Technology

Silicon Valley powerhouse Andreessen Horowitz (a16z) has some big, and bigger, news today. First, it closed a dedicated crypto fund late last week from a subset of its limited partners, who&ve provided the firm with $300 million in capital commitments. The fund had become the worst-kept secret in the venture industry, largely because so many other venture firms are trying to figure out their own related strategies and have been watching closely a16zslow but growing number of investments in crypto-related startups over the past five years.

Nine-year-old Andreessen Horowitz has also, at long last, brought aboard its first female general partner: Katie Haun, whose star has quietly been rising in the Bay Area over for the past couple of years. Haun — who is leading Andreessencrypto fund with general partner and renowned crypto enthusiast Chris Dixon — is kind of a big deal, so itno surprise that a16z nabbed her.

Among her other many accomplishments, Haun spent more than a decade as a federal prosecutor with the U.S. Department of Justice, where she focused on fraud, cybercrime, and corporate compliance no-noalongside the SEC, FBI, and Treasury. According to Haunbio, she was also the DOJfirst-ever coordinator for digital assets, and she led investigations into the Mt. Gox hack and the task force that investigated and ultimately took down the online drug marketplace Silk Road. Haun is also a lecturer at Stanford Business School and shea director on the board of the digital exchange Coinbase, which was backed early on by a16z and is where Haun got to know Dixon, who is also on the board. (Both are keeping their seats.)

We talked with Dixon earlier today to learn more about the fund, including how he and Haun are thinking about &exits& in the cryptocurrency world when there haven&t been a whole bunch. Our conversation has been edited lightly for length.

TC: You&ve raised $300 million from some of the same investors who fund Andreessen Horowitzflagship funds. Will this fund in any way impact the next flagship fund Does the firm intend to spend more time on crypto and less on other, more traditional investments

CD: No, we&re still full-speed ahead on all traditional areas. The fund is a way for us to double down on crypto and not in any way reduce our commitment to enterprise, consumer, or bio investing.

TC: Can this new fund invest in other investors& crypto funds, as Union Square Ventures has been actively doing

CD: It could, but we don&t plan to. We invested in Polychain and a few others about one-and-a-half years ago when we were figuring out our new crypto strategy. Now, with the full fund and investing in both early-stage and later-stage in crypto projects, the mandate is to be investing directly, though [we] never say never to anything.

TC: How many crypto investments has the firm made over the years, and will any of them be tucked into this new fund

CD: We&ve made about 20 crypto investments over the last five years. [Bitcoin competitor] Ripple was my first investment in January 2013 and Coinbase later in 2013, then we did 21.co, which became Earn [and sold earlier this year to Coinbase]. We did a few others — OpenBazaar and Mediachain — then the space got a lot more interesting with the rise of Ethereum and talented entrepreneurs entering the space. Those [investments] will remain in the funds where we put them in.

TC: Have you made investments from this new fund

CD: We&re in process with a few, but nothing thatbeen finalized.

TC: How have you been structuring these investments

CD: Some are equity investments, but with token provisions [meaning if the teams create a token, investors get access to them]. SAFTs are another thing we&ve done. We&ve also done direct, over-the-counter purchases of Bitcoin and Ethereum. But we were running into limits with what we could do out of the main fund. Now we&ll be able to do all sorts of things, as long as [we&re talking with] great entrepreneurs who are working on big and important projects with economic terms that make sense.

TC: Whatan exit going to look like with these deals

CD: Ita good question. To date, we&ve never sold any of our crypto assets. A lot of people in the market are day trading but we very much see this as investing. We&d expect any investment to have a five- to ten-year holding period. Some of these projects could have tokens that are freely tradable, so therethe potential to have an exit that way.

The most likely outcome is we invest in an early-stage project and we receive coins or tokens in exchange for [our commitment] and if the project becomes successful, those digital assets appreciate when that thesis is played out. But if we invest in some project that will be used by hundreds of millions of people, we wouldn&t want to exit until thatrealized.

TC: Presumably, you will not be paying your investors back in tokens

CD: No. We have LPs who prefer fiat money.

TC: How do you think about ownership stakes in these companies

CD: The traditional venture model of owning 10 to 20 percent of a company isn&t realistic in this world. We do think that if a project is very early stage, the valuation should reflect that. But we&re thinking more in terms of value: can this investment be big enough that it returns the fund on its own So we don&t think in terms of percentages but value. We think this next wave of companies could be 10 times as big [as their predecessors].

TC: How are you thinking about ICOs Are you investing in companies that will later sell shares to non-accredited investors

CD: If done the right way, we think democratizing access is a great concept. We&re fans of the idea that more people can participate. But we don&t think [ICOs as they&re widely considered today] are regulatory compliant and we&ve never gotten involved in one of those. We participated in Filecoin, for example, but [its offering] was made only to accredited investors.

TC: What about conflicts Itvery early days, so I wonder if the rules around backing similar companies are different. In traditional VC, obviously, itpretty much verboten.

CD: The norm in the crypto world is different than the traditional venture world. Typically in VC, you won&t invest in a direct competitor. But with crypto, therea different ethos. Itmore cooperative. People would rather grow the pie together rather than fight over the size of the pie. We always make sure that projects are okay with any investments that we&re considering that might be overlapping. But in emerging spaces, ithard to think about categories as itkind of fluid. I&d say standards are evolving, but I&d also say itokay to [back more than one currency, for example].

TC: How about so-called stable coins, specifically You backed Basis, a company thatbuilding a price-stable currency, which the world very much needs in order for cryptocurrencies to come into wider use. Do you think thereroom for more than one stable coin

TC: We&ve backed both Basis and Maker, though the mechanics are pretty different and we think can be complementary. We also spoke with both when we made our investments.

We do think ita really important idea, to have a coin pegged to something like the U.S. dollar in order to make the experience more mainstream and accessible, [versus a world rife with] these volatile coins. We think itsuch an important piece of infrastructure that there could be multiple winners.

A new report from The Intercept sheds light on the NSAclose relationship with communications provider AT-T.

The Intercept identified eight facilities across the U.S. that function as hubs for AT-T efforts to collaborate with the intelligence agency. The site first identified one potential hub of this kind in 2017 in lower Manhattan.

The report reveals that eight AT-T data facilities in the U.S. are regarded as high-value sites to the NSA for giving the agency direct &backbone& access to raw data that passes through, including emails, web browsing, social media and any other form of unencrypted online activity. The NSA uses the web of eight AT-T hubs for a surveillance operation code-named FAIRVIEW, a program previously reported by The New York Times. The program, first established in 1985, &involves tapping into international telecommunications cables, routers, and switches& and only coordinates directly with AT-T and not the other major U.S. mobile carriers.

AT-Tdeep involvement with the NSA monitoring program operated under the code name SAGUARO. Messaging, email and other web traffic accessed through the program was made searchable through XKEYSCORE, one of the NSAmore infamous search-powered surveillance tools.

The Intercept explains how those sites give the NSA access to data beyond just AT-T subscribers:

The data exchange between AT-T and other networks initially takes place outside AT-Tcontrol, sources said, at third-party data centers that are owned and operated by companies such as CaliforniaEquinix. But the data is then routed & in whole or in part & through the eight AT-T buildings, where the NSA taps into it. By monitoring what it calls the &peering circuits& at the eight sites, the spy agency can collect ¬ only AT-Tdata, they get all the data thatinterchanged between AT-Tnetwork and other companies,& according to Mark Klein, a former AT-T technician who worked with the company for 22 years.

The NSA describes these locations as &peering link router complex& sites while AT-T calls them &Service Node Routing Complexes& (SNRCs). The eight complexes are spread across the nationmajor cities, with locations in Chicago, Dallas, Atlanta, Los Angeles, New York City, San Francisco, Seattle and Washington, D.C. The Intercept report identifies these facilities:

Among the pinpointed buildings, there is a nuclear blast-resistant, windowless facility in New York CityHellKitchen neighborhood; in Washington, D.C., a fortress-like, concrete structure less than half a mile south of the U.S. Capitol; in Chicago, an earthquake-resistant skyscraper in the West Loop Gate area; in Atlanta, a 429-foot art deco structure in the heart of the citydowntown district; and in Dallas, a cube-like building with narrow windows and large vents on its exterior, located in the Old East district.

… in downtown Los Angeles, a striking concrete tower near the Walt Disney Concert Hall and the Staples Center, two blocks from the most important internet exchange in the region; in Seattle, a 15-story building with blacked-out windows and reinforced concrete foundations, near the citywaterfront; and in San FranciscoSouth of Market neighborhood, a building where it was previously claimed that the NSA was monitoring internet traffic from a secure room on the sixth floor.

While these facilities could allow for the monitoring of domestic U.S. traffic, they also process vast quantities of international traffic as it moves across the globe — a fact that likely explains why the NSA would view these AT-T nodes as such high-value sites. The original documents, part of the leaked files provided by Edward Snowden, are available in the original report.

Daguerreotypes & photos made with a process that used mercury vapors on an iodine-sensitized silvered plate & break down quite easily. The result is a fogged plate that, more often that not, is completely ruined by time and mistreatment. However, researchers at Western University have created a system that uses synchrotrons and &rapid-scanning micro-X-ray fluorescence imaging& to scan the plates for eight hours. The system shot an X-ray 10×10 microns thick at &an energy most sensitive to mercury absorption.& This, in turn, showed the researchers where the mercury is most prevalent, thereby bringing up the image that was lost to damage or decay.

Kozachuk used rapid-scanning micro-X-ray fluorescence imaging to analyze the plates, which are about 7.5 cm wide, and identified where mercury was distributed on the plates. With an X-ray beam as small as 10×10 microns (a human scalp hair averages 75 microns across) and at an energy most sensitive to mercury absorption, the scan of each daguerreotype took about eight hours. The team published their findings in Scientific Reports.

&Itsomewhat haunting because they are anonymous and yet it is striking at the same time,& said Madalena Kozachuk, a PhD student in WesternDepartment of Chemistry. &The image is totally unexpected because you don&t see it on the plate at all. Ithidden behind time. But then we see it and we can see such fine details: the eyes, the folds of the clothing, the detailed embroidered patterns of the table cloth.&

The technology promises to improve the methods of conservation for old photographs and should bring many previously unusable daguerreotypes back to life.