Every few months I post some predictions here.
I mostly write these to help clarify thoughts & build conviction.
Q1 2025
Hypothesis:
"Polygon's AggLayer Launches (buy $POL)"
The crypto market is still quite inefficient (ex: XRP pumping in 2025, memecoins on Solana, etc). So far this cycle, the market has bifurcated into hyper-degenerates vs builders who understand the technology underpinning non-Bitcoin use-cases in crypto. The wilder animal spirits know nothing about the tech so they have been chewed up and spit out by the hyper-degenerate memecoin casino leading to a depressing nihilist malaise in the market.
Ethereum UX is still horrendous for the non-crypto native due to limited scaling of the L1 and fragmented UX of the burgeoning L2 ecosystem. Solana claims they can scale the L1 to compete but we know they cannot, and their rebranding of L2s as "network extensions" is a stealth admission of that.
The Polygon team has invested heavily into ZK research and are about to launch the "AggLayer" which will unify the L2s in their SDK ecosystem. Credit to @JourneyMacro (Nomad) for pointing out that AggLayer *finally* solves the blockchain trilemma (security + scalability + decentralization -- the holy grail, at last). Additionally it solves the immense problem of fragmented L2 UX in Ethereum. The Polygon team already has a few blockchains that used their SDK lined up and ready to plug in to share liquidity & UX. Due to its architecture, the AggLayer should be able to aggregate not only those chains in its own SDK ecosystem but chains *outside* of it as well. Massive leap forward for scaling Ethereum.
The savvier whales have and will continue to extract money from retail degenerate gamblers via memecoins and rotate those gains into the real tech plays from here out. Fundamentals based on technology and network effects, which the AggLayer will have a head-start on will take hold & gradually build a moat that will be difficult to overcome later. Use-cases around stablecoins & payments will dominate a fundamentals-driven rally. This will take 6 months to a year or more to even begin to play out. The enormity of this shift cannot be overstated and is global.
Long $POL and $ETH
Q4 2024
Hypothesis:
"Crypto Stablecoin Payments: Distribution x Distribution"
Pre-requisites (these are all likely IMO):
-
Stablecoins on crypto rails take over payments & remittances (easier than physical cash, faster & cheaper than credit cards/ ACH/ wires, etc)
-
Stablecoin UX improves (it will, there's too much money on the line)
-
Reasonable stablecoin regulation for crypto networks across globe (banks won't want to give this market up but will be forced to; some banks will acquire the infrastructure to compete and become players here, too)
-
Bitcoin's value prop as "digital gold" doesn't suddenly switch to payments as Satoshi envisioned (this was already decided when BCASH & "big blockers" lost many years ago & it doesn't yet have a viable ZK L2; by the time it has viable ZK L2 for payments the network effects of players below will be too strong, plus Bitcoin is too volatile for day-to-day purchases -- Bitcoin is not a good unit of account -- and local users will demand conversion to stablecoins or local currency which will require addt'l transaction fees).
Given the above, there are two categories of distribution that matter for stablecoin payment players competing in an open market:
- Distribution, as in Market Penetration: access to merchants & end-users.
Critical factors:
- Crypto wallet infrastructure & UX
- Merchant preference & UX
- Cross-chain penetration
All will take time to get right.
-
Distribution, of a Token or Equity among stakeholders that accrues value of stablecoin cash flows:
- transaction fees
- US Treasury yields of underlying dollars
Paypal ($PYUSD) vs. Coinbase+Circle ($USDC) vs. Stripe+Bridge (TBD) vs. Visa vs. <fill in the blank>
The winner(s) will be the leader(s) in both categories of Distribution, or will be so strong in one category that they out-compete the leader in the other. Merchants, end-users, & other stakeholders will prefer a payments system that they have a stake in or can earn yeield from. We may see a situation where a stablecoin wins for a little while early in this race on the merit of 1/ but is ultimately overtaken due to 2/. Payment providers using stablecoins will also have to compete on terms such as chargebacks, bankruptcy provisions, etc.
In emerging free markets, 2/ will enable crypto stablecoin payments to out-compete digital payment systems that don't offer value accrual to stakeholders and/or end-users (ex: WeChat, Tether as it exists today). Network effects will compound this. But there will probably always be a market for payments with ultra-low-to-no fees & no terms at all in these markets (ex: Tether on Tron probably won't change much and will get a ton of usage for a while).
Understanding these tradeoffs will be the work of institutional risk analysts. Matt Taibbi has already called out Circle publicly for their somewhat vague and terrible bankruptcy terms.
You can bet on the payment providers or the underlying infrastructure that you anticipate they'll have to pay to use to reach end-users. You could also bet on any exchange with stablecoin pairs where market makers & other participants are likely to do large volumes.
Decentralized stablecoins are a dead-end. At least for US dollars. The Fed and regulatory apparatus has zero appetite for a new crypto eurodollar market that they can't impose censorship on. Sometimes i wonder if Do Kwon & SBF's excess was stoked by entities with a vested interest in demonstrating massive, memorable failures for the public.
Could see a stablecoin emerge that contains a basket of currencies; something like the original Libra Diem vision but not controlled by an entity like Facebook that is perceived as evil.
Risks:
- Mr Robot's E-Coin: Politician who promises "blockchain innovation" really means "E-Coin" on private bank blockchain rails, everything else becomes illegal.
- Kwonification: One of these crypto stables blows up, has terrible or zero bankruptcy terms and many people are harmed. Which is why decent regulation is a pre-requisite here.
- US CDBC: A variation where E-Coin's backend is the US Fed. Some politicians think this is a great idea. I doubt this gets traction politically in the US, plus its a stretch for the US government to develop something so multi-layered and technical in a timely manner. But if they were clever and engineered an emergency where they had to airdrop dollars, everyone would of course download the app or wallet and/or exchanges providers might be compelled to integrate it. Very long-term I could see a US CDBC living alongside other stablecoins with programmable features like "only valid for food", etc.
Hypothesis:
"Economic security is NOT just a meme.
It is the price tag for securing value with network effects."
- Institutions cannot trust crypto networks whose 1/ cost to attack is too low and 2/ level of decentralization is too low. Nobody wants to put a Billion dollars of AUM on a network secured by a dozen or so of SBF's friends dumping its native token on each other. Especially if the circulating market cap of the network is lower than said AUM. You wouldn't put the Hope Diamond in a gym locker.
- Economic security is NOT just a meme (unless your blockchain is full of worthless meme coins, in which case-- yes, it is just a meme).
- Various blockchain/ ledger designs will eventually converge; the difference in the meantime will be in the tradeoffs chosen (level of decentralization, security, execution speed, scaling, etc) and what sequence these tradeoffs are delivered in.
- Ultimately it will be economic security (cost to attack the network x AUM/ liquidity x level of decentralization) that will determine the adoption curve for institutional players from TradFi looking to secure millions/ billions in AUM.
- Every crypto cycle will have one or more new "darling" layer1 networks that will get a foothold by choosing a different sequence of tradeoffs from Ethereum. But bc they will be behind in economic security, the users & use-cases will be transient locusts hopping from one new chain to the next until one of them achieves an escape velocity in terms of economic security (most won't, but it also won't matter for layer1's specialized in gaming, AI, energy or another theme that doesn't need to secure $Billions in AUM).
- Economic security is the price tag for securing value at scale with network effects.
Risks:
- Ethereum ecosystem must deliver a solution to layer2 liquidity fragmentation or it risks being overtaken eventually, but that's likely coming in the form of Polygon AggLayer and/or OP Superchain or some solution at the base layer. Much of the value proposition of using a blockchain is in accessing its accumulated AUM/ liquidity, which reinforces the network effect. Web3 blockchains may prove to have even stronger network effects than web2 social networks.
- Eventually a layer2's own token might pump such that its circulating market cap far exceeds its AUM, in which case it may not need ETH economic security or liquidity anymore. This is likely to happen, many times. Ethereum might function as a sort of stellar nursery, where small networks grow over time & eventually break off.
- If not enough of the value of its layer2's filters back up to the Ethereum base chain token holders, the market cap of Ethereum may shrink.
- This could be solved by coupling ETH with its layer2's more tightly. Either by raising the fees the layer2's pay in ETH or making them stake ETH on the base chain in order to access its network effect. There's probably other clever ways to more deeply couple layer1 ETH and layer2 economic value that i just haven't thought of.
Q3 2024
Hypothesis:
"Last Quarter's Hypothesis also Bullish Blue Chip DeFi -- Soon™"
- Crypto industry pressure on US politicians is working, esp in run-up to Pres election
- Even Kamala must come to the table with industry, mostly due to pressure from Trump/ right who has seized issue as own
- Kamala appeals to younger folks, has deep west coast tech ties, not beholden like Biden to E. Warren/ Goldman Gary Gensler banking faction
- Younger voters (needed demographic) more likely to hold crypto
- SEC chair Gensler is likely out anyway, has been reprimanded by both courts & legislature
- Many defi protocols have "fee switches" awaiting "regulatory clarity" in US
- "Useless governance tokens" can activate fee switches, token buybacks, airdrops, dividends, etc as winds shift
- Blue Chip DeFi tokens win
Outcomes that could nullify:
- Harris (or Trump, but less likely) bait-and-switch industry
- But long-term, a backstab would be politically costly
Q2 2024
Hypothesis:
"SEC's Wells Notice to Uniswap Labs is Bullish $UNI"
- Uniswap has the most well-funded legal arm in the form of DeFi Education Fund (https://www.defieducationfund.org/)
- Previous actions against ZeroEx, Coinbase already set precedents around "unhosted" wallets, autonomous protocols, etc.
- Uniswap will almost certainly prevail on the most critical points for DeFi at large
- The courts have proven to be more even-handed than the SEC leadership & grandstanding bank-captured legislators
- Legal risk is already priced into the token & $UNI price now serves as a prediction market for DeFi regulation in US
Positive possible outcomes:
- Airdrops are legitimized for US participants
- Clears the way for $UNI fee switch to finally be activated by the community of holders via governance vote
- High-profile case will spotlight & possibly legitimize DeFi for those in finance outside of crypto
- More case-law is put on record by the best arbiters -- the judicial branch -- which will help guide legislators in Congress to create better legal rails for crypto & DeFi
Negative worst-case outcomes:
- $UNI & many other cryptoassets that share characteristics are deemed securities
- Airdrops are somehow deemed unregistered securities transactions
- SEC demands KYC for users and/or liquidity providers using the protocol
- Uniswap (the protocol) becomes bifurcated along nation-state boundaries, resulting in more fractured liquidity
Neutral likely outcomes:
- Wrist-slap fine & de-listing of small % of cryptoassets deemed securities traded on the protocol (per ZeroEx precedent with CFTC & derivatives)
- Clearer definition of a "cryptoasset security" (thanks, Gary)
The elephant in the room for me here is: why would the SEC choose to pick a fight with the protocol with THE most legal firepower in crypto? Are they looking for a high-profile "win" (risking high-profile loss)? Or is the intention to mostly lose while slowing down the industry, allowing incumbents to catch up?
Q1 2024
Hypothesis:
"Re-Staking"
Bitcoin ecosystem will speed-run history of Ethereum development & integrate best parts (zero knowledge proofs, re-staking, defi). There are considerable technical and political risks involved in each of these projects & their merits will have to be considered on a case-by-case basis. The political risk is laser-eye BTC purists may not want this "spam" on their blockchain & respond negatively by coding or forking out attempts like this (ex: Luke Dash trying to get Ordinals "NFTs" on BTC forked away by calling it spam).
Larger implications: convergence of Ethereum & Bitcoin value propositions? Each with own competing native yield asset? Who wins? Bitcoin unlikely to natively "host" stablecoins like Ethereum, but could via zk L2s in the further future & UX would be same as Eth eco. BTC block times unlikely to speed up, so settlement time will remain slower for foreseeable future. Projects like this could be the big unlock BTC needs to solve long-term problem of diminishing miner block rewards under current halving schedule/ 21M cap.
Babylon - https://babylonchain.io
- Exports BTC security via PoS checkpoints posted to BTC blockchain, similar to original Matic (Polygon) PoS sidechain
- BTC can be "staked" via self-custody to lend additional security (reorg protection) to PoS partner chains
- No bridging on the BTC side required, UTXO mechanism on BTC side makes it relatively native
- First 2 PoS network partners: IBC Hub ($ATOM) & Polygon ($MATIC)
- Can have any number of PoS network partners, cost will not change on BTC side
- Value will accrue to 1/ BTC stakers earning yield 2/ rest of BTC holders who benefit indirectly from locked up BTC not moving
- The question is how will this benefit holders of PoS tokens, perhaps via tax on BTC rewards?
- PoS networks can issue fewer staking rewards, reducing their inflation (which is Expensive!)
- Long-term, projects like this could dampen volatility of BTC via locking mechanisms like this
- Strong founder David Tse, EECS Prof at UC Berkeley & Stanford
Backed by Eigenlayer founder, Polychain, Hack VC, Framework, Polygon Ventures(!), Castle Island, OkX & Symbolic Capital.
- 2 raises: equity w token warrant $8M seed & $18M Series A
Risks:
- Relatively low technical risk, since Babylon is just aggregating block headers & committing them as checkpoints to BTC. Not an L2.
- Relatively low political risk on BTC side, same reason. It does export BTC's security/ carbon footprint & muddies waters between PoS & PoW. So if your thesis is that BTC won't gain mass adoption due to carbon footprint/ ESG concerns, this may not be for you-- look at Eigenlayer. One could argue that ship has sailed with BTC ETFs in the wild.
- Some political risk on PoS side, if PoS chains don't accrue value from this partnership. Babylon needs to sweeten deal, at what cost?
Q4 2023
"Reflections on last cycle (for next cycle)"
- Didn't sell enough at the highs, got complacent at the top and ignored rest of my sell plan. Next cycle: Read and re-read the plan weekly so it is wired into brain even when complacency sets in.
- Bought into bullshit "supercycle" narrative and left too much on the table. Crypto is highly leveraged which gets unwound... rather quickly when it starts to go down. Deep liquidity will dry up, don't take it for granted esp for long-tail assets & weird trades that work for a time.
- Should have exited more slowly and started selling sooner rather than trying to catch all at pico-top. This takes alot of discipline actually.
- Didn't account for taxes enough when selling, even though i did a good job of planning to mostly pay long-term cap gains vs short.
- Didn't appreciate that selling into stables wasn't enough. Need to follow through on plan to transition high-risk assets onchain to low-risk assets offchain that compound slow and steady. Compounding & farming stables onchain is still very risky in the grand scheme of things!
- Pay more attention to your own emotions and the emotions of others. When everyone is talking about it, it's already past time to sell and from that point forward it should be treated as a hot potato -- all of it.
- Holding on to cash for a while after the top is ok -- let the dust settle and the euphoria fade, pay your taxes. You don't have to invest/ buy hard assets right away.
Q3 2023
Hypothesis:
"Social Graphs on Ethereum Layer 2's"
Although Ethereum has the most significant network effect of any blockchain network, it still doesn't have a proper social graph that can be used to bootstrap an open social network. The roadblocks have been significant -- Layer 1 is expensive & not scalable. Layer 2's present the opportunity to finally create a user-owned/ user-controlled social network based on open blockchain data that is scalable & cheap. Other cheaper blockchains or alternatives might pop up in the future but i dont currently see any with enough network effects (maybe Solana at its peak via STEPN etc lol but that's over for now due to Sam and Solana will struggle in shadows for a while). Network effects are powerful in social and it will be hard to play catch-up.
An open social graph like like this is a pre-requisite to making consumer/ social crypto happen. It's also possible that an existing Web2 company goes the other way and uses its existing network effect to bootstrap a Web3/ crypto social graph, most likely Elon/X.com or Coinbase or both [ADDENDUM 6/6/2024: Telegram TON blockchain + MiniApps Ecosystem is a serious contender here].
Watchlist:
Lens Protocol - https://www.lens.xyz/
- Built on Polygon, funded by Stani from Aave. Flagship apps so far: Lenster (rebranded Hey.xyz yesterday) and Orb app.
- $15M funding round on June 8 2023 led by IDEO CoLab. Orb also raised $2.5M separately.
- Solid, simple architecture. Good developer docs & SDK, boilerplate code and widgets/ embeds to get started quickly.
- Waitlist only (closed beta) for now, even so it has 125,254 profiles created as of today.
- Profiles, Follows and Collect (publications) are minted as NFTs on Polygon, making it dead simple to get started as user or app dev.
- Just launched "Open Actions" = social graph + onchain tx.
- Profile Creation Proxy: https://polygonscan.com/address/0x1eec6eccaa4625da3fa6cd6339dbcc2418710e8a
Farcaster - https://www.farcaster.xyz/
- Built originally on Mainnet (i think?) but seems to be migrating to Optimism. Endorsed/ funded by Vitalik.
- Website claims ~15k signups and >1M posts by users but I only see very few profile creations on Optimism so far (22)?
- Stats (assume this is mainly mainnet): https://farcaster.network/
- Flagship app Warpcast: https://warpcast.com/
- Farcaster Id Registry on Optimism: https://optimistic.etherscan.io/address/0x00000000fcaf86937e41ba038b4fa40baa4b780a
- Built around idea of "Hub" servers which are not federated, must store all user data in P2P network.
- Its an attempt to charge users rent to store data on network. Yearly fee to each profile to prevent spam.
- Complicated rent pricing scheme to post via "Storage Registry" is not good, the most anti-viral mechanism i've seen in social media lol.
- Integrated with ENS names.
Q1 2023
Hypothesis:
"Blue chip DeFi & DEX Emerge from the bear market"
Brutal bear market leads to consolidation, much like 2000's era of internet startups. What are the Amazons and Googles that will emerge as winners of crypto?
- DEX: FTX collapse has perfectly and memorably articulated the case for DEX.
- DeFi: Transparent on-chain money markets. SBF paid back his DeFi loans first.
- CeDeFi: Centralized stablecoins, censorable & backed by US Treasuries (Tether not going anywhere tho, it is too useful to powerful actors in gray markets around the world). CEX'es also have incredible opportunity to harness defi for the masses, with buttery UX & regulatory compliance. DEX & CEX will eventually converge (Coinbase stock not a bad hedge here).
Winners:
- Uniswap, 0x, Aave, Curve Finance, Coinbase as hedge.
Concerns:
- Unclear how $UNI token captures value of protocol, esp w equity shares in the mix (token holders vs. equity holders).
- $AAVE might be in a similar situation, only from opposite direction (are they issuing equity for private money market products?).
- $CRV is pursuing decentralized stablecoin, and either way is the most used DEX for stablecoins, the use-case for crypto with most PMF (regulatory risk: big gov & tradfi hate decentralized stablecoin, could engineer a Luna-like crash). $CRV also has big token unlocks in 2023.
Hypothesis:
"Modular app-chains on Cosmos"
DYDX chose to move to Cosmos rather than Ethereum layer 2. Probably bc using an app chain solves problems of security, MEV, general value extraction by the underlying blockchain infra. $DYDX token used for infra layer also means more decentralization of protocol. Theirs is Orderbook model with off-chain orders stored in-memory by validators of sovreign blockchain made possible by flexibility of Cosmos SDK. More projects will choose Cosmos for this reason, plus ability to use their app-token for sovreign security on own chain. Upgrades to Cosmos that allow security to be "rented" from larger cross-chain network will accelerate trend.
Hypothesis:
"3-digit $ETH following Beacon Chain unlock in March 2023"
Shanghai update in March will unlock Beacon Chain stakers who have been patiently waiting. Ethereum will undergo temporary sell pressure from this one-time momentous event and tumble down into 3-digits before recovering. Be patient. Long-term $ETH becomes deflationary and crosses 5-digits in the next bull run (2024-2025). There will be at least one disaster with a liquid staking derivative (LSD) token.
Hypothesis:
"A Web 3 social network arrives (finally)"
A hypothesis with -- perhaps -- a long time horizon. The biggest question here is: Will it emerge from Web2 co's that embrace crypto ("outside-in", Ex: Reddit, Starbucks, Twitter?), or from crypto-native organizations/protocols that finally get as much traction as a Web2 co. ("inside-out", Ex: Lens, Farcaster, art/music NFTs). Perhaps they converge, similar to CEX & DEX. Arguably, the NFT communities on Ethereum base layer are already a proto-social network of their own. But that world still lacks fundamental infra (Ex: over-reliance on Discord).
Hypothesis:
"AI & blockchains converge"
Also longer time horizon. Decentralized storage archives like IPFS ($FIL) & TheGraph ($GRT) become training ground for AI, which accelerates but faces regulatory backlash around copyright. Data unions finally emerge that compensate creators for recombinant works produced by AI based on their originals. This seemed obvious years ago but AI has finally caught up. Tokenized machine-to-machine payments facilitate autonomous machine learning in these playgrounds. Integration with something like Neuralink or even a sophisticated wearable AR/VR creates cyborg humans capable of learning Kung Fu like Neo in The Matrix.
Potential local headwind here could be if China invades Taiwan and there is a semiconductor crisis that hamstrings progress via supply chain disruption.
Q4 2021
Hypothesis:
"Next-level infrastructure: Layer 0"
The emergence of MEV & Flashbots on Ethereum was only the start. MEV could affect proof-of-stake networks & rollups disproportionately given the systemic advantages of PoS validators & rollup operators w/r/t MEV.
If we embrace premise that protocol base layers + L2s will not attempt to solve MEV w their own "fair ordering" mechanisms, then we need incentivization solutions for privacy-preserving packet delivery & network routing (Layer 0).
Decentralized, blockchain-agnostic solutions to MEV are preferable.
REGULATION:
Front-running is prohibited in TradFi and heavily regulated, NOT incentivized.
UX:
MEV is poor UX for end-users. In Proof-of-Stake MEV particularly problematic.
Why would stakeholders opt into this?
- Validators want revenue bump for accepting MEV bundles
- Users & market makers only want to use networks that are "fair" (no MEV)
- Low-cost blockchains will want to reduce MEV spam
- MEV in current form (Flashbots) is centralizing force
Q2 2021
Hypothesis:
"1000 True Fans + Cryptoeconomics"
The perverse incentives of media in Web2.0 (clickbait, outrage porn) will be transformed thru well-designed crypto-economics. Media distribution will fundamentally change as audiences atomize into smaller niche communities.
Cryptoeconomics will enable creators of all kinds to leverage smaller niche audiences to support their work.
Open question:
Where do traditional publishers come out in all of this?
Q4 2020
Hypothesis:
"Staking is the new corp bond yield"
Globally, interest rates are going to go from low to even negative(!). Sources of yield will be scarce, which means staking on crypto-networks becomes the new source of steady yield (what corp bonds used to be).
Hypothesis:
"Crypto Payments in SE Asia"
Both individuals and businesses in SE Asia are unbanked/ underbanked. Stablecoins on crypto rails that give this population access to electronic payments and credit (defi) will win. Watch out for digital yuan, PBOC tho.
Asia always leads the way with tech innovation, esp S. Korea & Singapore.
Less regulatory friction for stablecoins as well.
Accumulate & stake $LUNA
Hypothesis:
"Emergence of DevDAOs"
Mainstream users need easier ways to get exposure to crypto networks that require work (i.e. running staking nodes, curating The Graph etc). In a "DevDAO", mainstream (non-technical) users could stake w set of active developers in the ecosystem. Upside: The devs get access to higher stake (= higher yields for work), and the mainstream user gets exposure to the higher yield as well. Better returns for everyone than old fashioned freelancing platform(!).
Open Questions:
- Would this be better structured as a 2-and-20 hedge fund managed top-down?
How is distributed governance better (or is it worse) -?
- Is this just a "curation" DAO?
- Opportunities must be scouted
- Technical contributors must be scouted
- Both must be managed
- Is already happening organically on staking networks, what does this add?
- Diligence around opportunities
- Can build opinionated portfolio about what work is most valuable
- How do "trustlessness" and collaboration go together? Do they?
Q3 2020
Hypothesis:
"Bootstrapping Liquidity: Focus on Incentives"
Bootstrap liquidity from community via a token. Get some meager funding, run a token sale to raise more $, incentivize users.
Ex: $COMP (Compound Governance Token) - the beginning of "liquidy mining" for money markets.
How will other types of Web3 apps bootstrap liquidity?
Hypothesis:
"For Microsponsors: Narrow product focus -- Do 1 thing well"
For Microsponsors - Validated by Mike Kriak of Consensys
- Current product is spread too thin.
- Focus on ONE THING (!) and do it really well:
- Scheduled Contextual Advertising
- Build a worthy competitor to BuySellAds.com with lots of publisher inventory and crypto payments rails
- Help Publishers & Advertisers connect DIRECTLY
- "Supports platform-independent content creation"
Example: 0xTracker.com -
Perfect case study, implementation is 0xTracker.com
Focus on streamlining that use-case from end to end in near term.
Q2 2020
Hypothesis:
"DApp devs also need to run validators"
Ethereum Dapps aren't DAOs or companies. They are first and foremost open-source design patterns that will be commoditized over time (ex: Uniswap).
DApp developers need to participate in economic growth at the network level to capture the most value from their dapp. In other words: dapps are easy to copy & have thin moats, so a builder must have a stake in the underlying network protocol if they're going to add value AND extract it.
Additionally, "money legos" work synergistically on the network, so adding value to a network in the form of building an application on it increases the value of the entire network, and that value can be captured by a network validator (or staker, in the case of Proof-of-Stake networks).
Hypothesis:
"Layer 2 Scaling"
Esp. with the rise of liquidity mining, tx volume is way up. Altho it has incredible network effects, transacting on Eth mainnet is too expensive for most.
Look to the Layer 2 protocols that have adoption, momentum, strong business development efforts and are ruthlessly pragmatic & cheap for end-users.
Accumulate $MATIC, stake it in a validator.
Hypothesis:
"Blockchain is the backend"
Alot of Ethereum DeFi will get tucked away from end-user perspective. Loyalty + game "points" (ex: Reddit) will be distributed to users and cashed out via CEXs (Coinbase, Gemini). These retail users will use CEX to exchange points for dollars, securities, etc or for liquid staking on cryptonetworks.
Where does this leave Decetentralized Exchange?
DEX & DeFi will be for market makers <> CEX (0x pivoted their token model to benefit market makers -- not sure if they will be successful but the general thesis stands). In the future, "retail" users wont be using blockchain directly.
DEX for B2B(!) <-- !!!
Microsponsors could be the backend of a variety of applications, but most bullish on it as a utility that powers financing Creators of websites, events, builders etc. The on-chain NFT time slots are a crypto-primitive that can serve as a kind of credit history and lenders can use this to help evaluate Creators & fund their projects up-front (partner w/ Maple Finance etc).
Q1 2020
Hypothesis:
"The Open Orderbook Model (like 0x) is for Non-Fungible Tokens Now"
Said to me at a conference recently by a guy working on a pooled liquidity solution: "Orderbooks made sense when it was a bunch of guys smoking cigars and screaming at each other in one room". Liquidity pools (Uniswap, Bancor) are much more efficient for ERC20 exchange (fungible digital assets) than open orderbooks.
BUT: Orderbook model like 0x has the ability to eat every Web2 marketplace via NFTs, which can be unique and have data fields attached to each token.
Edibles: Amazon, Uber, eBay, Etsy, Spotify, all of AdTech etc.
Hypothesis:
"Monetization/ Payments for the Cozy Web"
People are going to start segmenting themselves into WeChat/ WhatsApp/ Discord groups. The "public square" model of social media is problematic for so many reasons (mass manipulation, "cancel culture", etc).
Q4 2019
Hypothesis:
"B2B will go P2P"
The advantages of crypto/ P2P decentralized exchange will be very persuasive for B2B markets (real-time payments, transparent debt markets) -- once they get their heads around it and UX is smoothed out.
Microsponsors is a B2B tool, and it will be part of a media buyers' job to use it, whether for a brand or agency or labor force minting tokens.
Tl;dr - Debt might be better for startups than all-equity capital stacks. All-equity capital stacks work better for Finance Capital (Investors) rather than Productive Capital (Operators). Investors pumping valuation of their portfolio co.'s round after round is bad for the companies (creates down-rounds, often played out in public markets; "VC dumps").
The debt model works REALLY well in crypto, both from a financing/ infrastructure AND regulatory standpoint. Esp for recurring revenue/ SaaS biz models where co. needs up-front capital to acquire users who throw off predictable revenue streams going forward.
Hypothesis:
"P2P Decentralized Production & Distribution is the Future"
The next civilization will be powered by P2P production. A research project led by the P2P Foundation on the thermodynamic efficiencies of peer production found that a transition to open and shared models can result in an 80% saving in the amount of matter and energy used in running our society.
Q3 2019
Hypothesis:
"Software is eating the world ...and ETH is programmable money"
Just as software is eating the world, usage of programmable money like ETH & ERC-20 based Stablecoins will begin to devour the first markets they touch: Gaming, Finance (the Great Unbundling of Banks), Investment (Debt, STOs), Legal, Contracts, ... And these markets will grow and demand ETH-native AdTech.
Build for a small user base (crypto folks building DeFi, games, investment vehicles on Ethereum), and bet that this ecosystem will grow as programmable money eats these sectors.
Q2 2019
Hypothesis:
"Grassroots-Local Bootstrap Strategy"
A market already exists in the US that could bootstrap Microsponsors at a grassroots/ local level. Because this market has not found a company(ies) to harness their potential, they have fallen back to defrauding ad networks in exchange for phone farming. If a company were to come along and harness this market for legitimate passive income earning, these early adopters could bootstrap a network of 0x relayers with strong incentives.
Ingredients: Coupons/offers platform, affiliate fees, onboarded merchants, phone farmers.
Hypothesis:
"Web3 (the Internet of Value) needs privacy to be the default"
As we transition from Web 2.0 -> Web 3.0, the Web 2.0 values of openness and sharing will evolve to center individual privacy, with the *option* to publicly share info. As we transition to networked value in the form of cryptocurrency and programmable money, lack of privacy becomes a pitfall, not a value prop.
There is a massive gap where privacy-oriented marketing tools/ platforms should be.
Q1 2019
Hypothesis:
"Niche Networks: Riches in niches (esp LOCAL!)"
Hypothesis: The general trend in social media is going to be toward niche groups/ chats. More trust and safety with fellow travelers, content more contextualized and relevant. Ephemeral chat channels are a huge component of these emerging niche markets.
Ingredients: Chat groups, coupons/offers platform, affiliate fees, onboarded merchants. Specialized, semi-private channels like Telegram groups run by curators who push offers and deals thru, esp those focused on local experiences.
Hypothesis:
"Buidl on Ethereum: Go where the devs are!"
A key decision point was committing to 0x Protocol + Ethereum ecosystem (vs. smthg like or EOS, Hashgraph, Blockstack or Holochain). Tech development seems to be happening on Ethereum at a breakneck pace, tools are still in beta but at least they work (mostly). Participation in 0x Hackathon was key, proved a Proof-of-Concept was possible. Holochain dev team couldnt get back to me and were having trouble executing. Hashgraph team seemed too "enterprise" (KYC just to report testnet bugs), and their onboarding process for devs to their test platform was utterly broken, poorly executed.
Open permissionless standards, processes and development always win. Ethereum + 0x Protocol FTW.
Ingredients: Infrastructure, tooling, plan/ability to scale. Composability of Web3.
Q3 2018
Hypothesis:
"Crypto-networks of Contribution-Based Equity"
The jig is up for marketplace apps like Uber that are centralized and siphoning disproportionate value away from users of the network. Gig-economy user-workers are fed up, regulators taking aim. Contribution-based equity networks are the future, but tech needs to build it first. Cryptocurrency/ blockchain is uniquely positioned to facilitate this efficiently. Could be massively disruptive to: Uber, Amazon, food delivery apps like DoorDash, Postmates, apps that exploit commoditized labor.
Main ingredient: Token that captures value of crypto-network. Preferably a utility token so # of participants is not limited by securities laws (unless those caps are increased by SEC and/or lawmakers).
Principal
Lauren Garcia
Contact → eljee [at] protonmail.com
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