” is the new lingo.
In case that doesn’t jog your memory, DeFi is all the things that let you play with money, and the only identification you need is a crypto wallet.
On the normal web, you can’t buy a blender without giving the site owner enough data to learn your whole life history. In DeFi, you can borrow money without anyone even asking for your name.
I can explain this but nothing really brings it home like trying one of these applications. If you have an Ethereum wallet that has even $20 worth of crypto in it, go do something on one of these products. Pop over to Uniswap and buy yourself some FUN (a token for gambling apps) or WBTC (wrapped bitcoin). Go to MakerDAO and create $5 worth of DAI (a stablecoin that tends to be worth $1) out of the digital ether. Go to Compound and borrow $10 in USDC.
(Notice the very small amounts I’m suggesting. The old crypto saying “don’t put in more than you can afford to lose” goes double for DeFi. This stuff is uber-complex and a lot can go wrong. These may be “savings” products but they’re not for your retirement savings.)
Immature and experimental though it may be, the technology’s implications are staggering. On the normal web, you can’t buy a blender without giving the site owner enough data to learn your whole life history. In DeFi, you can borrow money without anyone even asking for your name.
DeFi applications don’t worry about trusting you because they have the collateral you put up to back your debt (on Compound, for instance, a $10 debt will require around $20 in collateral).
Read more: There Are More DAI on Compound Now Than There Are DAI in the World
If you do take this advice and try something, note that you can swap all these things back as soon as you’ve taken them out. Open the loan and close it 10 minutes later. It’s fine. Fair warning: It might cost you a tiny bit in fees, and the cost of using Ethereum itself right now is much higher than usual, in part due to this fresh new activity. But it’s nothing that should ruin a crypto user.
So what’s the point of borrowing for people who already have the money? Most people do it for some kind of trade. The most obvious example, to short a token (the act of profiting if its price falls). It’s also good for someone who wants to hold onto a token but still play the market.

Doesn’t running a bank take a lot of money up front?

It does, and in DeFi that money is largely provided by strangers on the internet. That’s why the startups behind these decentralized banking applications come up with clever ways to attract HODLers with idle assets.
Liquidity is the chief concern of all these different products. That is: How much money do they have locked in their smart contracts?
“In some types of products, the product experience gets much better if you have liquidity. Instead of borrowing from VCs or debt investors, you borrow from your users,” said Electric Capital managing partner Avichal Garg.
Let’s take Uniswap as an example. Uniswap is an “automated market maker,” or AMM (another DeFi term of art). This means Uniswap is a robot on the internet that is always willing to buy and it’s also always willing to sell any cryptocurrency for which it has a market.
On Uniswap, there is at least one market pair for almost any token on Ethereum. Behind the scenes, this means Uniswap can make it look like it is making a direct trade for any two tokens, which makes it easy for users, but it’s all built around pools of two tokens. And all these market pairs work better with bigger pools.

Why do I keep hearing about ‘pools’?

To illustrate why more money helps, let’s break down how Uniswap works.
Let’s say there was a market for USDC and DAI. These are two tokens (both stablecoins but with different mechanisms for retaining their value) that are meant to be worth $1 each all the time, and that generally tends to be true for both.
The price Uniswap shows for each token in any pooled market pair is based on the balance of each in the pool. So, simplifying this a lot for illustration’s sake, if someone were to set up a USDC/DAI pool, they should deposit equal amounts of both. In a pool with only 2 USDC and 2 DAI it would offer a price of 1 USDC for 1 DAI. But then imagine that someone put in 1 DAI and took out 1 USDC. Then the pool would have 1 USDC and 3 DAI. The pool would be very out of whack. A savvy investor could make an easy $0.50 profit by putting in 1 USDC and receiving 1.5 DAI. That’s a 50% arbitrage profit, and that’s the problem with limited liquidity.
(Incidentally, this is why Uniswap’s prices tend to be accurate, because traders watch it for small discrepancies from the wider market and trade them away for arbitrage profits very quickly.)
Read more: Uniswap V2 Launches With More Token-Swap Pairs, Oracle Service, Flash Loans
However, if there were 500,000 USDC and 500,000 DAI in the pool, a trade of 1 DAI for 1 USDC would have a negligible impact on the relative price. That’s why liquidity is helpful.
You can stick your assets on Compound and earn a little yield. But that’s not very creative. Users who look for angles to maximize that yield: those are the yield farmers.
Similar effects hold across DeFi, so markets want more liquidity. Uniswap solves this by charging a tiny fee on every trade. It does this by shaving off a little bit from each trade and leaving that in the pool (so one DAI would actually trade for 0.997 USDC, after the fee, growing the overall pool by 0.003 USDC). This benefits liquidity providers because when someone puts liquidity in the pool they own a share of the pool. If there has been lots of trading in that pool, it has earned a lot of fees, and the value of each share will grow.
And this brings us back to tokens.
Liquidity added to Uniswap is represented by a token, not an account. So there’s no ledger saying, “Bob owns 0.000000678% of the DAI/USDC pool.” Bob just has a token in his wallet. And Bob doesn’t have to keep that token. He could sell it. Or use it in another product. We’ll circle back to this, but it helps to explain why people like to talk about DeFi products as “money Legos.”

So how much money do people make by putting money into these products?

It can be a lot more lucrative than putting money in a traditional bank, and that’s before startups started handing out governance tokens.
Compound is the current darling of this space, so let’s use it as an illustration. As of this writing, a person can put USDC into Compound and earn 2.72% on it. They can put tether (USDT) into it and earn 2.11%. Most U.S. bank accounts earn less than 0.1% these days, which is close enough to nothing.
However, there are some caveats. First, there’s a reason the interest rates are so much juicier: DeFi is a far riskier place to park your money. There’s no Federal Deposit Insurance Corporation (FDIC) protecting these funds. If there were a run on Compound, users could find themselves unable to withdraw their funds when they wanted.
Plus, the interest is quite variable. You don’t know what you’ll earn over the course of a year. USDC’s rate is high right now. It was low last week. Usually, it hovers somewhere in the 1% range.
Similarly, a user might get tempted by assets with more lucrative yields like USDT, which typically has a much higher interest rate than USDC. (Monday morning, the reverse was true, for unclear reasons; this is crypto, remember.) The trade-off here is USDT’s transparency about the real-world dollars it’s supposed to hold in a real-world bank is not nearly up to par with USDC’s. A difference in interest rates is often the market’s way of telling you the one instrument is viewed as dicier than another.
Users making big bets on these products turn to companies Opyn and Nexus Mutual to insure their positions because there’s no government protections in this nascent space – more on the ample risks later on.
So users can stick their assets in Compound or Uniswap and earn a little yield. But that’s not very creative. Users who look for angles to maximize that yield: those are the yield farmers.

OK, I already knew all of that. What is yield farming?

Broadly, yield farming is any effort to put crypto assets to work and generate the most returns possible on those assets.
At the simplest level, a yield farmer might move assets around within Compound, constantly chasing whichever pool is offering the best APY from week to week. This might mean moving into riskier pools from time to time, but a yield farmer can handle risk.
“Farming opens up new price arbs [arbitrage] that can spill over to other protocols whose tokens are in the pool,” said Maya Zehavi, a blockchain consultant.
Because these positions are tokenized, though, they can go further.
This was a brand-new kind of yield on a deposit. In fact, it was a way to earn a yield on a loan. Who has ever heard of a borrower earning a return on a debt from their lender?
In a simple example, a yield farmer might put 100,000 USDT into Compound. They will get a token back for that stake, called cUSDT. Let’s say they get 100,000 cUSDT back (the formula on Compound is crazy so it’s not 1:1 like that but it doesn’t matter for our purposes here).
They can then take that cUSDT and put it into a liquidity pool that takes cUSDT on Balancer, an AMM that allows users to set up self-rebalancing crypto index funds. In normal times, this could earn a small amount more in transaction fees. This is the basic idea of yield farming. The user looks for edge cases in the system to eke out as much yield as they can across as many products as it will work on.
Right now, however, things are not normal, and they probably won’t be for a while.

Why is yield farming so hot right now?

Because of liquidity mining. Liquidity mining supercharges yield farming.
Liquidity mining is when a yield farmer gets a new token as well as the usual return (that’s the “mining” part) in exchange for the farmer’s liquidity.
“The idea is that stimulating usage of the platform increases the value of the token, thereby creating a positive usage loop to attract users,” said Richard Ma of smart-contract auditor Quantstamp.
The yield farming examples above are only farming yield off the normal operations of different platforms. Supply liquidity to Compound or Uniswap and get a little cut of the business that runs over the protocols – very vanilla.
But Compound announced earlier this year it wanted to truly decentralize the product and it wanted to give a good amount of ownership to the people who made it popular by using it. That ownership would take the form of the COMP token.
Lest this sound too altruistic, keep in mind that the people who created it (the team and the investors) owned more than half of the equity. By giving away a healthy proportion to users, that was very likely to make it a much more popular place for lending. In turn, that would make everyone’s stake worth much more.
So, Compound announced this four-year period where the protocol would give out COMP tokens to users, a fixed amount every day until it was gone. These COMP tokens control the protocol, just as shareholders ultimately control publicly traded companies.
Every day, the Compound protocol looks at everyone who had lent money to the application and who had borrowed from it and gives them COMP proportional to their share of the day’s total business.
The results were very surprising, even to Compound’s biggest promoters.
COMP’s value will likely go down, and that’s why some investors are rushing to earn as much of it as they can right now.
This was a brand-new kind of yield on a deposit into Compound. In fact, it was a way to earn a yield on a loan, as well, which is very weird: Who has ever heard of a borrower earning a return on a debt from their lender?
COMP’s value has consistently been well over $200 since it started distributing on June 15. We did the math elsewhere but long story short: investors with fairly deep pockets can make a strong gain maximizing their daily returns in COMP. It is, in a way, free money.
It’s possible to lend to Compound, borrow from it, deposit what you borrowed and so on. This can be done multiple times and DeFi startup Instadapp even built a tool to make it as capital-efficient as possible.
“Yield farmers are extremely creative. They find ways to ‘stack’ yields and even earn multiple governance tokens at once,” said Spencer Noon of DTC Capital.
COMP’s value spike is a temporary situation. The COMP distribution will only last four years and then there won’t be any more. Further, most people agree that the high price now is driven by the low float (that is, how much COMP is actually free to trade on the market – it will never be this low again). So the value will probably gradually go down, and that’s why savvy investors are trying to earn as much as they can now.
Appealing to the speculative instincts of diehard crypto traders has proven to be a great way to increase liquidity on Compound. This fattens some pockets but also improves the user experience for all kinds of Compound users, including those who would use it whether they were going to earn COMP or not.
As usual in crypto, when entrepreneurs see something successful, they imitate it. Balancer was the next protocol to start distributing a governance token, BAL, to liquidity providers. Flash loan provider bZx has announced a plan. Ren, Curve and Synthetix also teamed up to promote a liquidity pool on Curve.
It is a fair bet many of the more well-known DeFi projects will announce some kind of coin that can be mined by providing liquidity.
The case to watch here is Uniswap versus Balancer. Balancer can do the same thing Uniswap does, but most users who want to do a quick token trade through their wallet use Uniswap. It will be interesting to see if Balancer’s BAL token convinces Uniswap’s liquidity providers to defect.
So far, though, more liquidity has gone into Uniswap since the BAL announcement, according to its data site. That said, even more has gone into Balancer.

Did liquidity mining start with COMP?

No, but it was the most-used protocol with the most carefully designed liquidity mining scheme.
This point is debated but the origins of liquidity mining probably date back to Fcoin, a Chinese exchange that created a token in 2018 that rewarded people for making trades. You won’t believe what happened next! Just kidding, you will: People just started running bots to do pointless trades with themselves to earn the token.
Similarly, EOS is a blockchain where transactions are basically free, but since nothing is really free the absence of friction was an invitation for spam. Some malicious hacker who didn’t like EOS created a token called EIDOS on the network in late 2019. It rewarded people for tons of pointless transactions and somehow got an exchange listing.
These initiatives illustrated how quickly crypto users respond to incentives.
Read more: Compound Changes COMP Distribution Rules Following ‘Yield Farming’ Frenzy
Fcoin aside, liquidity mining as we now know it first showed up on Ethereum when the marketplace for synthetic tokens, Synthetix, announced in July 2019 an award in its SNX token for users who helped add liquidity to the sETH/ETH pool on Uniswap. By October, that was one of Uniswap’s biggest pools.
When Compound Labs, the company that launched the Compound protocol, decided to create COMP, the governance token, the firm took months designing just what kind of behavior it wanted and how to incentivize it. Even still, Compound Labs was surprised by the response. It led to unintended consequences such as crowding into a previously unpopular market (lending and borrowing BAT) in order to mine as much COMP as possible.
Just last week, 115 different COMP wallet addresses – senators in Compound’s ever-changing legislature – voted to change the distribution mechanism in hopes of spreading liquidity out across the markets again.

Is there DeFi for bitcoin?

Yes, on Ethereum.
Nothing has beaten bitcoin over time for returns, but there’s one thing bitcoin can’t do on its own: create more bitcoin.
A smart trader can get in and out of bitcoin and dollars in a way that will earn them more bitcoin, but this is tedious and risky. It takes a certain kind of person.
DeFi, however, offers ways to grow one’s bitcoin holdings – though somewhat indirectly.
A long HODLer is happy to gain fresh BTC off their counterparty’s short-term win. That’s the game.
For example, a user can create a simulated bitcoin on Ethereum using BitGo’s WBTC system. They put BTC in and get the same amount back out in freshly minted WBTC. WBTC can be traded back for BTC at any time, so it tends to be worth the same as BTC.
Then the user can take that WBTC, stake it on Compound and earn a few percent each year in yield on their BTC. Odds are, the people who borrow that WBTC are probably doing it to short BTC (that is, they will sell it immediately, buy it back when the price goes down, close the loan and keep the difference).
A long HODLer is happy to gain fresh BTC off their counterparty’s short-term win. That’s the game.

How risky is it?

Enough.
“DeFi, with the combination of an assortment of digital funds, automation of key processes, and more complex incentive structures that work across protocols – each with their own rapidly changing tech and governance practices – make for new types of security risks,” said Liz Steininger of Least Authority, a crypto security auditor. “Yet, despite these risks, the high yields are undeniably attractive to draw more users.”
We’ve seen big failures in DeFi products. MakerDAO had one so bad this year it’s called “Black Thursday.” There was also the exploit against flash loan provider bZx. These things do break and when they do money gets taken.
As this sector gets more robust, we could see token holders greenlighting more ways for investors to profit from DeFi niches.
Right now, the deal is too good for certain funds to resist, so they are moving a lot of money into these protocols to liquidity mine all the new governance tokens they can. But the funds – entities that pool the resources of typically well-to-do crypto investors – are also hedging. Nexus Mutual, a DeFi insurance provider of sorts, told CoinDesk it has maxed out its available coverage on these liquidity applications. Opyn, the trustless derivatives maker, created a way to short COMP, just in case this game comes to naught.
And weird things have arisen. For example, there’s currently more DAI on Compound than have been minted in the world. This makes sense once unpacked but it still feels dicey to everyone.
That said, distributing governance tokens might make things a lot less risky for startups, at least with regard to the money cops.
“Protocols distributing their tokens to the public, meaning that there’s a new secondary listing for SAFT tokens, [gives] plausible deniability from any security accusation,” Zehavi wrote. (The Simple Agreement for Future Tokens was a legal structure favored by many token issuers during the ICO craze.)
Whether a cryptocurrency is adequately decentralized has been a key feature of ICO settlements with the U.S. Securities and Exchange Commission (SEC).

What’s next for yield farming? (A prediction)

COMP turned out to be a bit of a surprise to the DeFi world, in technical ways and others. It has inspired a wave of new thinking.
“Other projects are working on similar things,” said Nexus Mutual founder Hugh Karp. In fact, informed sources tell CoinDesk brand-new projects will launch with these models.
We might soon see more prosaic yield farming applications. For example, forms of profit-sharing that reward certain kinds of behavior.
Imagine if COMP holders decided, for example, that the protocol needed more people to put money in and leave it there longer. The community could create a proposal that shaved off a little of each token’s yield and paid that portion out only to the tokens that were older than six months. It probably wouldn’t be much, but an investor with the right time horizon and risk profile might take it into consideration before making a withdrawal.
(There are precedents for this in traditional finance: A 10-year Treasury bond normally yields more than a one-month T-bill even though they’re both backed by the full faith and credit of Uncle Sam, a 12-month certificate of deposit pays higher interest than a checking account at the same bank, and so on.)
As this sector gets more robust, its architects will come up with ever more robust ways to optimize liquidity incentives in increasingly refined ways. We could see token holders greenlighting more ways for investors to profit from DeFi niches.
Questions abound for this nascent industry: What will MakerDAO do to restore its spot as the king of DeFi? Will Uniswap join the liquidity mining trend? Will anyone stick all these governance tokens into a decentralized autonomous organization (DAO)? Or would that be a yield farmers co-op?
Whatever happens, crypto’s yield farmers will keep moving fast. Some fresh fields may open and some may soon bear much less luscious fruit.
But that’s the nice thing about farming in DeFi: It is very easy to switch fields.

Summary and modeling considerations:
The basic thesis of this post is that, for many reasons, the volatility (riskiness) of buying a house are significantly higher than generally believed.
The considerations explored here are the result of discussions with a financial advisor and plugging various pieces of publicly available data about housing markets into adhoc models of long run performance. Ultimately, predictions about asset classes usually come down to reference class forecasting, as any appeal to 'over' or 'under' priced is relative to some trend, and choice of the timescale on which trend following is expected can be chosen to tell a story. E.g. two people arguing can have one arguing for a reversion to a long run historical trend while the other argues for a reversion to a short run trend. They may both be right on different time scales going forward too. This post attempts to surface reasons why buying may be more expensive than a popular model one might encounter, which may have been generated by people in the pro real estate camp. Thus it argues that people's confidence intervals, especially to the downside, are too narrow when modeling home buying. Losses in the housing market are hard to get quantified data on since they are private and often vary enormously due to imputed rents and opportunity cost being idiosyncratic between individuals. A small thumb on the sale at each step in a multiplicative planning space can add up to a lot by the time you reach the output of your model.
The main parameters looked at in this post if you want to do you your own homework (which obviously you should for an individual purchasing decision) are as follows:
Rent-to-Buy ratio (see linked post at bottom for problems with the default parameters of popular rent to buy calculators)
Average time spent in purchased homes
Historical house price indexes
Historical rent price indexes
Vanguard's Balanced Index investment fund (leveraging a balanced fund handily beats all-stock allocations btw)
Salary and savings considerations over a career
Home ownership tax benefit calculators
I'll add any more that occur to me.
Beware extrapolating averages to unusual situations. Outlier markets usually have various reasons that have driven metrics to extremes. Failure to understand the casual mechanisms will prevent one from predicting when such trends might reverse.
Original post:
The average person spends about 10 years (87k hours) in a house before moving, which already goes against people's tacit models. This post is about the various reasons why buying a house is a bad idea.
First let's address the idea that renting is 'throwing money away'. This ignores the opportunity cost of investing extra income and the lump sum of the down payment into a house instead of the stock market. People spend on average 50% more money on mortgages, taxes, and fees than they spend on rent. If that money were invested in the market it would be earning you a return. People very often report being surprised how much more a home wound up costing them than they had expected. You can plug in the numbers for yourself in a rent to buy calculator (and should do so do get a sense of which numbers matter, but keep in mind they tend to have defaults set that are crazy and home buying tilted). A financial planner goes into more details about rent to buy ratios here(link below). Summary: buying makes sense in growing markets where the rent to buy ratio is under 20. But the markets in which the rent to buy ratio is under 20 are the same markets that you *don't* want to live in. The ratios are low precisely for the reasons you don't want to live there, various quality of life and job prospects.
Second let's address the fear that 'rents keep going up so it becomes a better deal over time.' Rents can't go up relative to house prices or vice versa for very long because eventually people will arbitrage the difference away. When renting is cheap, demand for purchasing homes drops. When renting is expensive demand for purchasing homes goes up. But we'd expect small persistent distortions in the direction of buying being more expensive because so many people default to buying even when it doesn't make sense. But what about the Bay Area? Compound annual growth in housing prices over the last couple decades has been around 7.5% while growth for rent has been around 4.6%. But this is exactly why I expect regression to the mean. Overall rent to buy ratios in the Bay have been overheated and are now dropping, and it's prices that are getting pulled down faster than rent is going up. Additionally, rents have historically appreciated much more slowly than the stock market, meaning renting should get cheaper for you over time if you're investing.
Isn't that all moot if the home you buy keeps appreciating in price since you get to buy with leverage? (A down payment is typically 20% so a home purchase is leveraged 5:1). In the fastest appreciating housing markets, this has been true. But buying a single house is like buying a single stock. The volatility you should expect is going to be much higher than a diversified stock portfolio. Essentially, any claims made about predicting future housing returns boil down to momentum based reasoning vs regression to the mean based reasoning. Either could turn out to be true, and you shouldn't assume that you're going to out guess the market. And with all those wins you hear about you have to account for survivorship bias. All the people who didn't make out so great aren't bragging about it.
Take housing the in the Bay Area for instance. Apparently more than half of home sales are going to Chinese buyers. If there is a substantial crack down on the various schemes these buyers are using to get money out of China, or if a different city becomes a hotter investment market, or unforeseen things cause this to change, a lot of speculative money that was piggybacking on this cash flow might leave. This has happened in other times and places. Indeed, the price index in some of these super hot markets like SF and Seattle have seen sharp declines the last few months. You may hand wave this away by claiming that 'it always comes back' but that again doesn't actually calculate through how much opportunity cost you are paying by not pumping money into the market during down turns.
Another source of volatility is the inherent linkage between house prices and employment in the area. By buying a house close to where you are currently making a high salary (which you would want to since commute times disproportionately affect happiness) you are making a long term bet which, if it doesn't pan out, will simultaneously leave you without that high paying job, either forcing you into a long commute or selling the house and moving to a different city. This is extraordinarily common. Labor mobility boosts earnings, and it is difficult to account for this in a calculator, but the younger you are the more wary you should be of locking yourself out of major career moves that move you geographically.
'But the market is expensive too!' there are a couple important points about that. The first is that none of the typically cited measures that people tout to claim the market is expensive have historically been very good predictors. Remember, if you can make a confident prediction about the market you can make gigabucks, so anyone claiming this who isn't sitting on top of a mountain of money should be considered suspect. Second, let's look at three examples of people trying to time the market. All three people invest at a rate of $200/mo. Person A has the absolute worst luck in the world and invests on the eve of all the worst stock market crashes over the last 40 years. Person B has the best luck in the world and invests exactly at the bottom of all the crashes. Person C believes it is hard to out predict the market and just puts some of their savings into the market each month. Maybe you're guessing that person B and C do about the same even though C's strategy is way easier. Nope, it's even worse than that. Person A, the unlucky one wound up with 660k. Person B, the lucky one made 950k. But Person C, who just plugs $200 in rain or shine made...1.38 million. What? How is that possible? Person B still misses out on gains over time by waiting around with cash in hand trying to time things.
So let's plug this back into the housing situation. If a mere $200 a month over time in the market generated 1.38 million...well that puts a big damper on the stories of people making millions from holding a house for a long time. If you were to sit down and carefully go over the numbers with such happy folk they usually did worse than they would have putting similar amounts away into the market (people will get very mad at you if you do this). Again, people who happened to buy into the hottest markets before they sharply appreciated may have outperformed, but you shouldn't expect to be able to predict that ahead of time.
Aren't I doing the same thing from the other end by predicting that the stock market will do well over the next 40 years? It's very different because, as mentioned before, a single house is more like a single stock than it is like a globally diversified portfolio. When you look at a stock index over the long term, even things as catastrophic as the World Wars is just a blip. Betting on the world economy is just a much different bet than betting on a single house in a single market.
What about if I do something clever like buy a big house with my friends? Bigger houses cost less per room etc. A few problems. Going in on a house with multiple people also means splitting the tax advantages of home ownership. More luxurious homes are subject to bigger swings in home valuation during downturns than single family houses since that's where most of the demand is. Second, this situation multiplies the opportunity cost of not being mobile. The chance that at least some of the people will wind up needing to move sooner than expected is high. Which leads to the third thing which is that this is a much bigger hassle to coordinate both immediately and ongoing and it may end your friendships, which is going to be painful if you are living together for years.
What if I time the housing market? This doesn't work for the same reason that timing the stock market doesn't work. Pretend it is right after a crash and you're thinking of making an offer on a house. Where does the down payment come from? You can bet that lending standards have gone up in a crash and you're not going to get a zero down loan. The money will have to come from your investment portfolio, which means you're pulling money out of the market at the worst possible time to gamble on a particular house outpacing the market. This is a bad plan.
Come on! There has to be some situations in which buying makes sense! I did manage to find two situations where you can have a reasonable expectation of coming out ahead, or at least not doing too badly if things turn south. These scenarios are still highly reliant on you being sure you want to stay in a particular spot for at least 10 years, so there's opportunity cost and risk there. 3 Bedroom, 2 bath houses are in highest demand, leaving 2 and 4 bedroom places slightly better deals. If you buy either a 2 bedroom condo and rent the second bedroom to someone reliable, or rent a 3 bed/2 bath with a fourth bedroom converted garage and live in the converted unit while renting the house to a family, both of these can pay off while giving you future flexibility to not need to move if family planning comes along. In either case you just stop renting the extra room. In the case of the 4 bedroom you'd start renting the garage unit when you moved into the house until you needed it as well. If you want to pull off this strat in a crazy housing market you'll still need to find a good deal and run the numbers yourself. And you'll have a tendency to put your thumb on the scale to get the outcome you want, so you have to be pretty careful about that. Also, trying to convert a garage yourself can be a real time and money sink without guarantee of success due to insane zoning laws, so that kind of setup is rare. Using a strat similar to this you can stretch to maybe make rent to buy ratios of 25-30 close to break even i.e. in cities you'd actually want to live. The Bay Area is probably still out though unless you want to live far from your job which is a terrible misery inducing decision.
'I still think I should go in on a house with someone else'. One of the reasons the above scenarios work is that they don't introduce the complications of multiple stake holders. Having renters vs owners means the friction is relatively low if (more like when) things change.
Gambling on hot housing markets isn't a free lunch. It takes up a lot of your time (both before and after the purchase) and encourages poor emotionally driven decisions. And then it exposes you to a bunch of politics that will further degrade your quality of life as you now have a huge proportion of your net worth tied up in this scheme. The realtor market is oriented around juicing whatever misconceptions you have that will encourage you to buy whatever you can afford, and the politics around trying to force homes to be 'good investments' are toxic.
Okay so this is a lot of doom and gloom. Gee thanks, Romeo. Well, the reason I went to the trouble of writing all this is because there's a massive upside to being aware of these issues. And that's freedom from worrying that renting is bad! This pays huge dividends over time as you don't need to ever worry about locking anything down. Combine with having few enough belongings that moving is no longer a huge chore and the ability to move once every few years becomes a real boost not only to your career potential but also to not calcifying into routines that make your life seem shorter and less varied.
https://rhsfinancial.com/2019/06/rent_vs_buy/

Post Script:
This post was originally written for young people in HCOL areas considering obviously -ev financial moves. Home ownership obviously makes a lot more sense if you are

More established in your career and can predict moves more easily
Living in a medium to low cost of living area
Farther along your savings trajectory making the house a much smaller proportion of your net worth
Are relaxed enough in your search time that you can wait for something that actually makes sense to come along

[Part 2] KAVA Historical AMA Tracker! (Questions & Answers)

ATTN: These AMA questions are from Autumn 2019 - before the official launch of the Kava Mainnet, and it's fungible Kava Token.
These questions may no longer be relevant to the current Kava landscape, however, they do provide important historical background on the early origins of Kava Labs.
Please note, that there are several repeat questions/answers.

Q51:

How do you think about France in Kava market development plan?

What is your next plan to raise awareness among French about Kava?

Answer: It is important to reach many top markets. For countries like France we need to find 1st regulator partners such as Binance that can help provide access to KAVA for users. When our CDP platform launches, we will work through local validator partners to help translate content and work with local users.
We have some great community efforts where people create content for us.

Q52:

Why did you choose Cosmos instead of Aion, which comes with AVM built on JAVA, which can be accepted by many developers?

Will there be a possibility that one day we will be able to collateralize a privacy coin, such as Monero, on KAVA?

Answer: We like programming in GO, interfaces are OK for Java. Cosmos will also feature a WASM module and EVM later. The Cosmos-SDK is very flexible and it allowed us to choose our own security model. That was unique compared to other frameworks where we had to adopt the underlying blockchains. In Cosmos-SDK we can create our own blockchain.
Re: privacy - you can do some fun things in payment channels to make transactions more private. Such as onion routing clearing and settlement across different nodes. This can be possible in the future, but not our priority now.

Q53:

The biggest advantage of finance is the efficient allocation of resource allocation. If KAVA connects assets of multiple platforms through the interchain technology, the efficiency across the market will be improved.

But in terms of connectivity, Facebook's Libra, with its centralized giant platform, could be a big threat for the future. Of course, regulatory uncertainty still exists. KAVA wonders what big platform companies think about entering the blockchain field and how they can cope with their competition.

Answer: We think of Kava as a DeFi service that can integrate with wallets, exchanges, and other platforms when users want loans or stable coins for payments. We don't see competition with Libra, but we see lots of users potentially getting into crypto which will be good for the market, good for BTC, and good for Kava.

Q54:

What will you do with the money after IEO?

What is the most important markets that Kava is focusing?

What is your marketing strategy to approach those markets?

Answer: What will we do with the IEO money? Put it in a bank and keep building. We keep our funds safe in secure accounts that are insured. We always maintain at least 2 years runway in pure fiat to ensure we can survive in any bear market conditions and come out on top in the end.

Q55:

On mainnet, which function/feature can we expect to see on Kava since i only saw informations about its testnet?

Answer: mainnet will feature KAVA, staking, delegating, validator software, voting and governance / parameter changes. Following mainnet, the validators will vote to enable transactions and the CDP platform. We expect this to be towards the end of the yeaQ1 2020

Q56:

How does Kava maintain the stability of its stablecoin? Are there any opportunties for outsiders to arbitrage or any other mechanisms to maintain price stabilization?

Answer: Kava users deposit crypto assets as collateral and can withdraw a loan based on the amount they deposited. They must always provide more collateral than the loan is worth. When the value of the collateral drops due to market conditions, before it reaches the value of the loaned amount, the platform will auction off the crypto assets for USDX that is on the market at a discount. Holders of USDX can buy these assets at a profit. This removes USDX from the market and makes sure that the global USDX to collateral in the system remains balanced. Similar to MakerDao, 3rd parties can run "keepers" - very simple implementations which continuously monitors the Kava/USDX credit system for unsafe CDPs, and execute the liquidation function the moment they become unsafe. Keepers can also perform arbitrage on DEX/Exchanges executing trades across the Kava platform and the markets.

Q57:

Alright! So KAVA is doing DeFi right, could you explain DeFi in layman term to us.

Answer: Decentralized Finance. Finance is really ensuring everything about past, present, and future value of money. You need safe custody and a store of value to keep money you earned in the past safe to be used later when you need it. You need something liquid and easily tradable to be used in the present. And the trickier one is the future - people need to get loans on the assets they have or hedge against the assets they have in order to ensure they can build for a better future. That’s finance.
DeFi is taking all those things and making them open access and unregulated so that regardless if you were born with out an ID, if your credit score is bad, or if the government is trying to censor your actions and limit your spending - DeFi promises to give you a way to get access to the financial products you need.

Q58:

Could you please briefly explain your projects, and why you choose DeFi as a problem to solve?

Answer: Kava is a cross-chain DeFi platform for cryptocurrencies. Kava offers decentralized loans and stable coins for any other crypto asset such as BTC, XRP, BNB, and ATOM.
DeFi is the killer use case of crypto today. I think most people see this clearly now. We believe providing the basic DeFi services is the very first step that is required before blockchain technology can really become wide spread - so we started here.

Q59:

Why the name of the project KAVA?

Answer: We started in crypto thinking we would build banking products and we wanted a more relaxed cool name to stand out from other solutions. Turns out Kava means many things.
Kava = Hippopotamus in Japanese
Kava = crow in hindi
Cava = wine region in spain
Kava = a medicinal root you add to Tea
Kava = now a cross-chain DeFi platform
But TLDR - we liked the name and thought it sounded short and sweet.

Q60:

What do you think of the future of DeFi in this space? Will DeFi one day take over the traditional financial systems? -- any wild guess on when it might happen?

Answer: I think centralized solutions will always have certain advantages and DeFi will also have certain advantages.
But truthfully, KYC is a problem from a user experience point of view. One of the big things with DeFi is there is no need to make people go through a KYC process anymore.
If we imagine a world where USD Is king, or Renminbi is king, or BTC is king. DeFi has a place in all of them because open access to financial services is a basic human necessity.

Q61:

As we have known, Lending is not the only problem to solve in the whole financial areas, are you planning on going beyond lending? What other financial products are in your pipeline?

Answer: Thats a good #Q .
While we have a lot to solve to offer lending to other crypto assets - we can expand our support to non-crypto assets, to NFT tokens, and other assets.
We also have plans to offer derivatives and other synthetics other than USDX - such as synthetic bitcoin and Yuan. What is exciting about Kava and the oracle system run by validators is that we can leverage this infrastructure around the world to do all sort of things.
One of the more interesting products is creating under-collateralized loans using payment channel (layer-2 tech) of our USDX coin. Two parties can lock funds in payment channels and place bets on the price feeds from the oracles. When the funds reach a maximum threshold, the bet closes. Since a price feed is just a data set, we can have the settlement rules be multiples of the real data. In simple terms we can create 100x leverage products for the craziest of traders 😉

Q62:

Btw KAVA is a bit unique because it use Cosmos/Tendermint. While other DeFi use Ethereum , why you guys choose Cosmos?

Answer: Cosmos is the future. Even facebook’s Libra consensus design was just a copy of Tendermint. Kava, Binance, the Cosmos Hub and many other blockchains are built on the same Cosmos-SDK framework.
It’s very flexible and soon interoperable. This is a huge advantage over Ethereum. Where system’s like MakerDAO will be forced to develop in a slowly evolving chain like Ethereum and only touching Erc20 assets, Kava will be able to rapidly evolve, program in GO rather than solidity, and interoperate with chains like Binance directly.
We’re very excited to get BNB and BTCB onto Kava’s CDPs and to put KAVA and USDX onto the Binance DEX. This is fairly easy on Cosmos.

Q63:

I saw in KAVA deck that you guys will use USDX, is it a stable coin? How is it going to work and its relationship with KAVA token itself?

Answer: USDX is an algorithmically stable token pegged to the USD. USDX is the token users recieve when they get a loan from the Kava platform. USDX is collateralized or backed by crypto assets so the Kava platform should always hold more crypto value than the USDX it loans making USDX a very safe store of value even if the market crashes 10x overnight. That is what a stable coin should do.
USDX is special though. Natively, users can spend or trade USDX freely like other stable coins, but the important difference is that 1) USDX is free of censorship and does not require a bank or anything else. 2) USDX can be “bonded” or “staked” providing an interest bearing yield between 2-10% APR. This is substantially more than what I can even get from my bank account.

Q64:

From your point of view as KAVA team, what would be most anticipated feature in KAVA ?

Answer: Our CDP platform launch later this year. The first USDX will be minted then.
Support of BTC in the CDP smart contracts. No blockchain has supported a real decentralized custody and use of BTC with smart contracts before.

Q65:

Indonesia is one of the “developing” countries, how is DeFi can help in making a difference in those “developing” countries?

Answer: I can’t speak for developing countries as it’s not my expertise, but DeFi in general is trying to offer the exact same services to EVERYONE. Whether you are in San Francisco or Indonesia, the financial services you should have should be similar. The rates and fees you pay should be the same. DeFi is fair treatment and open access for everyone. That is what’s nice about having things run on a protocol.

Q66:

Last but no least, since we are doing AMA in Indonesian group, I believed our members wants to know if you are interested in going to Indonesia to expand your community and reach?

Answer: As I said, I have not been before! I am traveling throughout South East Asia for a lot of the year. It is one of my destinations. I hope to meet many of you while I am out there.

Q67:

Defi companies are growing at a rapid pace, but they're actually smaller than traditional financial institutions. In order for Defy to become a global trend, it must eventually acquire consumers within the traditional financial industry.

Traditional financial consumers, however, have poor technical understanding and want psychological stability through government guarantees such as deposit insurance. After all, what does KAVA think about long-term competitors as traditional financial institutions, and what long-term strategies do they have to embrace traditional financial consumers?

Answer: We think of financial institutions as big honey pots of potential DeFi users. For example, if Kava can offer margin lending at better rates than a bank because there is no middle men or compliance costs, users should want to use that service.
As crypto grows, I believe more FIs will integrate crypto assets and DeFi services. For example, in the US you cannot currently margin trade crypto as a retail user. But it could be possible for a regulated FI to integrate a lending service like KAVA without causing issues with regulators due to Kava having no counter party risk other than the user itself.

Q68:

MakerDAO is only for ethereum but Kava support multiple assets, is this only difference?

What are Kava main advantages compared to MakerDAO?

Answer: Kava supports multiple assets THAT are on different blockchains. Maker can only support ETH. This is a huge difference. In addtion, the role of Maker is quite likely a security token. It represents fees paid by others. Where in Kava, the token is used in security of the blockchain protocol itself. The holders of Kava have a lot at stake and need it to govern the system. Maker holders have nothing at stake.
I think a huge difference is that with our model being POS and based on validators with slashing if they don't participate our governance participation and management will be much more effective than MakerDao.

Q69:

Ticket claim for KAVA Launchpad is comming around the corner. This maybe last IEO ticket claim of this year. With this hype and expectation of investors/traders, do you think KAVA will be a big boom to end this year with happy tears?

If someone wants to manipulate Governance function of KAVA by changing voting result by possessing many Validators Node through buying over 51% KAVA of market, what will KAVA team do? Do you think Emergency Shutdown(Maker has this) can be considerd as a solution?

How will USDX be minted and backed on KAVA platform? If its based on uses crypto collateral, how will KAVA team make it stable since the inflation of crypto price?

Answer: I believe Kava to be underpriced currently, especially compared to maker which is 10x the value and serving ETH which is much smaller market than ours.
But I cannot tell you with certain if Kava will boom or bust - only the market can decide that. As with all speculative assets, do your homework and trade at your own risk. We here at kava are very LONG Kava, but we are biased 😉

Q70:

Stablecoin is the word that I heard everyday, so do you have any plans to release wallet for stablecoin?

Answer: There are already wallets created for Kava that can hold our tokens 😉

Q71:

My first question is: Why do traders choose to use KAVA instead of margin on exchanges?

My second #Q is: What happens whenKAVA doesn't have enough cash to loan out?

Answer: Traders who cannot get passed KYC can use Kava. Traders who want better rates than exchanges can use Kava. If regulators like in the US prevent margin trading, Kava is a great solution.
Kava creates USDX out of thin air when users withdraw loans. It will only create Kava is the user locks a great value of crypto in the system to back it. When the USDX loan is repaid, it is destroyed. In this way, Kava can scale however big it wants - it will never run out of cash.

Q72:

i heard as you said before in San Fransisco, Silicon Valley. what is the relationship about Silicon Valley and KAVA? and what will KAVA done in this Q1 ?

Answer: I am born and raised in Silicon Valley. I am blessed to have grown up in this area where lots of tech innovation is. However, I am the only one at Kava that lives here full time. The others on my team are in the Cayman Islands and Cambridge.
San Francisco is a hub for the largest crypto projects - Ripple, Coinbase, Stellar, etc. It's a great place to network with founders and feel inspired to do big things. It is not the best weather here, but the people are focused and extremely helpful if they can be if you aim to do big things.

Q73:

With regard to minting new USDX, is there any potential chance to against Global financial law? Likewise USDT, issuing money should guarantee deposit of real collateral as I have known.

Answer: USDX is debt. It is not a guarantee, but the protocol's rules state it must have more crypto assets behind it than the # of USDX issued. In this way, rules are better than guarantees. Tether guaranteed 1:1 USD, it turned out not to be true because their funds were seized by regulators. That is impossible in the case of Kava.

Q74:

What is the uniqueness of KAVA project that cannot be found in other project that´s been released before?

Answer: Cross-chain is unique for us. But most unique is our partners and validator group that is launching our blockchain. We have incredible partners that support our work including Ripple, Cosmos, Arrington, Hashkey, SNZ, Lemniscap, etc.

Q75:

KAVA was initially planned to launch on Ripple network but later switched to Cosmos Tindermint Core. What is that something you see in Tindermint Core that is not available anywhere.

Answer: We did not plan to launch on ripple and did not launch on "Tinder"-mint. I have a fiance - she would be quite mad.
We did however use the Cosmos SDK - a tool set, to build our blockchain that features tendermint consensus.
Tendermint is just the consensus so I assume you mean the SDK. The SDK is very much "choose your own adventure" you can build anything and design all the spec of your blockchain easily. In this way you choose the tradeoffs that make the most sense for your special application/network

Q76:

How much portion of USDX is backed from crypto/fiat money ...& please mention why any trader, hodler will prefer USDX over other stable coins?

What are the biggest challenges you expect to face and how do you plan to overcome these challenges?

Answer: 150% of USDX or more is backed by crypto. Traders will use USDX because it offers a savings rate. This rate allows traders heding bitcoin or other assets to not only store value, but earn a return.

Q77:

What do you think about creating liquidity for the Kava project?

Answer: It's the biggest challenge. My hope is the savings rate USDX offers will give it natural organic demand over existing stable coins. It will definitely be a large BD process to get USDX listed and used worldwide.
We work with some of the worlds best market makers to seed liquidity today. But we will need organic demand in the long-term

Q78:

So many IEO projects consistently drop in price after listing. Whats different with KAVA, what are some special highlights?

Answer: Why is Kava based on Cosmos? Based on what considerations?

Q79:

How do you see the chinese language community? How do you view the opportunities for growth in the chinese community?

Answer: You will be soon listing on Binance, what are your plans on the business side after listing? In one years time, what are your thoughts on where Kava's development will be?

Q80:

If we take a look at all the different types of DeFi products/apps out there, including decentralized exchanges, stablecoins, atomic swaps, insurance products, lending platforms, trade financing platforms, custodial platforms, crowd investment platforms, etc, nearly cover all the important areas of traditional finance.

In this age of all these different platforms taking hold, where does Kava see itself appealing to its app developers, users, investors?

Answer: What does Kava do? What can a normal user (of crypto) achieve by using KAVA?

Q81:

How does Kava maintain the stability of its stablecoin? Are there any opportunities for outsiders to arbitrage or any other mechanisms to maintain price stabilization

Answer: What is the reason for the IEO price reaching 6x the first round private sale price? How did you come about to reaching this valuation?

Q82:

What would you be able to do more for Russian-speaking communities and regions?

Answer: one thing to keep in mind is that yes, we do have limitations and regulations to follow when it comes to certain countries and we will adhere to those regulations in hopes of proving ourselves to be a thoughtful and long-term solution. while we may not directly work with some countries, we hope that communities there can understand that we're here focused on being sustainable rather than another project around shorter-term gains.
for myself, I'm actually belarusian myself so I absolutely see the value of working in the CIS/Russian-speaking regions. we'll continue to do AMAs, interviews, and always engage with Russian-speaking communities to better understand what the #Q s, concerns, and thoughts.
If there's anything else we can do in this region and with the @gagarin_ico communities, please let us know!

Q83:

What are your major goals to archive in the next 3-4 years? Where can we KAVA ecosystem in this period? What are your plans to expand and gain more adoption?

Do you guys feel satisfied by seeing your progresses and achievements till now, when you look back to the day when you have started this project?

Answer: We want to really build out great DeFi products for the masses. I really believe that DeFi will be a major force to allow much more mass adoption for crypto over the coming years. In the sorter term, we want to push out our blockchain and build on top of that our CDP platform, which allows users to trustlessly put collateral onto the Kava blockchain, and receive a loan in USDX that will be also trustlessly administered.
We will then build out more complex products and financial derivatives for crypto users and traders. We have barely scratched the surface in what we can do with DeFi so I can't predict the future, but we want to build products that are pegged to BTC values so that traders have more leverage purely in crypto.

Q84:

Which one of your milestone do you think was difficult and which was the encouragement that courages you to achieve it?

What were the Minimum and Maximum limit of KAVA tokens that one can be able to STAKE after the Mainnet launch ? And What will be the percentage of reward one gets and will it in future ?

Answer: Good #Q ! Well we've been working on open source cross-chain technologies for a number of years and honestly it can be a pain. I think the Cosmos SDK made it significantly easier to implement the features that we wanted into the software.
I think the largest challenges for Kava are not software based but in market adoption. Makerdao is a great project and they have spearheaded a lot of the work in the lending field. Hopefully Kava can be a very meaningful contributor as well

Q85:

What if someone fails to repay the debt? Is that KAVA is taking collateral system to enterprise level & if so, what's the plan? How secure KAVA is to safely handle the collateral tokens?

Answer: These CDPs or "collateral debt positions" are always over-collateralized, which means you have to have more asset locked up in the bucket than you can draw from the bucket. The system leaves a margin when the collateral is 'called' to be able to sell off. If the asset cannot be fully redeemed KAVA is minted to cover the balance. Hence KAVA is a 'lender of last resort". This is why its important that we select good initially assets to support 👍

Q86:

I am very impressed with your voting method, how does it work? Whether users can vote to change things in the platform, are you a programmer with filters to decide what can be voted on and what is not possible?

Answer: Thanks. A lot of this was pioneered with the Tendermint team. Basically voting is entirely open and asynchronous, meaning anyone can submit a proposal to be voted on. All the project in the Cosmos ecosystem are working diligently to expand the space of variable or features that can be modified via this governance method in protocol. For example, we were the first to enable transactions directly via governance in our Testnet-2000!

Q87:

Where does the interest rate come from for holding USDX specifically & technically?

Answer: Great #Q ! Just like in MakerDAO, lenders of collateral (e.g. BTC, BNB) pay an annual interest rate to borrow USDX. A portion of that interest rate accretes to holders of KAVA, the rest we can apply a 'carrot' for users to adopt USDX. In short, Savings rate is loan interest rate less 'rents' collected from KAVA holders

Q88:

As far as I understand it KaVa is used both as a staking token and as collateral for Kava stablecoins (UsDX) .Can you talk a bit about the stability mechanism? Can other forms of collateral be used to create Kava stablecoins (a la Multi-Collateral Dai)?

Answer: KAVA will not be used as a collateral type in the CDPs. Collateral types will be assets exogenous to the system, like BTC and BNB. Of course BTC and BNB's value fluctuates. To make USDX not fluctate we ensure there is always more BTC or BNB in the CDP bucket than 'stable' USDX. Therefore BTC could increase or decrease a lot, as long as its less than the 'stable' debt of USDX that you have drawn, the system is healthy and functional 👌

Q89:

As far as I know, KAVA had 150 Validators in the test. Why do you have so much. Which conditions are your team based on to choose / invite them to stay decentralized, important for a Defi platform like KAVA?

Answer: KAVA mainnet will launch with a cap of 100 validators. We want as many validators as possible. The reason? What if KAVA was run by just you and me. Well that works if people trust us, but its pretty for us to collude and act maliciously. Its harder for 100 people to collude -- its still possible, but harder. And so we put a lot of effort in to promoting a healthy and large validator community, and empowering them to grow their stake in the system

Q90:

As a developer, which program languages can i use in kava core smart contracts?

2How secure your fully on-chain liquidity protocol & What's is a core Smart Contract ?can you briefly explain.

Answer: Yay developers! 🤓 The Cosmos SDK is currently written in Golang. So thats a good start. What other language would you like to work in?

Q91:

What do you think of DEFI in the Blockchain space?

DeFi brings many benefits to users, but conflicts of interests with the Bank. What is the solution of kava?

Answer: Defi to me is offering financial primates, the supplies of which are spreadout amongst many participants, as opposed to few. People offer loans on BTC today. Kava's goal is to maximize the amount of counterparties to any loan, thereby 'socializing' the returns on any activiely used financial product

Q92:

What is the crucial thing, in your opinion,that would increase adoption of KAVA and possibly the rest of crypto. What’s the KAVA economic model and how will it is architecture ensure scarcity of the token and help to growth token price?

Can you tell me more about the new technology that combines the benefits and interactive functions of Cosmos with the DeFi applications you have built?

Answer: Principly what I believe is 'new' about the KAVA tech stack is that we are building a standalone piece of software that treats other network techologies as 'first class citizens'. This means from the ground up our design is mean to easily incorporate and work with other software. A lot of blockchain is a story of "everyone will use my software, because its the best". Kava Labs worked for years against this view while bringing open Interledger to market.

Q93:

As Per Kava website ! $KAVA was done many partnerships with Big project like Ripple, Cosmos, TenderMint, Hashkey, etc ! So, whats the major reason and benefits of these partnerships to kava project?

Kava Project have their own Mainnet Blockchain So, whats the main work of Cosmos Blockchain in Kava ? Is Kava projects is on Both mainnet and Cosmos OR Kava is just using the Cosmos Blockchain services?

Answer: Working together. Pooling resources and talent to make something bigger! Crypto is still a little fish in a huge ocean of financial services. Kava Labs has always had an eye for inclusivity. Grow the pie!

Q94:

I have been too involved in KAVA's AMA, I think I know all about your technology.I want to ask a successful person like you why come with cryptocurrencies and blockchain, with talent. There are many other areas for you to choose, so why are you targeting such a risky market?

Answer: Successful ay? hehe. Depends how you define success and what your goals are. I love delivering products to users. Crypto has some fantastic users, and there is still sooo much to be built. I think KAVA has a lot of promise, but there is still so much work to be done and I hope users like you all become producers some day as well

Q95:

What's the most critical and innovative point of KAVA to ensure users that it is the best under DeFi niche?

How can you compete MakerDAO which has done good number of business with recent market! If I hold KAVA tokens how KAVA leverage the tokens value and make it moon for me? 🙈

Answer: "IF" you hold KAVA tokens now? 😂 Again I think this a markets concern. To the extend that users on other chains begin to trust KAVA brand for loan issuance, and we get some solid adoption of USDX I think we're in a good spot. I would say a benefit of KAVA is that we are FOCUSED. We're not trying to be everything for everyone. This is lending, quite simply, for the large market cap coins -- and that's hard enough

Q96:

Why KAVA needs to create it's own stable coin, whereas there are are many other options available in the market? Is that crypto tokens can be stable!!?

Answer: Yeah there are a lot of USD backed stable coins that is true. Indeed we have looked around with working together with a number of them. The difference with USDX (and DAI) is that its crypto-collateral backed. Doesnt mean we won't work with others in the future 😉

Q97:

Processing fees on loans we need to pay in kava or usdx?

Which types of success you've been seen in testnet? Why on Nov 5th you've planned to launch mainnet? How many testnet was processed in the past?

Answer: Three major testnets with some minor iterations therein. Testnet-3000's software was pinned to KAVA mainnet software. That testnet is looking good which is a good indicator for smooth sailing on mainnet launch, we'll see 🤞

Q98:

DeFi is a hot niche when it comes to crypto/blockchain project! Most of the projects are developing aiming DeFi, How KAVA is looking to contribute in DeFi ecosystem? What will be the approach of KAVA to systemize & increase adoptability?

Answer: DeFi is big. Mostly on Ethereum, which is great! KAVA is for non-ethereum networks 😇

Q99:

What is the main reason that you think that Cosmos-based Kava zone will present a new validator opportunity :- a complex and multi-faceted governance system that allows differentiation?

Answer: Validator #Q , nice. I believe its important for validators to be able to distiguish there service in multiple ways, not just on security (otherwise they will be treated as a commodity). KAVA present an opportunity for validators to distiguish themselves on the basis of proper governance of system parameters on behalf of their delegating constituents. KAVA is a "lender of last resort", so delegating to a sophisticated validator could lead to better results beyond security.

Q100:

How is kavas tendermint better than other defi consensus especially with the introduction of etheruem 2.0 which many believe will be better than all others - considering kavas association with ripple, is it possible to foresee defi loans from crypto to fiat ?

Maybe kava partnership with centralised banks?

Answer: IDK about that. But we will be working closely with the great folks over at Ripple, thats for sure!

Q101:

Adoption is one of the important factor that all sustainable blockchain projects should focus to be more attractive in the invertors' eyes.

Can you tell me what KAVA has done and plan to do to achieve Adoption in the reality, real use cases, our real society?

Answer: Bitcoin is real!? I'm continuously impressed by the demand and size of that network. Help us capture that demand! Really, if we can I think the future looks bright for KAVA!

Bitcoin ETF details and price effects

For those of you who don’t know VanEck and SolidX have submitted their 3rd ETF proposal for Bitcoin. I highly encourage you read the proposal so you can understand how it may affect the prices of Bitcoin and other cryptocurrencies. There was a massive public misperception of what the BTC futures would do to price which, in my opinion, led to the incredible rise and fall in Bitcoin’s price. Also, I would like to supply some topics you could present to SEC during their call for public comments.
Here is the ETF proposal as submitted on June 5, 2018. This initial document is what I have used to base the following post on.
Here is a slightly updated proposal that the SEC has requested public comment on dated June 26, 2018.
ETF vs Futures
A Bitcoin ETF increases Bitcoin scarcity and liquidity which is bullish for price whereas BTC futures contracts has no direct effect on BTC markets with the exception of removing longs. Since Bitcoin futures removes longs they are bearish for price. Let me explain.
The futures contracts introduced in late 2017 are cash settled, they do not directly result in ANY buying or selling of Bitcoin. They are contractually enforced bets on the outcome of price. Because they do not result in the buying (demand) or selling (supply) of Bitcoin they do not affect price directly. Before futures existed if a US investor wanted to go long on Bitcoin they had to buy Bitcoin (increase demand), there was no other option. However, with the creation of futures contracts Bitcoin bulls gained a new option for going long: Bitcoin futures.
It is somewhat understandable why an investor would go from buying actual Bitcoin via frequently hacked and regularly overloaded crypto exchanges to highly regulated legacy exchanges that don’t carry the risk of losing Bitcoin to a hack and have clear tax laws. Unfortunately this resulted in a loss of demand for Bitcoin as some investors moved from the physical market to the derivatives market. Also, the public did not understand the supply and demand implications of the Bitcoin Futures contracts resulting in the price runup and subsequent crash upon their opening.
The proposed Bitcoin ETF, on the other hand, will result in the buying and selling of actual Bitcoin. This means anyone with a brokerage account will have the ability to buy and sell Bitcoin indirectly through the ETF. It will have major implications for supply and demand and, subsequently, price.
I implore you to read the top link but for the lazy I will discuss some topics I find interesting in the proposed ETF.
Summary p.8-11, 53-57
Each share of the XBTC ETF initially represents 25 Bitcoins. This value will decrease as BTC are sold to pay fees associated with the fund. Shares will be created and redeemed in baskets of 5 shares by “Authorized Participants” using cash OR Bitcoin. This means any brokerage firm can buy or sell the shares in the ETF which represent actual Bitcoin. These brokerages can then offer the ETF shares to their customers allowing any average Joe and grandma to (indirectly) buy Bitcoin.
Here we can see the major implications of a BTC ETF. While it will not necessarily increase adoption it will increase liquidity. The ETF allows for the most technologically naive investor to buy Bitcoin. It also increases market efficiency as “smart money” can buy and sell shares to the SolidX trust using cash or Bitcoin, in other words, smart money can arbitrage. Interestingly, the ETF plans to do all transactions in the OTC markets…
Settlement via OTC markets p.39-42
The Bitcoin ETF plans to do all of its buying and selling of Bitcoin via OTC markets. If this is not possible they will look to general cryptocurrency exchange markets for settlement, specifically GDAX, BitStamp, Gemini, iBit, BitFlyer, Kraken (p.41-42). As they plan to buy Bitcoin in chunks of $500,000 or more they do not want to singlehandedly alter the spot price of Bitcoin. This is why they plan to use OTC markets. They have not named the OTC markets they plan to use.
Price Determination p.60
The price of Bitcoin will be calculated at the end of every trading day by the MIVS OTC Bitcoin Index (MVBTCO) which primarily aggregates price from several, yet to be named, OTC markets (p. 60-61). It would be nice to know who these OTC markets are but essentially the price of Bitcoin will be determined at the end of each trading day by aggregating the price across multiple markets. This will reduce issues with price discrepancy across exchanges.
At the end of the day Net Asset Value of the ETF is determined by multiplying Bitcoin price (obtained by the MVBTCO) by the number of Bitcoins held by the ETF and finally adding the value of any cash held (p.60-61).
Great Discussion of Risk
The proposers have a great discussion of risk, including the risks inherent to the security of blockchain (p.13-17) such as early investors (Satoshi?) dumping all their Bitcoin, 51% attacks, and collusion of miners.
They need to elaborate more on my favorite risk: forks. Bitcoin will fork again. One of these forks, like BCash, will be successful from a financial standpoint. Who at the ETF decides which is the real Bitcoin? Will they sell one of the forked coins, add it to the valuation of XBTC, or offer a new ETF...XXXBTC anyone? If you want to comment to the SEC, this is one area that needs clarification. No one wants their BTC ETF to decide to hold Bitcoin Diamond because of a bad executive decision.
Another risk is big after hours swings as Bitcoin is traded 24x7x365 but the ETF will only be traded during market hours. This isn’t a new risk but it leaves ETF holders vulnerable to market swings at times of zero liquidity.
A final risk is regulation and they have a great discussion of changing regulatory status on pages 27-28. They seem equally frustrated by the lack of clear regulatory guidance.
They have a good understanding of how Bitcoin works but look at p.36 for a comical depiction of a Bitcoin Miner.
While the XBTC ETF does not increase adoption directly it will indirectly benefit the crypto space. The increased visibility of Bitcoin and blockchain in general will give the public comfort in the space. They will no longer think Bitcoin is just for buying fentanyl and other drugs. With increased comfort will come increased research and investment. Hopefully the ETF is fuel for the next leg of innovation is this transformative space.

Why Bitcoin futures and a shoddy market structure pose problems

HFT market making and prediction/speed

[discussion] Dynasty is Hell Rookie Draft Recap

Last year, a group of degenerates from the subreddit started an auction league. It was awesome, terrible, terribly awesome, awesomely terrible, etc. We drafted the rookies in April, and keeping true with tradition, just completed the second year’s early (Pre-NFL Draft) draft. Here’s how it started.
ROUND 1
1.01 – Ezekiel Elliott
1.02 – Laquon Treadwell
1.03 – Josh Doctson
1.04 – Corey Coleman
1.05 – Leonte Carroo
1.06 – Tyler Boyd
1.07 – Will Fuller
1.08 – Michael Thomas (OSU)
1.09 – Derrick Henry
1.10 – Sterling Shepard
1.11 – Pharoh Cooper
1.12 – Kenneth Dixon
1.13 – Malcolm Mitchell
I started with picks 1.02, 1.09, and 1.13.
There are no real surprises in the top 4. To be quite honest, if you have any pick in the top 4, you should feel pretty good about it. There’s no truly wrong answer. Taking Doctson or Coleman first overall might turn some heads, but if things are as I truly believe them to be (that Treadwell ~= Doctson ~= Coleman) then it shouldn’t matter. Yes, Elliott is the 1.01. No, it’s not a huge difference between 1.01 and 1.02. If you’re sitting at 1.02 and can’t pull the trigger on somebody in particular, offer the trade back to 1.03 or 1.04 and see what kind of juice you can pick up.
Personally, I drafted Treadwell, and I am very happy about it. He’s likely to be a first round draft pick, he’ll be 21 during his rookie season, and he showed a very clear statistical progression from 18-19-20 years old at Ole Miss. If he just ran a little faster on his 40, he’d be just as much of a slam dunk 1a/1b as Amari Cooper was last year.
Picks five through eight are where things get interesting here. Leonte Carroo is probably the biggest reach as far as ADP is concerned, but it’s early enough that you can mostly throw ADP out the window. I would like him a lot better if he had the chance to be a first round NFL pick, but I don’t think that’s the case. Even still, he should be able to be a productive fantasy WR with WR2+ upside depending on where he lands. Boyd, Fuller, and Thomas (OSU) should be no surprise to anybody in the first round here. All three are talked about as possible first round NFL Draft choices, and any WR drafted by the NFL in the first round should be worth a look in fantasy. I would take them in a different order (Thomas, Boyd, Carroo, and then Fuller) but all four of these guys are solid first round WRs in rookie drafts.
My pick came up next with the 1.09, and one obvious name was available. This league tends to value WRs >>> RBs so Henry being on the board was no surprise, but it did make fielding trade offers very simple. I was offered Breshad Perriman for the pick and accepted quickly. It was a perfect example of making a very good initial offer, and both teams got their guy. Perriman for the 1.09 might look a little awkward on paper, but Perriman for Henry fits market values pretty closely.
The first round finished off with a few picks that I love. This might be the sweet spot for draft picks this year. Sterling Shepard went at 1.10, and he might be my favorite (price-adjusted) WR in the first round. Will be very interesting to see him adjust to the NFL. On the other hand, Pharoh Cooper is not somebody I would have picked here. I’ve seen him compared to Randall Cobb which seems somewhat fair, and if he gets play on special teams it should help his progression. Can’t argue against the pick, but I wouldn’t have made it for myself.
At 1.12 though, Kenneth Dixon might be the steal of the round. Some people have him as their overall RB2, and he could be an early favorite to be an every down back. He could also be one of the safer bets of the second half of this round to be drafted in the top 50+ next year in startups. Can you imagine if he went to Seattle in the second/third round? RIP Thomas Rawls. I was really hoping he would fall to me at 1.13. Alas, I had to settle for the top remaining WR on my board, Malcolm Mitchell.
He could either look like a massive reach or a relatively fair value by August, but my team’s composition suggests that’s what I want. At this point, my team’s starting receivers were Amari Cooper, Allen Hurns, Laquon Treadwell, and Breshad Perriman – the latter two of which were just acquired earlier that day, and both of which had never played a snap in the NFL. I need to swing for the fences here, and at the very least, pick up a warm body at the position. My RBs were fine. It was too early for TEs and QBs.
So, Mitchell became my guy. Without giving away too much, I’ll defer to Matt Waldman when he writes:

Whatever the reason, Mitchell is a solid receiver with athletic skills and dimensions similar to Jeremy Maclin. The fact that Mitchell also displays the focus, craft, and toughness of an NFL vet makes him a receiver to watch.

And with that, the first round concluded.
ROUND 2
2.01 – C.J. Prosise
2.02 – Mike Thomas (SMU)
2.03 – Braxton Miller
2.04 – Devontae Booker
2.05 – Jordan Howard
2.06 – Paul Perkins
2.07 – Tajae Sharpe
2.08 – Rashard Higgins
2.09 – Charon Peake
2.10 – Keith Marshall
2.11 – Alex Collins
2.12 – Keyarris Garrett
I entered the draft with picks 2.02, 2.04, and 2.09.
Round 2 started off with a guy I wished I could have gotten for my own team, C.J. Prosise. My team composition suggested I lean WR one more time with my next pick, but Prosise would be my backup plan. He’s a decent prospect that can catch the ball, and could easily be my RB4 after the NFL Draft. For now, that’s where he sits, but it’s on pretty even footing with a number of other guys.
I was next at 2.02, and for very similar reasons to my pick of Mitchell, I reached a bit on another WR that could run the gamut between boom and bust. But, so it goes when throwing darts, and Mike Thomas of SMU would join my team. He’s been getting a lot of buzz (“the good M. Thomas”), and while I bet his draft stock takes a big hit after he’s drafted later than folks on Twitter would like to see, I’m fine losing in the short term to get a player I really want on my team. Going back to Matt Waldman, he says:

While Odell Beckham might be more acrobatic, his displays were mostly confined to practices at LSU. Thomas is the most acrobatic receiver I've seen this year—maybe in several years—in actual college level competition.

That’s some very high praise. I’ll take a lotto ticket if the payout is high enough, and this one seems to fit the bill.
Braxton Miller came off the board at 2.03, which seems fine. He’s another candidate in the “boom/bust WR” pool, although his name is at the end of my own list. Then we saw three RBs drafted in a row: Booker, Howard, and Perkins. All three of these are very strong “mid-high second round” RBs. Depending on landing spots, they’ll each have a shot at a starting gig or at leading a timeshare, and they can all win in certain ways. Booker is older than we’d like in a rookie RB, but that didn’t stop David Johnson from doing some very sick things at a similar price point last season. And quite frankly, we’re at the point in the draft where the WR is starting to dry up, so these picks all make a lot of sense.
Three more WRs then came off the board in a row: Sharpe, Higgins, and Peake. To be quite honest, they’re not really on my radar much at all at this point, and the sources I defer to for deeper scouting aren’t very high on any of them either. Solid late second round WRs, but not much more or less.
I traded away both picks 2.04 and 2.09 to teams for players that I had inquired about before the draft. Starting a dialog on both early helped get each deal done while on the clock. For 2.04, I sent the pick and Sammie Coates for John Brown. For 2.09, I sent the pick for Torrey Smith and a future 3rd. I think I made solid additions with both trades, and my goal with each trade (including the original one in the first round) is to accelerate my rebuild into a playoff team as early as 2016, and as a championship competitor no later than 2017.
The 2.10 went to Keith Marshall, which turned out to be my favorite selection of the entire round. He was someone I was eyeing at 2.09, and I had dreams of him falling down to my 3.02 selection. He’s got everything you want out of a late second round pick and has some truly elite upside if he lands in the right spot, and turns into the player at the top of his range.
The round finished off with Alex Collins at 2.11 and Keyarris Garrett at 2.12. Collins, like Marshall, has pretty much everything you might want out of a RB at this point in the draft, and Garrett has been gaining steam as a mid-round sleeper thanks to Matt Harmon, among others.
Overall, the first two rounds of the draft were very tame. There were a few trades, but nothing spectacular, and there were a few reaches, but nothing truly out of the ordinary. If I were to make up a list of my top 24 prospects, most of them would be represented in these 25 selections.
ROUND 3 HIGHLIGHTS
Maybe I’ll write up rounds 3/4/5 if there’s interest, but for now, here are the highlights:
I took Jared Goff at 3.02. Seems like a fine arbitrage of sorts for a player I expect to be drafted ~1 round earlier by August, and the RB/WR value had dried up for the most part. Carson Wentz was the only other QB taken in the third round at 3.10.
Hunter Henry was the next non-RB/WR to be taken at 3.05. A fine price for him, I’d expect similar here as with Goff.
Jonathan Williams was my favorite RB taken in the round at 3.03. Jordan Payton was my favorite WR taken at 3.08.
All in all, there were plenty of targets left in the third round, but the talent dried up more than I was expecting it to. It will be very interesting to see how this changes after the NFL Draft. Otherwise, the sweet spot for me seems to be the top four overall picks, and then entire second round. I would assume that some of the WRs taken at the end of the first round here would be available in the second round of most drafts.
For completeness' sake, here is the team as it stands today: http://i.imgur.com/8MBwJCf.png
Hope you enjoyed the read! I’d love to hear your thoughts on the first few rounds: Which picks do you like? Which do you not like? Where are you going to try and stack your own draft picks if you have the option?

You may not know this...but your mods at /r/StockMarket can predict the future months in advance and are on a 10-trading day prediction streak!

Options/Trading 106: Risk and Strategy (Part II-A)

Recommended reading (note, there is no 101):
Options/Trading 102: Past the basics
Options/Trading 103: The Premium
Options/Trading 104: The mechanics of buying options
Options/Trading 105: Risk and Strategy Part I
~~This is likely to be the last post on this subject.~~ Thanks to character limits, I have to divide this into 2 posts. Here's the second half
If you've made it all the way here you should be equipped enough to move on to any of the countless sources of information out there.
Special thanks and shout-out to goppeldanger for inspiring me to write these.
Lastly, I want to emphasize a disclaimer: Please don't trade options based on what I've written. As you can see, this 5 part series was longish but does not do the justice that options deserve. I love options, but spent a considerable amount of time learning about them before trading. I have no problem admitting that I lost a lot of money and luckily got it back when I first started, at which point I became humble, lucky, wiser and thankful. The particular focus on these posts was on trading options, not hedging as was their original purpose. Trading options in the way I've discussed here has nothing to do with long term investing, but rather speculative gambling.
As we saw last time, there are many ways to profit from options. In addition of being able to bet on underlying price increasing/decreasing, options let you to bet on timing moves, the market's "fear", price movement indifferent from direction and more. They also let you be on either side these bets.
The most important thing to consider your strategy first, and decide which of these many factors you're actually betting on and remember to consider how all the moving parts work. Even if you successfully predict the outcome of any of the variables, it is entirely possible to lose the bet. The strategy you pick defines the risk you take. The strategy you pick will also let you limit the risk, even if it involves selling calls on expensive stocks. This is important, because it's easy to take a single metric/position and judge it: writing an AAPL call right now sounds like the most dangerous thing in the world. But if you already own 100 shares of it, writing the call suddenly turns into a very safe move. The difference between the two is whether we're evaluating a position or an overall strategy.
I'm also covering things outside of options, given that some options strategies involve things that aren't options. (Editor's note: for simplicity and scope, I will refer to an ETF/ETN/ETP and ET the alien as an ETF)
VIX
This probably deserves its own 5 part series, but I'll touch on it.
Affectionately known as the "fear gauge," the VIX simply a statistic which measures implied volatility for options on the S&P 500 index. The VIX is an extremely popular tool used by options traders - if you remember the Black-Scholes pricing model, the variables which make up an options premium are stock the price, time until expiration, interest rates and implied volatility - implied volatility being the only unknown variable built into premium. Even if it's an unknown variable ahead of time, it's quite easy to reverse engineer real time (google "options calculator").
The principle is simple: if people anticipate big moves in a diversified and historically successful index, they'll load up on options, increasing their demand, and subsequently their price. Typically, the anticipation is a bearish one (hence the fear). As such the VIX can be useful to get a general idea of what the market is feeling, and how much people are willing to pay to hedge their positions or bet on an impending swing. It's also unique because it's not an actual security that can be bought, instead it's a statistic with a ticker symbol and people can buy options for betting or hedging.
To be clear, you can't own VIX shares, but you can bet on its future price. And this is where some of the widespread confusion starts, by treating its options and ETFs the same way as regular options and stocks. On top of that, it doesn't help that there are a ton of ETFs related to VIX futures - a quick google search brought up VXX, VXZ, VZZB, XIV, XXV, XVIX, XVZ, ZIV, CVOL, VQT, SPLV, IVOP, SVXY, TVIX, TVIZ, UVXY, VIIX, VIIZ, VIXM, VIXX, VIXY. And these things are complicated. My favorite description of them: "They're derivatives, sometimes leveraged, of a future that is a forward expectation of a statistic that nobody can arbitrage." I had to read that a few times to get it.
Here's some key characteristics of the VIX:

If you check out the price history, you'll notice a few things. First. The price is mean reverting which means that the price is constantly trying to return to the average (which at a glance, looks like it's around 20, could be wrong). So if it's priced at 30, you can expect it to go down and if it's trading at 10, can expect it to go up at some point. Second, although the price could technically be zero, it's a highly improbable if not outright impossible. Third, this measure of volatility is itself, very volatile (violently moves up and down), which is attractive to some. But there's no such thing as easy money - I'll explain how looks can be deceiving.
Because the VIX can't really go to zero, it can give put options the peculiar behavior of having lower prices than their intrinsic values.
VIX options are european style, meaning they can't be exercised prior to their expiration date. Because of this, options can be less volatile than the underlying when far from expiration - since the price has time to revert to its average before expiration. This also means VIX options are most useful for hedging if market crashes coincide around expiration dates.
Since you can't own VIX shares, the options settle in cash when they expire. The implications of this are huge when considering strategy (e.g. no way of selling covered calls). Cash settlements also reinforces the fact that these options are just bets - you can't "agree to buy the shares at strike price at a later date." You only get the cash equivalent of doing so.

Now let's take a look at VXX, an ETF which tracks the short-term futures for VIX:

VXX acts like a normal stock, in the sense that it has its own ticker, and you can actually buy shares of it.
Yes, you can buy options of VXX (american style which allow early exercising). In which case you'd be buying stock options of a contraption tracking implied volatility of stock options within an index. See how this can get complicated? This recursive price relationship makes VXX options behave different from normal ones, so even though you can buy the underlying and exercise at will, normal strategies (like spreads or straddles) won't necessarily work as you'd expect.
Because VXX tracks short term (30 to 60 day) futures, it suffers a negative roll yield while trying to stay balanced. In simple terms, it means VXX is permanently losing relative value by constantly trading cheap "close to expiration" options for more expensive "further from expiration" ones. In very simple terms, VXX price is permanently aiming to be worth $0, and will forever rely on reverse splits to avoid being categorized as a penny stock. This is the case with most of the other VIX specific ETFs (with some exceptions). So if you're betting on volatility long term, simply buying and holding VXX shares is a terrible idea. And if you're planning on simply using long term options, now you'll be losing value from the roll yield AND time decay. However, if predict that Greece is going to take out the market next week, using VXX to get rich is perfectly acceptable.
If you look at the picture again, you'll also notice that VXX is not as sensitive as VIX. This is largely for two reasons. 1. VIX has mean reverting price 2. VXX tracks VIX futures, not existing spot price (a common misconception). Because of this, if VIX shoots up one day, investors assume that the price will go back to normal in the future and don't over-react, and vice versa. This also means that longer term VIX ETFs (such as VXZ) are even less sensitive to short term price moves.

Finally, leveraged VIX ETFs

Take everything I just wrote, and multiply it by itself 2 or 3 times!
On a serious note, it's not even that simple. Leveraged ETFs are in a category all of their own and quite dangerous if you don't understand how they work either - I've actually been thinking of doing a write up for them because they're also misunderstood. That and I'm secretly fascinated with their irrational existence.

Ok. I'm finished touching on the VIX subject.
tl;dr - Don't salivate over a graph and its apparent opportunity to get rich. Many moving parts.
And finally: Options/Trading 107: Risk and Strategy (Part II-B)

Colored Coins vs ERC20 Tokens - The future of Futures?

04-09 01:23 - 'Actually, I do understand them, but I’m arguing against Bitcoin advocates so it’s not like you guys understand markets very well. But I’m in an echo chamber so it’s not like I’ll win through upvotes. I traded oil futures...' by /u/blocktradz4dayZ removed from /r/Bitcoin within 8-18min

Introduction into futures trading: how to profit from increasing price without buying more Bitcoins

The smartest bitcoin trade in town?

[uncensored-r/BitcoinMarkets] Why Bitcoin futures and a shoddy market structure pose problems

[Table] IAmA: I have a PhD in EE and an MBA from Harvard; I study tech hardware companies for a living; ask me anything about any tech hardware company on the planet

Verified? (This bot cannot verify AMAs just yet)
Date: 2012-06-25
Link to submission (Has self-text)
Link to my post

Questions	Answers
What does a vagina look like?	Actually relative to the course of humanity, no question is more relevant for a man to know definitively.
	But knowing what it looks like is less important than knowing how to get there. And if long-term enjoyment is your objective, you also need to figure out how to stay.
Also, what do you think of Dell's announcement that they're going to move away from consumer computers?	Every few years, Dell says they want to move away from low-margin consumer PC where they can't make much money.
Isn't HP pretty much in the same boat?	Yes, but they're #1 and do a lot of other things.
But what's the long term value in remaining in that market? It seems applications and content are where it's at. A company that can support that growing sector with enterprise hardware and services has an advantage over a company that puts too much into consumer hardware, especially as Apple slowly takes that space away. Wouldn't Dell want to make that move?	I think so, but have to do it via M&A since Dell has almost zero R&D in house.
Their enterprise services are basically being eaten away by Oracle and they are widely viewed as less competent than IBM. They are #1 in the printer market but isn't that a shrinking market due to tablets etc?	Services - they have some work to do, but the infrastructure is all there. Need to rebuild their bench of talent and wrap up all the bad contracts signed under Hurd. Networking is a decent business and they are maintaining their position there.
	Printer is in secular decline, but a very strong cash generation business in the mean time.
Do you have any insight of the workflow how such incompetent pricks end up in the high level management of tech companies?	Quite often, the guy in the CEO's chair was (a) extremely lucky at some point in his career, and (b) stuck around long enough to get full credit for it. My opinion of most corporate executives is pretty jaded after having met so many of them. But doing their job is no picnic and the average tech enthusiast I meet understands less than 10% of what the CEO needs to know or do to run the company. There's actually an extreme shortage of qualified people to run big tech businesses.
Realistically, what do you think about the so called "talent shortage"?	There is a shortage of talent in markets that are new and growing fast, and an excess supply of talent for industries that are old and not growing.
Do you base your analysis purely on public information?	Yes, but the amount of information I can put together on company A working full time and utilizing every available public resource is many times greater than what the average armchair quarterback can do at home working a few hours a week. Investing is an incredibly cumulative job, so the longer you do it the more you can see patterns in the data. I spend a lot of my time doing detailed models for every company I invest in, which I think can be a huge competitive advantage. Not just for knowing how a particular trend will impact the business, but also when something is announced or a company upstream/downstream from them says something, I know what it means and how to react.
What doing your analysis do you have bullshit meter for each company your analyze? Which one is the worst offender?	Ha great question. I have had to develop an acute bullshit meter over the years. The worst offender is no longer a publicly traded stock.
Could you be specific as to the markets that are new and growing fast?	Smartphones, wifi, solid-state storage, to name a few.
Ok, this is sweet. So it sounds like I'm on a good track; I'm starting research today in fact with one of my prof's, and have an internship quasi-lined up for next summer at Apple.	Minor = doesn't matter. If you need some electives, take accounting and corporate finance. Helps when you transition to the business side of things if you can speak the language.
Have you noticed a difference between colleagues/friends of yours that chose to go to grad school vs going into industry? Would a minor in anything in particular be useful in retrospect? Also, best and worst part of getting your EE undergrad? What made you go to grad school for your MBA and not EE/Physics/Comp. Sci?	If you are really brave, take OB.
What is "OB"?	Organization Behavior.
	Aka, how not to look like a complete asshole when you're in a management position.
How long do you think it will be before RIM is bought out or goes bust? What do you think of the rumour that they will be purchased by Facebook?	RIM is attractive for its net cash position, IP portfolio, and long tail of BBS subscriber revenue. The hardware/phone side is worth nothing. I am surprised it hasn't been acquired yet.
	Facebook, lol.
At what point does Steve Balmer get forced to leave Microsoft? And why has he been able to stay at the head of that company for so long with so few successes?	Ballmer should leave today, imo. He is running a terrible farce. Windows8 is awful. And as much as they like to point to the scoreboard (earnings), Microsoft has been awful at seeing and capturing technology changes.
Windows8 is awful.	Fair points.
Why do you think he is so awful? I mean not his specific failings, but why he actually has those failings?	Monopoly power and ridiculous amounts of money flowing in. Perfect combination to give everyone there (especially at the top) all the evidence they need to confirm they are awesome. Even when they suck.
What did you think of the Skype acquisition?	Waste of money.
What are your thoughts on MSFT's new Surface tablet?	On your bio, TL;DR sorry. Anyone can make it into a top MBA program. See my other AMA where I answered a lot of questions like this.
Do you think it'll be a platform that will spur more innovation in the future?	Tech-wise.
Do you think APPL has now reached the level where MSFT is at in terms of growth and being cash rich?	Surface: hate it. But the non-Apple PC community will invest billions developing and marketing Win8 tablets so expect to see a lot more like this and potentially someone will make a winning device. Needs to be cheaper. Hate that WindwsRT comes with office by default. That adds $25-40 to the bill of materials. Makes it impossible to compete w/ ipad on the basis of price.
Do you believe the tech industry has reached the peak of a bubble with the whole FB valuation fiasco and most of the IPOs current prices below offering?	Apple: still a lot of growth potential as they continue to enter new geographic markets. But agree, not a lot of innovation on the near-term horizon.
What range do you think FB should've been priced at?	The FB IPO was an embarassment, one of the worst processes I've seen, and I have invested in or evaluated hundreds of IPOs. Good companies are reluctant to IPO now due to the FB hangover.
What are your thoughts on the all startups in Sillcon Valley that are spurring up?	I have no opinion honestly about what people do with companies they start. If cashing out is what you want, then do it. If staying at a company forever because you're passionate, do that. But ffs, don't stay as CEO of a startup if you are holding the company back from reaching the next level. It's not about you anymore once you hire employees.
How long till they come back down and will they?	Now, back in oversupply. I expect prices to move down to normalized levels very quickly.
Why aren't we seeing more dual mode e-ink / LCD displays?	1) too expensive to combine.
	2) you can't do e-ink with a touch panel - it response to small voltages and the capacitive touch panel messes up the view.
What are the main barriers to US based electronics manufacturing?	A few things make it hard to manufacture electronics in the US 3) Taxes are 30% here vs 0 to 15% in favorable countries. IMO the tax rate on manufacturing in the USA should be 0% since we're currently getting 30% of nothing anyway.
Thoughts on Amazon's hardware business?	Amazon doesn't have a hardware business for long if all it does is sell crap at a cheap price to hopefully lock you into Prime. If they can make a decent tablet, then it makes a lot of sense to sell that at $0 profit in order to drive more of the core retail business. I'm skeptical because Amazon lacks the R&D capability to move at the industry pace with compelling products. Better to stick with what they're good at.
What's the future for Microsoft's mobile efforts?	Same opinion for the elusive Facebook phone.
Do you think they can break through the iOS/Android duopoly?	I don't believe MSFT will succeed in mobile. But they will waste a lot of money trying.
What country is best poised to take over America as the leading tech innovator? America seems to be falling behind in education and IMHO it's a matter of time till it falls behind. Any private dot coms that you think are poised to do big things?	I don't think America will lose its spot as the leading tech innovator. Our system of free enterprise and high rewards for the biggest risk takers is unlike any other country on earth. Everyone thinks it's China, but I disagree. Too little respect for IP protection, and frankly too much corruption in the relationship between state and private enterprise. I don't think it's Japan or Europe or any other mature market. I do agree America is falling behind where it should be in terms of education, but innovation is more about how the system encourages people to take risk by offering a huge potential reward to winners and respecting the rule of law especially around protecting IP.
How do you see the cable business in the future? Both the big networks (Comcast, etc..) and the hardware suppliers like Motorola, Cisco and Broadcom?	IPTV and over the top TV/video will slowly eat away at cable subscriptions, but that doesn't mean the cable co's are dead. Just means they will likely need to change their business model to cafeteria style as opposed to shoving over 9000 channels at you for one high monthly price.
Hi - I'm a supply chain analyst/PM who works for Research in Motion in Ontario, Canada. You are undoubtedly aware of the company's current situation.	Assuming you can move around, press on Apple or Samsung. If you're feeling a bit braver, Intel and Microsoft are desperate for talent.
What other companies do you think a would be a good move, career-wise, should the worst come to pass, that could make the most of my six years of experience in this industry?	My view stay clear of LG, HTC or Nok.
What? What' s wrong with LG and HTC?	Both in market share death spiral... will begin losing money and never recover. Not enough smartphone units to offset the increasingly high fixed costs of doing business as a global smartphone vendor. That's my opinion.
Do you follow the deemphasis of .NET and managed code by Microsoft? They are all in on C++, or native code as they call it, for the windows 8 tablets and phones. Anders Hejlsberg is probably the greatest language designer of all time and has done amazing work on C# and .NET. Yet in this latest version of Windows with WinRT as the foundation does not advance .NET at all. Who is in charge at Microsoft?	Sorry, I'm the wrong guy for code base questions.
	MSFT had to make some changes with Win8 to make sure all Windows appstore apps will run from a single binary on ARM or x86, but that may or may not be relevant to your .net question.
	On who is in charge at Microsoft, answer is a few delusional rich guys whose heads are the size of Mars up their Jupiter size asses.
Why is Bill Gates standing on the sidelines while Microsoft imploads? He would love to have Apple quantities of money if just to bankroll his plans to save the world.	He and Steve Ballmer don't see it happening that way. They see (a) record earnings, (b) believe Win8 is a panacea for the Microsoft brand moving into phones/tablets while holding lock on PCs, (c) think they are innovative and awesome.
The more of your comments I read, the more I wish all business analysis reporting was done in your tone/plain english. It would make it so much more refreshing to read on a daily basis!	That's because you don't have to be professional or PC on reddit :)
Why can't anyone do a better job at search than Google? The quality of the search results from google have not improved for the last 10 years. Yet no one else seems to have developed anything better.	There are some potentially better solutions, but proven only on a small scale. Google may improve their search using some of them.
	Only a few companies on earth have built out the data center capacity to index the web in near real-time, algorithmically search all the data, and give you an answer right away. The tech infrastructure alone is a barrier to anyone who thinks they have a better search.
	Also, google has improved its results over time by doing stuff in the background to reduce gaming of their algorithm.
Lenovo?	Good company with high market share in the only regions of the world where PCs are still growing.
	I worry about competition from Samsung (they are pushing hard on PCs now) and general slowing in China.
Any specific Samsung products you think will pose a threat to Lenovo's market share?	Mainly in notebooks, but Samsung is starting to push very hard both on high-end laptops (ultrabooks), and will see more of this next year around Windows8 with hybrid tablet/clamshell devices and low-end ultrathin laptops that should see prices as low as $350 imo.
	Samsung is #2 in Brazil (3rd biggest PC market in the world now) and Lenovo is #1. If the battleground for growth is emerging BRIC markets then Samsung and Lenovo are potentially the prize fighters. I'd probably bet on Samsung either (a) winning or (b) losing but not until making life difficult for Lenovo for 2-3 years.
Wow I need you as a tutor! I have many many questions. You don't have to answer them all. Thanks! Can you elaborate more on Samsung vs other companies in different countries on the case of laptops? What about cellphones? What do you see as Nokia's future? Is there any chance that Samsung/LG will go bad? What path should Japan take to take on the global world of cellphones? Will iPhones stay in Hong Kong/Singapore? (iPhone got a pretty big share) Will German tech industries go bad with the EU going bad? What do you see on EU's future? If you are familiar with Hynix, how would they perform compared to others? Which companies are worth a look from the BRICS? G20? If you are familiar with North Korea's software development, what would you say about their development of Red Star OS? Which companies are relatively easier to get hired into for their size? What do you think about Korea and Japan's technological integration into social services; which companies should reap the greatest benefits after FTA's? What is the future of American car companies? German? French? On what you mentioned, how will Samsung perform against Lenovo in Brazil in the territory of laptops? With SSD's on the rise, which companies have positive outlook in that area? Do you see a future in Google's self-driving cars? How soon/late or why not? If you are familiar with Rasberry Pi, which companies should/would take the benefits from it if there are any benefits? With the ever evolving FTA's around the world, which steel company do you think will reign supreme? Does Chile have any potential in the tech industry in the global market? What do you think about Sony with their playing level? Do you think they are going to go the right/wrong path? Community social sites, like reddit, is coming on the rise and making million/billionaires by the month. Should I start one too (of course I have some innovative idea) or am I too late? Should I sell my ideas? Korea has started schools with "smart classrooms"--not sure if you are familiar with that. Do you think tech companies will jump into that boat around the world? Will this be the next level of competition? Nigeria and South Africa are growing, but they have really high crime rates and that's what's discouraging my interests there. Do you think it's worth investing into tech industries in those countries?	You're asking a lot of good questions. I am signing off for the night but will just say that in business (and life) you will go a lot further by figuring out which questions to ask than by correctly answering the wrong questions.
Opinions on Xerox? importance of their ridiculous amounts of patents and high spending on r&d?	Biggest waste of potential in tech history.
Thoughts on corsair pending IPO. what metric do you think is best to trade on? do they have any simliar competitors that are public? also, on ARM. what do you think of their high PE? is it justified and do you think it should be higher like it was last year? who is gonna win in the mobile space ARM or INTEL???	Generally speaking, I don't often buy memory stocks. Too much cyclical and commodity dynamics.
	ARM is one of the best positioned companies in the tech space and that's why it trades for such a high P/E. I wouldn't make an investment bet based on ARM failing to succeed. The stock itself is another issue and for that I'm gonna avoid giving advice one way or another.
	Mobile space will be dominated by ARM, plain and simple. Intel might get some wins but I do not expect to see Intel ever get above 10% share in mobile comms.
Since nobody else has seemed to ask it, and since it's one of my favorite companies, got anything on ASUS? Sorry if I'm late to the party...	I think Asus is challenged over the long run even though they have a nice notebook business today. Their Ultrabook is good too. I worry mostly that their scale and cost structure are not good enough to sustain profitability as the PC industry consolidates around much bigger companies (HP, Lenovo, eventually Samsung).
Wow, thanks for actually getting back to me. I also noticed that nobody asked about Corsair. Got anything there?	High performance memory. Days are numbered is my opinion. No such thing as sustainable business making a differentiated product in a commodity business.
What do you do now?	I work for a global hedge fund, focused exclusively on tech hardware stocks.
Why the PhD in EE?	A few reasons for the PhD but basically because I could... I was working full time in R&D engineering, got a bunch of my stuff patented and published, so I approached some professors I knew and they said it would make a great PhD.
How is the compensation (if possible more specific than "good"), what about bonuses? What are your colleagues like? How is the climate and work environment betteworse/different where you are now compared to engineering?	It varies a lot from fund to fund, both comp and people.
	Some are full of assholes and don't pay well (common)
	Some have amazing people and pay very well (rare)
	And combinations in between.
	If I had to guess, entry level hedge fund analysts probably make $250k/year in salary + bonus. If you do well and have a share in the carried interest, it can easily be $1M or more. If you do poorly, you make $250k for a year or two and then have to find a new job.
Did you continue to work in industry while completing your PhD? On a side note, MechEng forever!	Yup I worked full time through my whole PhD, including classwork. It was a bitch.
How many patents have you authored?	4 granted.
Why does the hedge fund focus on hardware tech only? Like what purpose does that serve/what do they gain, rather than just looking for good investments in general?	Well, not all funds are the same.
	Some funds employ generalists who look at everything, everywhere.
	Some look at specific geographies.
	Some look at specific sectors... mine happens to be tech hardware.
	Still others look to invest in anything as long as it fits a certain theme, such as trading two sides of patent litigation outcomes or arbitraging the risk spread on M&A (basically when you buy stock in a company that is being acquired for $XX because it feels like a high probability event and you can earn, say, 6% in 3 months for holding the shares.
I am an EE an was offered a job in Schrader, which I refused for another job a bit closer to home. I was recently told that in the UK and possibly many more countries that a law is passing that states all cars have to have a tire pressure monitor fitted (which I believe Schrader dominates the market). Did I shit out by passing for a job with a company that (from the sounds of it) is going to hit the big time? And if this is true is it worth investing in Schrader?	There are a lot of regulations like this for autos, especially in EU zone and USA, geared around meeting CAFE targets for fuel efficiency. I haven't looked into tire pressure monitors but it sounds legit.
Do you think we'll see the next-generation of gaming consoles from Sony and Microsoft next year? Seems to me like they'd both want to put it off for a long as possible, given that they make the most money on software.	Yes, both have console upgrades planned in time for 2013 holiday sales
Can you recommend any publications/blogs you read regularly that get into some of the nuts and bolts of industry analysis? I'm really tired of reading the same bullshit pundits that love/hate Apple/Google/Samsung/Microsoft.	Honestly, I don't read any of it. This is my full time job, I do all my own research, talk with everyone and formulate my own opinions.
	What I read on blogs, press, and even a lot of the research brokerages is a mixture of garbage, shit, and recycled rumors.
Can you roughly outline your research sources? Is it a lot of reading press releases and earnings reports?	That, plus I travel a lot and meet companies all throughout the tech space including supply chain down to retail.
	Investing is a lot like the scientific method. Formulate a hypothesis, test it, narrow it down, test some more. It is a never ending process because companies change, technology changes, people running the companies change.
Do you have a blog of your own I can follow?	No.
Smart-Grid: What is the best company in the electrical smart metering and communication industry?	Nothing comes to mind except the wifi vendors. All the other businesses I've looked at serving this space (itron, some niche memory plays, etc) are uncompelling.
Thanks for the AMA. Can you elaborate on why you think Windows 8 sucks? Do you think Windows 8/Windows Phone 8 will have a slow market adaptation? And if so why? Also, what are your thoughts about the new Surface tablet, and how will this effect MS OEM partners?	Well, I think the metro interface is not user friendly and a lame attempt to imitate iOS.
	I also think it's going to be confusing to consumers that some Win8 devices will support your old applications and others won't. Who is going to explain that to your mom when she buys a notebook but can't install her 10-year old printer driver?
	Surface to me is MSFT's way of saying their OEM partners are taking too long and something needs to be out now to challenge ipad. It's pissed off a lot of OEMs already.
What about Microsoft and the upcoming Windows 8. Will they be able to gain new market share in tablets and smartphones?	Win8 sucks.
	Phones aren't selling and the ones they do sell are currently being so heavily subsidized it makes my eyes bleed.
	A lot of OEMs will make the tablets and you'll see a lot of push. Ultimately will be more expensive than ipad and that probably won't work.
After reading most of your answers so far, it sounds like you have a pretty negative view on most hardware manufacturers. Is there any particular hardware company that you do have faith in, or feel is doing the right thing to survive?	Ha, you got me. I think hardware is in secular decline. Cloud will only make that worse for all the HW companies selling into enterprise.
	Which pony is best? Ask me a name and I'll give my thots. Really trying not to give specific stock advice here.
With the introduction of Apple's "Retina Display" in the new MacBook Pros, it seems inevitable that they eventually feature it in all or most of their products. My question is, why aren't other phone/computer makers attempting to mimic the Retina Display level qualities in their products?	It is easier for Apple to justify the more expensive screen since they play exclusively in high-end PCs. For a guy like HP selling $500 laptop vs Apple's Macbook Pro in the $1200-2000 range, it makes a big difference in profitability.
	But yes, everyone is attempting to copy Apple, and most are not doing it successfully.
When do you think HTML5 will be the standard platform for mobile gaming?	Or something like it, browser based, yes. But distribution is still the bigger problem. If you can avoid paying Apple a 30% distribution tax, that's great, but saving 30% of nothing is still nothing.
Do you have any opinions or general insights on VMware vs Citrix vs gasp Microsoft in the world of Virtualization?	Virtualization still only at 5% penetration last I checked. Plenty of room for the pie to grow and that's good for all these guys. My understanding is VMW has the advantage. MSFT does ok in the channel with low end product.
	Personally I hate citrix on ipad.
	But i'm a hardware guy and for hardware virtualization is good for now (driving a server upgrade cycle) but long term will lead to longer hardware upgrade cycles which is bad.
Also, when are these graphics cards with 1000+ cores going to "revolutionize" computing? All I've seen so far is highly advanced science simulations, almost nothing for an end user.	NVDA is kicking AMD's ass in discrete graphics. And Rory @ AMD doesn't seem to mind focusing away from discrete cards - his attention is focused on what a few OEM customers want. I don't see that changing any time soon. GPU computing is slowly changing things for high-performance computing. Look at the makeup of the top 10 super computers - roughly half GPUs now. For every day computing, most software can't take advantage of all those cores.
NVDA is kicking AMD's ass in discrete graphics.	Nvidia owns 65% of discretes and 70-75% of the high end.
Is intel a threat to either of them? Last i checked they had a massive share of the gpu industry	Intel's share in GPU is entirely from integrated and chipsets, but 0% share in discrete graphics.
	But I do think Intel is a threat to both since over time I think we'll see all graphics except for gaming cards move to integrated on-die with the CPU. That's about 75% of the discrete GPU unit volume that will move away from NVDA over time. AMD is somewhat shielded because they also have integrated GPU and CPU on-die now, and are driving that to become the standard.
How is Kepler killing it? GPU Boost is an unpredictable gimmick that no two GTX680/670's are consistant (and review sites no doubt get cherry-picked high boosters), and gets beaten in compute by a Radeon 7870, in addition to the yield issues?	Market data is market data. Keppler is killing it.
How many hours per week do you currently work?	PhD took about 4 years.
how long did your PhD take?	Work-wise, this job never sleeps. Half of my investments are in Asia, so if I wake up to pee at night, I'm working for 20 minutes then too.
What is your view on the opensource hardware movements popping up everywhere? Will it make a big impact?	Something to watch, but I think more valuable for technologies that are highly customized and/or low unit volume.
What do you think of the motion detection technology of Kinect? Does Apple have motion detection planed for its devices? Gesture detection seems like it could be very useful to a user.	Eventually, yes.
So, how are Salesforce doing?	Still killing it as far as I know.
	Marc Benioff is one hell of an arrogant asshole though. But so was Steve Jobs.
What is the future of making CPUs faster? Adding multiple cores will only give a certain amount of speed increase, even with software optimized for multicore processing. The CPU clock frequency of new processors seems to have peaked at around the ~3ghz mark. Is using optical buses a possible solution?	Optical serial busses, eventually but it is expensive.
	I think near-term it will be less about faster CPU cores and more about consolidating system functions on-die to make the overall experience better. At least that is what I see Intel trying to do.
	Also stacked die and silicon interposers will make things smaller, faster, more battery efficient.
What do you see happening with google in regards to the moto mobility purchase? Iphone killer?	I think they sell the hardware business. They only wanted the IP and it's not good to compete with your customers.
How were you legally able to use your patents and publications from your R&D gig for your PhD thesis without violating a NDA?	All the R&D was published anyway, and patented, so it was public domain. And the company gave permission for me to do it. They even paid my tuition for 2 years.
How did you get into Harvard? Did they do an interview? Did you go to a public or to a private school? What do you think has a higher value, passion or natural skill? Thanks for the Ama.	Maybe check my other AMA first.

Last updated: 2012-06-29 20:22 UTC
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