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Although many have shown a lot of angst about Bitcoin use on Silk Road, buying drugs is far from a major use of Bitcoin.

As the recent Forbes Article about Dread Pirate Roberts, the man behind Silk Road, points out, Silk Road is estimated to be doing about $30-45M in annual revenue. They also report that Atlantis, a newly launched competitor to Silk Road, did around $500k in revenue in the first two months of operation, so annualized to about $6M. Combined we’re talking at max $50M in annual revenue. Now it isn’t good that $50M of drugs is being sold for Bitcoin, but this needs to be put into context for total Bitcoin transaction volume. According to Blockchain.info, average daily Bitcoin transaction volume has been around $25-30M for the last 30 days. That annualized out to about $9-11 billion in annualized transaction volume. So about 0.5% of Bitcoin transactions were to buy drugs.

Wikipedia claims that the illegal drug trade constitutes 1% of world GDP. Bitcoin seems to underindex to other payment mechanisms for buying drugs.

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Growth without retention leads to the dreaded sharksfin curve. If you’re not retaining your users, then it doesn’t matter how quickly you add new users to your product. You have a leaky bucket.  Sooner or later, when you saturate your market of users and your new user growth slows, the rate of your existing user loss will outpace your new user growth and you will see overall usage fall.

Conversely, as long as you have good retention, if you add good growth you will rapidly see overall usage increase.

The problem with measuring and understanding retention is that by definition it takes time to measure. You have to watch multiple user cohorts over manye months to be able to really understand who users will use your site or app over time.

As a proxy for retention, you can measure engagement instead. If a user is going to stay a user for a long time, you need to create habituation, and habituation comes from repetition. So the more often someone uses your product, the more likely they will be to stick around. This isn’t a perfect predictor, but it is pretty good within a category. So within social games for example, all else equal, a game with a higher DAU/MAU ratio will have greater retention than a game with a lower DAU/MAU ratio. But a game with a higher DAU/MAU ratio may or may not have greater retention than a communications app or a media app with a lower DAU/MAU ratio. Because usage of apps varies by category, you need to be careful of comparing across categories.

This is one of the reasons that Facebook watches the “6 of 7″ day metric very closely. This is the proportion of total users that have used your product 6 or more days out of the last 7. Clearly, highly engaged users. For a new startup if you were above 20% on this metric you would be very, very happy.

I always look at engagement for fast growing social apps to see if the growth is underpinned by strong retention. When we invested in Snapchat in the seed round and Whisper in the A round, we saw extremely strong engagement in both cases, and both companies have seen tremendous growth since then.

 

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PernixData announced the general availability of the Flash Virtualization Platform (FVP) today. Congratulation to Poojan Kumar, Satyam Vaghani and the entire PernixData team for an amazing execution! It’s hard to believe how far the company has come along in just 18 months since founding.

The revolutionary FVP platform aggregates and virtualizes flash storage across servers to create a scale-out data tier to boost storage performance with no impact to the existing storage infrastructure.  Simply put, companies can run more virtualized applications without having to increase their storageIt is truly a disruptive innovation with a completely non-disruptive consumption model.

The all software FVP decouples storage performance from storage capacity and essentially changes how storage is designed and operated in virtualized data centers. The PernixData FVP is the industry’s first clustered flash hypervisor that can be installed and operated with a few clicks of a mouse to scale-out storage performance independent of storage capacity with seamless VMware clustered operations support.

At Lightspeed, we are proud of the PernixData team and what they have achieved in a short time. It’s been an amazing journey since their founding and Series A investment. We can’t wait to see how the company dominates the enterprise storage agenda in a very near future!

If you found this post interesting follow me on Twitter @bipulsinha

 

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It’s hard to believe that it has been 4 ½ years since the founding of Bloomreach.  At that time I was working at Bain Capital Ventures, having just moved from Boston to spearhead the launch of their West Coast …

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We met Evan and Bobby, the founders of Snapchat, in March 2012. We were mesmerized. They had a vision for how disappearing photo messages would make people more authentic, more silly, more real in their communications with their friends. They …

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Over the years, I’ve had the great honor of supporting some truly inspiring entrepreneurs as they have strived to not only disrupt markets, but also improve the world we live in.  Today, I am thrilled to see that one of …

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Earlier this week the Federal Government shut down Liberty Reserve, a digital currency exchange, alleging that it ran “what amounted to an online, underworld bank that handled $6 billion for drug dealers, child pornographers, identity thieves and other criminals …

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Well it looks like the Department of Homeland Security is investigating Mt. Gox and the primary complaint is operating an unlicensed money transmittal business. Things do not look good for Mt. Gox. Its US accounts are being seized. This …

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Congratulations to Poojan Kumar, Satyam Vaghani and the rest of the PernixData team for raising a great Series B round led by Kleiner Perkins.

At Lightspeed, we are very proud of what the team has achieved in short 15 months

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It’s no secret that that I see the opportunity for Bitcoin to disrupt multi-billion-dollar markets and dramatically cut transaction costs for people around the world.  We are in the early stages of innovation in this ecosystem, and Lightspeed wants …

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