Ethereum recently underwent a network upgrade as part of the London hard fork which will improve the pricing of transaction fees and introduce a new dynamic to Ether’s monetary policy.
The most significant London update was Ethereum Improvement Proposal (EIP) 1559. Prior to this update, an eBay-style first-price auction determined the fee a user paid to confirm a transaction on the network. Users posting the highest bids would see their transactions confirmed first but would be charged the full amount even if a lower bid would have sufficed. With no bidding transparency, the auctions resulted in unnecessary and highly volatile transaction fees.
Shifting the bidding from users to the protocol itself, the new approach seeks to smooth out the volatility in transaction fees. Instead of guessing what price would be necessary to include a transaction in the next block, users now pay a “base fee” which the network scales up and down based on demand relative to supply, reducing unnecessary payments. Users also can pay a “priority fee” to speed up the most time sensitive transactions.
A notable component of EIP-1559 is that the new “base fee”, paid in ether, is burnt, or permanently removed from circulating supply instead of being transferred to miners. This implementation design prevents miners from gaming the new fee system and, like a share buyback program, ties network demand directly to value accrual in ether. By lowering ether’s net-issuance rate, EIP-1559 reduces the number of ether issued per block.
Long term, with this change and the upcoming migration to Proof-of-Stake, some have forecasted that, subject to demand on the network, ether could become a deflationary asset. In the first 24 hours, about 5,000 ether valued at $14 million were burnt.
This might be good for corporate farms bottom line but it will accelerate the depopulation of rural America. Basically there are not enough jobs already in the corn belt. Little farm towns will disappear
Recently, Square announced plans to acquire Afterpay, the Australian Buy-Now-Pay-Later (BNPL) company, for nearly $30 billion. Afterpay enables consumers to split payments for purchases into four interest-free installments over eight weeks, charging merchants roughly 5% of the purchase value. Afterpay serves 16 million users and 100,000 merchants globally.
Although we were surprised by its size, this acquisition could enable Square to launch its proposedly planned Cash App payments network and to allocate its scarce resources to other strategic efforts like Bitcoin and DeFi that will benefit both the Cash App and Square seller ecosystems. Earlier this year, Square hired many software engineers to build “the fastest, most reliable, and easiest to use…most-sought after payment network in the US” as well as many sales people to “influence senior decision makers at the largest retail businesses and financial institutions in the world”. In essence, Square is building the merchant or supply side of a payments network to supplement Cash App’s already established 70 million annual active user base on the demand side of the network. Already integrated into a 100,000-strong merchant network globally, Afterpay should help solve Square Cash App’s supply side problem. Afterpay also has integrated Stripe and Adyen which should allow Cash App’s 70 million users to connect with millions of other online and offline merchants. In other words, this acquisition will marry Cash App, Square’s consumer brand with an extensive merchant distribution network, potentially creating a strong two-sided network.
Seller:
The combination of BNPL, Cash App’s already popular Boost rewards program and coming in-app merchant discovery can drive demand to Square sellers, increasing the value proposition of Square’s seller-focused products like Point of Sale (POS) and Online Store relative to those of competitors like Clover and Shopify POS.
Convert Afterpay’s larger, online-first merchants to Square merchants who today skew offline with annual sales below $500,000.
Accelerate Square’s international efforts, particularly in Australia, Afterpay’s home market, and various European countries like the UK where Afterpay operates as Clearpay, Italy where Square invested in digital wallet Satispay, Spain where Square acquired digital wallet Verse, and France where Square Seller is in beta.
Cash App:
Help Cash App’s customer acquisition in the US and in other countries, notably Australia where Afterpay plans to launch a banking app - or perhaps Cash App Australia - in October.
Boost Cash App’s revenue by cross-selling Afterpay users into its suite of products.
Enhance BNPL underwriting with data collected from Cash App users to which BNPL-only players like Affirm or Klarna do not have access.
Throughout history, the evolution of programming languages has abstracted away complexity continuously. While a simple calculator application might have required thousands of lines of code 30 years ago, today a few lines of JavaScript can create a functional, albeit rudimentary, calculator.
We believe OpenAI Codex is the next step forward. A sibling of GPT-3, the latest version of Codex is like Google Translate for code. A human can input English language commands like “Create a login page” and Codex will create functional software code. At a demo earlier this week, OpenAI showcased, a 10-percentage point improvement over the last generation.
While it may not solve the shortage of talent in software development, Codex does promise to multiply the productivity of software engineers and to help non-technical knowledge workers build products and solve problems that historically would have required engineering resources. In our view, Codex points to a future in which knowledge workers partner with AI-powered software to boost productivity significantly.
Talk about SQ as if ARK likes it. It has been liquidating SQ since Apr. It has dropped out of top 10 and now at number 20. Meanwhile PLTR and PATH are now in top 10. Regrettably, I didn’t load up heavily on PLTR, trying to get more below $20 and miss many good buys at low $20s. Ditto for COIN. Underinvested in COIN and PLTR. Meanwhile have lots of red TDOCs.
AI Day Highlighted Tesla’s Artificial Intelligence Prowess
By Frank Downing
Analyst
In 2018, ARK wrote that Tesla’s strategy of vertical integration would enable it to create novel use cases, deeper moats, and faster execution. At the time, Tesla controlled all of the hardware stack except for semiconductors: Nvidia provided the chips for training and self-driving.
At AI Day, an event focused on recruiting top artificial intelligence talent, Tesla unveiled an ambitious plan to complete the vertical integration of every component of its hardware and software stacks, from silicon, training cluster and compiler to driving simulator. If fully implemented in 2022, Tesla would be the most deeply integrated “automotive company” in the world, as shown below.
Forecasts are inherently limited and cannot be relied upon. For informational purposes only and should not be considered investment advice, or a recommendation to buy, sell or hold any particular security. Source: ARK Investment Management LLC.
Tesla pulled back the curtain on Dojo — its custom-built AI training supercomputer capable of 1 exaflop of performance, roughly twice the raw performance of the most powerful supercomputer in the world today. Dojo is centered around the D1, an application-specific chip (ASIC) designed from the ground up specifically for AI training, optimizing for low latency and high bandwidth. With System-on-Wafer packaging technology similar to that of Cerebras, Tesla combines 25 D1s on a single training tile for a whopping 9 petaflops of compute. A bespoke compiler designed to harness the D1’s custom instruction set architecture should be able to train Tesla’s neural nets with best-in-class hardware utilization.
We believe that by owning the AI stack - from training silicon to labeling to neural network design - Tesla should be able to iterate much faster than the competition. Not hostage to third parties shipping chips or fixing bugs, Tesla will be in full control.
Horizon Workrooms Offers a Glimpse into Facebook’s Vision for the Future
By Nick Grous
Analyst
This week Facebook released a new app for its Oculus Quest headsets, Horizon Workrooms, a virtual workspace in which to connect teams. Currently in “open beta,” Horizon Workrooms are virtual meeting rooms in which individuals and their avatars can interact in an immersive and collaborative experience. Check out Mark Zuckerberg’s demo.
With features like spatial audio, hand tracking, passthrough camera feeds, and plenty more, we believe the app is beginning to transform digital immersion. Although it is not a game-changing must-have application yet, Horizon Workshops does provide a glimpse into the future or, at least, Facebook’s hope for the future.
After missing the vertical integration associated with desktop and mobile computing, Facebook is going all-in on virtual and augmented reality, VR and AR, respectively. In addition to apps like Horizon Workrooms, Facebook owns and operates Oculus and has been aggressive in making VR- and AR-related acquisitions. In fact, roughly 20% of its employees are working on either VR or AR.
Positioned as a vertically integrated player in VR and AR, it appears Facebook hopes to own the next generation of internet experiences. Or, as Mark Zuckerberg would say, “In the coming years, I expect people will transition from seeing us primarily as a social media company to seeing us as a metaverse company.”
Pinduoduo (PDD) traded up more than 22% on Tuesday after the company pledged 10 billion yuan to support the advancement of agricultural technology and improve the livelihood of farmers in China. Management will be allocating all net profits to this initiative starting this fiscal quarter. Pinduoduo posted its first quarterly profit, though management does not expect the profitability to continue. While pledges to the Party may have alleviated some investor concerns about the future of big tech in China, we believe that Pinduoduo’s important role in modernizing China’s agriculture industry and alleviating poverty across Tier 2 and 3 cities is improving its relationship with the Chinese government relative to its competition. Pinduoduo’s interactive social e-commerce platform connects consumers and farmers throughout China.
30% Bill.com (BILL) appreciated almost 30% on Friday after releasing its fiscal fourth-quarter earnings. The company surpassed revenue expectations and guided analysts to revenues for fiscal 2022 that exceeded consensus estimates by an exceptional ~60%. Bill.com provides cloud-based software that automates back-office financial operations for small and mid-size businesses.
Zoom (ZM) traded down more than 16% on Tuesday after reporting earnings that pointed to a deceleration in the growth of its core Meetings product in the SMB/individual segment. That said, revenues increased a better than expected 54% on a year over year basis against the blistering 355% surge during the depths of the coronavirus crisis last year, and the number of customers with more than 10 employees increased a further 36%. Meanwhile, with roughly 2 million seats, Zoom Phone is gaining momentum while, with its acquisition of Five9, Zoom plans to expand horizontally with its own front-end UCaaS (Unified Communications as a Service) ecosystem. While higher churn from lower-end markets is not surprising as the global economy reopens, Zoom is likely to overcome that slowdown with share gains in the massive enterprise segment as it evolves the most technologically advanced offering for video conferencing and PBX. Zoom is a leader in cloud communications, providing solutions for video conferencing, voice, and chat worldwide.
The Federal Aviation Administration Has Grounded and Is Investigating Virgin Galactic
By Sam Korus
Analyst
The FAA is investigating Virgin Galactic after learning about a mishap during the flight that carried Richard Branson to space. While the flight looked picture-perfect, the spacecraft deviated from its planned trajectory, potentially putting its landing at risk. In a scathing report, the New Yorker highlighted Virgin Galactic’s lackadaisical processes and procedures, noting that it fired a flight-test director who raised concerns about the space program’s safety.
The New Yorker also contrasted Virgin Galactic’s strategy and technology to those of its competitors, Blue Origin and SpaceX. At Virgin Galactic, humans control extraordinarily complex systems, while Blue Origin and SpaceX have automated them. ARK believes that automation adds to the safety and security of complex systems, not just rockets but all vehicles.
