Crypto 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.

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Maker Investment Thesis

Credit has greased economic wheels for millennia, and Maker is the world’s first 100% software-based, community owned and operated credit facility. As a family of smart contracts operating on Ethereum, the system offers secured loans of equal cost to anyone in the world. The by-product of loan generation is dai, a stablecoin collateralized using on-chain rules and assets.

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Funding 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.

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The 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.

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Cryptonetworks are not Companies

Joel was the first person that stuck the word cryptoeconomy in my mind. It was mid-2017 and the idea struck me because most everyone was thinking about cryptonetwork valuations (most commonly ICOs) in the context of company valuations. Which is partially why they were considered so obscene.

What the crypto market vaguely understood, though could not fully articulate, is that the prices being paid were for emerging economies. Emerging economies using a protocol in place of the government, specializing in a single (digital) service, and capable of global scale from inception. The good ones, at least.

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