As the cost of producing artificial intelligence models decreases, the population of AI agents will grow exponentially. Agents will soon outnumber humans online, creating, consuming, and exchanging multitudes more information than humans ever could. But if we get, say, a million-fold increase in digital activity, and 99% of that growth comes from machines, it will be hard to cope with this transformation without adopting onchain infrastructure and business models that both empower agents to reach their full potential and allows us to identify, control and audit their actions.
Read moreEthereum and Solana
Ethereum and Solana are like Android and iOS. Android values modularity: it runs on many different types of devices made by hundreds of manufacturers worldwide; Google only makes 1-2% of them. This approach made it the world’s most popular mobile operating system, with an estimated 60-75% market share. Android’s flexibility has been a boon for hardware companies making anything from smartphones to televisions, as they can bring new products to market without investing billions into building bespoke operating systems. However, such diversity also makes it more difficult to develop apps that seamlessly work across many devices with different specs, screen sizes, and the various versions of Android these devices run.
Read moreStop Burning Tokens – Buyback and Make Instead
In most “buyback-and-burn” token models, a network generates income in one currency token and uses the proceeds to buy-back and “burn” its own native token. The intent is to grow token value by reducing its supply as income grows. Buybacks tend to accomplish that goal, but burning affects currency and capital assets in different ways. When it comes to money, reducing the supply does theoretically increase the unit value of currency assets. But when it comes to capital assets like governance tokens, issuance is key to capitalization and burning can get in the way of growing fundamental value.
Read moreMagic Authentication
Magic is a passwordless authentication system. It starts with “magic links,” where you’re e-mailed a login link instead of providing the usual username and password. Magic makes it quick and easy for developers to implement this model in any application. Peek behind the scenes, and you’ll find a robust security platform built on secure hardware and user-owned encryption that paves the way for broader adoption of Web 3.0 technologies.
Read moreProof of Liquidity
In a standard proof-of-stake system, the more people stake, the more tokens are taken out of circulation. This may seem good for the price of the token, but in many cases insufficient liquidity can get in the way of network growth. So we should look for ways to create a direct, positive relationship between staking and liquidity. One idea is to use Balancer pool tokens as proofs of liquidity that can be staked in place of the network’s token, such that its liquidity grows together with staking.
Read moreAragon DAOs
DAOs collapse the cost of creating and managing organizations by replacing slow and expensive paper contracts with fast and cheap smart contracts. With lower costs and higher speeds we unlock new levels of organizational scale. Think of it as a spectrum: on one side of the range we can have a larger number of smaller organizations in cases where setting up a legal entity is far too expensive to be worth it. On the other end, we can create mega-organizations that would also be too expensive, or downright impossible to manage with paper. On either side, we can both capture underserved markets and create completely new ones.
Read moreErasure Thesis
Information is a strange good: it’s created in unpredictable ways, you can’t know if it’s good until you have it, and it can be reproduced at no cost by anyone who does have it. This makes it hard for markets to price and distribute its value. But we can use crypto to address these challenges. Erasure is a new protocol for exchanging valuable information on the internet. It uses encryption, smart contracts, and staking with the Numeraire token (NMR) to create a trusted, decentralized venue for exchanging data.
Read moreThin Applications
Big Web companies tend to expand their platforms and monopolize information by locking users into proprietary interfaces. Cryptonetworks, on the other hand, tend to provide single services, and can’t “own” the interface because they don’t control the data. Specialization helps because the more decentralized a network, the harder it is to coordinate a complete suite of services under a single interface like Google, Facebook, or Amazon do. So instead, consumer applications in crypto are independently built on top of multiple protocols using what we could call a cryptoservices architecture (like microservices, but with sovereign components).
Read moreHow Much Does a Crypto-Vote Cost?
In cryptonetworks where a token provides some kind of voting power (e.g. a DAO or proof-of-stake), we might determine the cost of each vote by calculating how much interest it would cost to borrow that token in secondary lending markets for the duration of the vote. This idea highlights the important role of time as a variable in the governance process, because the longer the period one needs to borrow the token to vote, the more expensive it is in terms of interest paid. If this is true, we can use this insight to design stronger governance systems. Protocols can’t control second-market interest rates, but they can influence the “cost of governance” by manipulating how much time it takes to complete the voting process.
Read moreHow To Think About Value
One way to think about “value” is through the lens of costs. The basic principle is that markets allocate value along the lines of costs as they trend to equilibrium. So we can estimate the overall behavior of future value by studying its associated cost structure. To establish this logic we’ll review some fundamental principles of economics (primarily equilibrium and MB=MC) and piece apart what we mean by “costs”. Then we’ll apply this insight to reason about the nature of value capture and investment returns in crypto.
Read moreEthereum and The Seven Dwarfs
People in the 1960s computer industry would say the market was IBM “and the seven dwarfs” in reference to the other popular computer makers: Burroughs, Control Data, Digital Equipment, RCA, Univac, Honeywell and GE. They all poured fortunes into developing newer and better technologies than IBM, yet none could compete with its massive distribution advantage. Ethereum is the IBM of the smart contract blockchains: it may not be the “best” technology, but it works well enough and has amassed a distribution advantage that will be hard to overcome by its competitors.
Read moreWeb vs. Crypto Service Models
We compare web vs. crypto service models across two dimensions: the production model (from centralized to decentralized) and the data model (from custodial to non-custodial). The more decentralized and non-custodial a service, the more distributed its cost structure. This is important because markets tend to allocate value along the line of costs. So the more we decentralize the cost structure of a service, the more broadly we distribute its value.
Read moreSovereign Cryptonetworks
A state is sovereign when it has supreme authority to govern its territory without interference from a foreign power. Similarly, a cryptonetwork is sovereign when it runs in a way that resists outside influence. But instead of managing the rules and politics of a geography, cryptonetworks use blockchain protocols to govern the production and exchange of information services over digital space. Achieving sovereignty is necessary to fulfill crypto’s ultimate promise of independent online networks that distribute value more broadly across its participants, instead of concentrating it in a particular company or jurisdiction.
Read moreFOAM Thesis
Location services are critical to the global economy, but GPS infrastructure is surprisingly fragile, the data layer is effectively a Google monopoly, and personal location data logged and sold without user consent. To help solve these problems, FOAM is building a decentralized location services network which (1) reduces our reliance on GPS satellites, (2) provides open access to key metadata such as geocoding and points-of-interest, and (3) guarantees permissionless access and user agency through the use of open standards.
Read moreCryptonetwork Governance as Capital
Capital is, in essence, the power to organize the economic resources of a social system, and its worth a function of how much of those resources can be directed to the holder’s benefit. This understanding reveals the inherent value of cryptonetwork governance as capital, and helps us understand tokens with governance rights as new kinds of capital assets.
Read moreCrypto Hedge Funds Vs. Venture Funds
Cryptonetwork founders, unlike those starting traditional equity businesses, now have to think about the fund structures of their investors. This is because the liquidity of cryptoassets brought the hedge fund model, which carries an active trading bias, to early-stage tech investing, a field historically dominated by venture capital. If you’re raising money for a cryptonetwork, each model has pros and cons depending on your goals, but understanding how they operate is key to making good decisions about how to structure financings.
Read moreFunding Cryptonetworks
When we invest, we think in terms of funding teams, and funding networks. Funding teams provides the financial capital to build the service. Funding networks supports growth by capitalizing the whole community. They’re very different kinds of investing, but both are essential to long-term network success.
Read moreThe Cryptoeconomic Circle
Cryptonetworks are online micro-economies organized around a specific service, and regulated by a cryptoeconomic protocol. The cryptoeconomic circle is a model I like to use to think about how value flows through different participants in these economies.
Read moreDecred Thesis
Decred (DCR) is a cryptocurrency with hybrid proof-of-work/proof-of-stake consensus that enables on-chain governance. Its proof-of-work mining is similar to Bitcoin’s, except each block has to be approved by a randomly-selected group of users who “stake” their DCR. In addition to approving a block, these selected stakers can also vote on changes to Decred’s consensus protocol, allowing them to influence the long-term evolution of the network. This architecture creates a fair system of checks and balances between users, miners and developers.
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Read moreInformation Technology Market Cycles (A Brief History) →
"Information technology evolves in multi-decade cycles of expansion, consolidation and decentralization. Periods of expansion follow the introduction of a new open platform that reduces the production costs of technology as it becomes a shared standard. As production costs fall, new firms come to market leveraging the standard to compete with established incumbents, pushing down prices and margins, and decentralizing existing market powers."