5 Things I learned about bitcoin from Chris Dixon, Balaji Srinivasan & a16z

I’ve avoided the bitcoin hype for long enough. I’ve watched a bit on the periphery, but recently been doing a bit more research. Then I bumped into the new Andreessen Horowitz podcast, and got a crash course on it!

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http://blog.pmarca.com/2014/01/22/why-bitcoin-matters/

1. Goldman Sacks has taken notice

Want proof that Bitcoin isn’t just for geeks? Goldman has released a report and they have real interest.

Specifically Goldman identified the potential for 210 billion dollars in savings in payments that Bitcoin could bring. That’s billion with a “B” and serious opportunity for disruption!

Also: 5 cloud ideas that aren’t actually true

2. Solves online trust problem

There are many who feel Bitcoin doesn’t have potential as a currency. But even those folks feel it’s underlying technology could solve a big problem with online payments, the general ledger problem.

When you want to send digital things, whether a signature, contract, keys or currency, you need a way to establish trust between people. Bitcoin solves this with it’s technical sounding “block chain” which serves as a sort of internet notary public. Anyone can check on this common general ledger the status of a transaction, without fear of compromise, double entries or theft.

For more in-depth discussion, check out Bitcoin & the Byzantine Generals problem. It explains the general ledger aka the block chain in a lot more detail.

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3. Better digital wallets

Although currently bitcoin wallets are banned on the iphone AppStore, the potential there is huge. Currently there still isn’t a good digital wallet solution, and bitcoin sits nicely in that space.

Bitcoin is more a platform, and a set of protocols, a new digital infrastructure that solves a lot of big problems online. As new apps are built on top of it, they abstract away the technical complexity, providing day-to-day

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4. Store of value for Greek & Cyprus

Citizens of distressed countries can face the fear of their savings eroding away. That can happen rather quickly as we’ve seen in Greece & Cyprus. Savings in Bitcoin presents an alternate currency within which one could place some of their savings. Since it’s not controlled by any government or power, it provides a hedge against such fears.

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5. Say goodbye to inflation

Fiat currency, as it’s known, is the currency we live with today. It’s the post gold standard currency, where the federal reserve controls the money supply. Quantitative easing, aka printing money, is the lever the fed uses to keep a small steady inflation on the money supply.

With the gold standard before it, and potentially through something like Bitcoin, you eliminate the government meddling, and inflation along with it. Some argue this would reduce or even eliminate the so-called moral hazard in the present system. With the gold standard, large & systemic firms cannot be bailed out, so they have a huge insensitive to behave prudently, or fail.

Read: Why AirBNB didn’t have to fail

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Why tracking can make or break your content efforts

social index

I’ve become a social media fiend in the past year. Mostly because it’s working. The number of prospects & leads I get each month has been steadily rising. Here’s how I track. I hope it will help you too!

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The image above displays the results of my social media efforts. It’s what I call my “iHeavy social index”. I’ll have a followup post that goes into more detail about how that works.

1. Start measuring your time using social media

Let’s think about this carefully. Why not write down everyday, 1 hour on twitter, ½ hour on Google+, ½ hour adding links to buffer or hootsuite. The more you track the better idea you’ll get of how you’re spending your time. So try to be honest. Mine for this past month was 27 hours.

Read: Why twitter is the best way to reach journalists (and email sucks)

2. Track your time spent creating content

Writing content should be easier to track. For me idea time is two hours and writing time is another few. Last month I wrote five piece of content so 25 hours total.

Read: How to hack disqus, discover experts & new blogs

3. Monitor your total conversion value

If you’re a services business like mine, you’re sending people to your website, but don’t have widgets to sell. So how do you track revenue?

The answer is you still need to value conversions. For me, a visit to my pricing page has a value, as that indicates someone who is zeroing in on a service provider, or at least doing some comparison shopping. What’s more a newsletter signup has a value. But how much?

Suppose a new client is a $5000 piece of business. How many newsletter signups might bring you one piece of business? Consider that people who get your newsletter are already in your inner circle, probably share your insights, and talk about you from time to time. Let’s say for arguments sake 50 newsletter signups will bring you one piece of business. Then a newsletter signup is worth $100.

Some other conversions that have value for a services business, about-us, pricing, download whitepaper, testimonials and so forth. Last month my total conversion value was $4350.

Read: Why a killer title can make or break your content efforts

4. Add it all up

This past month my conversions value came in at $4350. Since I spent 52 hours total on content & social media, my efforts yielded a value of $84/hr.

Now I admit there is a lot of estimating going on here, but the point is, track what you can. If you think your numbers are a bit high, adjust your conversion values (view pricing page or newsletter signup for example) downward.

You *could* also compare the above to actual revenue, but that is likely to be shifted in time. In other words social media that was effective in February, might yield a new client in March, and an invoice paid in May, so 90 days off or more.

Read: Why generalists are better at scaling the web

5. Get real with yourself

If you’re spending more and more time on social media & just hoping, you may be spinning your wheels. Looking at numbers like this forces you to face the hard facts. If what you’re doing isn’t working, try something new.

Remember too, social media can have a residual affect, where people start talking, or your name gains visibility. If you’re getting more business though, folks should surely be checking you out on your website.

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5 cloud ideas that aren’t actually true

storm coming

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Cloud computing is heralding us into a wonderful era where computing can be bought in small increments, like a utility. This changes the whole way we plan, manage budgets, and accelerates startups making them more agile.

But it’s not all wine & roses up there. I’ve heard a few refrains from clients over the years, and thought I’d share some of the most common.

1. Scaling is automatic

Rather recently I was working with a client on building some sophisticated reports. They needed to slice & dice customer data, over various time series, and summarize with invoices & tracking data. Unfortunately their dataset was large, in the half terabyte range.


Client: Can we just load all this data into the cloud?
Me: Yes we can do that. Build a system in Amazon public cloud, can support large datasets.
Client: I want it to scale easily. So we won’t have these slow reports. And as we add data, it’ll just manage it easily for us.
Me: Well it’s a little bit more complicated than that, unfortunately.

Unfortunately this is a rather familiar conversation that I have quite often. A lot of the press around cloud scalability, centers around auto-scaling, Amazon’s renowned & superb virtualization feature. Yes it’s true you can roll out webservers to scale out this way, but that’s not the end of the story. Typically web applications have a lot of components, from caching servers, to search servers, and of course their backend datastore.

But can we scrap our relational database, such as MySQL and go with one that scales out of the box like Riak, Cassandra or Dynamodb?

Those NoSQL solutions are built to be distributed from the start, it’s true. And they lend themselves to that type of architecture. However, if you’ve built up a dataset in MySQL or Oracle, and more so an application around that, you’ll have to migrate data into the NoSQL solution. That process will take some time.

Like teaching a fish to fly, it make take some time. They do well in water, but evolution takes a bit longer.

Related: RDS or MySQL 10 use cases

2. Disaster recovery is free

In the traditional datacenter, when you want DR, you setup a parallel environment. Hopefully not in the same room, same city or same coast even. Preferrably you do so in a different region. What you can’t get around is dishing out cash for that second datacenter. You need the servers, just in case.

In the cloud, things are different. That’s why we’re here, right? In amazon you have regions already setup & available for plugin-n-play use. Setup your various components, servers, software & configure. Once you’ve verified you can failover to the parallel environment you can just turn off all those instances. Great, no big charges for all that iron that you’d pay for to keep the rooms warm in an old-school datacenter. Or do you?

As it turns out, since you don’t have this environment running all the time, you’ll want to test it more often, run fire drills to bring the servers back online. That’ll incur some costs in terms of manpower. You’ll also want to include in there some scripts to start those servers up, and/or some detailed documentation on how to do that. And don’t lose that documentation, either will you?

You may also want to build some infrastructure as code unit tests. Things change, code checkouts evolve, especially in the agile & continuous integration world. Devops beware!

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3. Machines are fast

Fast, fast, fast. That’s what we expect, things keep getting faster, right? Hard to believe then that the world of computing took a big step backward when it jumped into the cloud. Something similar happened when we jumped to commodity Linux a decade ago.

In amazon, it’s a multi-tenant world. And just like apartment buildings, popular restaurants, or busy highways you must share. When things are quiet you may have the road to yourself, but it’ll never be as quiet as a dirt road in the country!

Amazon is making big strides though. They now offer memory optimized & storage optimized instances. And an even bigger development is the addition of the most important feature for performance & scalability. That said the network & EBS can still be a real bottleneck.

Also: What is a relational database & why is it important?

4. Backups aren’t necessary

I’ve experienced a few horror stories over the years. I wrote about one noteworthy one When fat fingers take down your business.

True EBS snapshots make backing up your whole server, well a snap! That said a few extra steps have to happen (flush the filesystem & lock tables) to make this work for a relational database like MySQL or Oracle. And suddenly you have a verification step that you also need to perform. You see no backups are valid until they’ve been restored, remember?

But even with these wonderful disk snapshots, you’ll still want to do database dumps, and perhaps table dumps. Operator error, deleting the wrong data, or dropping the wrong tables, will always be a risk. Ignore backups at your own peril!

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5. Outages won’t happen

In an ideal world, everything is redundant, and outages will be a thing of the past. We’ll finally reach five nines uptime and devops everywhere will be out of work. :)

It’s true that Amazon provides all the components to build redundancy into your architecture, and very cutting edge firms that have taken netflix’s approach with chaos monkey are seeing big improvements here. But AirBNB did fail and at root it was an Amazon outage that shouldn’t ever happen.

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Why managers & CTO’s underestimate operational costs

too much inventory

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1. Technology choices & talent shortage

I worked at one firm evaluating their technology stack. When we got to the programming language, I paused in my tracks. “Haskell” I asked? “Oh you haven’t heard of it? It’s a really cool functional programming language, and we found it had some cool features that we really wanted to use”.

I had to fight the urge to roll my eyes. Yes I’d heard of the language, sitting in the club with scheme, lisp & prolog, you study them at university. They’re certainly an interesting bunch and to be sure, can do some things that imperative programming languages can’t. But did it belong in the stack of this run-of-the-mill internet startup?

In this case the developers had full reign to choose any technologies they liked, adding more & more to the mix almost daily. But what are some of the ramifications here?

Two years, three years, or five years down the line, this team will be long gone, and another team will be picking up the pieces. Will you as a manager be able to find a lot of Haskell experts? What’s more operationally will you be able to support those choices? Will updates be made often enough to have a secure stack for years to come?

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2. Scalability & server costs

Server costs are easier than ever to estimate. Build your application to serve your first 10,000 customers on Amazon with a couple webservers and a database server. Growing 100x to a million customers, just vertically scale your db, scale out your webservers and you’re good. Or are you?

What happens when you hit a wall? Did you build your application on ORM technology or take on technical debt? I’ve seen firm after firm struggle with technologies like hibernate, eating up precious resources, and being helpless to eliminate the problem. Tread carefully on these types of questions.

Related: Why you’re not hitting five nines uptime

3. Patching, fixing bugs & managing security

Another long term cost of an application will be minor repairs and bug fixes. Those might appear in a slow steady trickle over the years, but security may loom larger. Cross-site scripting, SQL injection and many other threats can be a real headache.

What’s more fixes may involve the libraries your application sits on top of. And when they are upgraded, your application will require tweaks too. It’s all basic stuff when you’re knee deep in development, but when your application has been deployed, the original team is long gone, and you’re supporting it years later, it can surely get messy.

Read: The four-letter-word dividing dev & ops

4. missing operational switches

When building a web application, all eyes are on features. Which ones to include, and which are a priority. Pressure is heavy to build functions that can be sold to customers. Pleasing customers is of obvious importance.

So it’s no surprise that backend switches are often missing. But they can be a real boon for operations team. Suppose you roll out a new feature to support star-ratings on certain pieces of content. An operational switch can be built to allow that feature to be disabled as necessary. If the site is loaded, or trouble is brewing, you may desperately want some switches to disable parts of the site, without the whole thing going down. I talk about this in AirBNB didn’t have to fail.

Another useful thing is a browse only mode. This allows your site to operate, even when writing to the database is not possible. If you’ve ever tried to update on a social network like twitter, facebook or instagram, perhaps late and nite and gotten a “please try again later” message, you’ll understand the value. Here users can’t make changes, but otherwise the site appears to be working, and browsing works normally.

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5. Consider bitcoin

Mt. Gox, the Japanese exchange handling bitcoin failed in a spectacular fashion. 500 million of the digital currency was stolen. And what’s more since it’s all frictionless currency, untraceable, there’s no marked bills to try and track down. Ooops!

How does this relate to operational costs? The failure was squarely with the operations department. Functionally the site worked fine. But security wasn’t handled well enough, intrusion detection wasn’t employed, and “unspecified weaknesses” were to blame.

Security is one of those things that can be ignored without pain. Until something goes wrong. What’s more if it is being handled well, it’s invisible, and unappreciated besides.

Read this: Why Oracle won’t kill MySQL

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