📌 An opinionated recap of the most interesting news in crypto
Token Economy
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Thoughts from Aracon
We're back from Aracon in Berlin, which was a blast. Here's a quick video recap of the 2-day event, though everything was live-streamed (day 1, day 2).
The unbiased commentary from YR is that the community that the Aragon team has managed to create around itself has really proven to be second to none, particularly when it comes to 'layer 2' types of projects (perhaps only 0x would rank higher?). I pin it down to a combination of compelling vision + ability to communicate it effectively, religious commitment to transparency, sense for product + pace of shipping.
A couple of themes that emerged from the conference worth highlighting:
- participation in governance is a big unknown unknown, there does not seem to be a benchmark or standard of success yet. This seems to be a key question mark, particularly so for project whose tokens are purely 'governance' enablers. We'll see all sorts of experimentation to drive higher participation rates in the next 1-2 years ad standards will start to emerge. - Polkadot as Ethereum's main (only?) threat. Aragon One has announced that they are exploring launching a new chain on Polkadot network, and from the grapevine the level of excitement for the project is very palpable across the Ethereum ecosystem (Ryan Zurrer gave a very compelling overview). Beyond the technical differences between the two projects, this would also be a test of formalized on-chain governance vs Ethereum off-chain approach. - decentralized oracles are closer than we think. Witnet demoed the "world's first data retrieval, aggregation and consensus trustlessly performed by a truly decentralized oracle network".
--- Moving on to this week's issue, a healthy debate emerged around ideal fund structures for investing in this asset class. The debate originated from, or coincided with, a Bloomberg post revealing Polychain's new 'hybrid' hedge fund subjecting LPs to a 7-year lock up period, with Placeholder and Fred Wilson weighting in. The key message for founders there is to ensure you really understand different investors incentives before banking their checks and you plan your fundraising accordingly.
On a related note, it emerged this week that Grin's development funding campaign was off to a difficult start, despite +$100M of 'speculative' VC capital was rumored to have flown into mining operations. It really speaks to the trade-offs that teams have to make in this space and still raises questions about what's the optimal funding mechanism for open source software.
In the meantime #defi continues to show momentum with 'wrapped BTC' going live as an ERC20 token providing an additional liquidity source, and a bunch of other tools and interfaces emerging.
A rather contrarian read of Carlota Perez's framework applied to crypto, by Daniel Heyman of ConsenSys (i.e. we are still in the "gestation period" because we still lack replicable business models and easy-to-use infrastructure).
Excellent essay by Cyrus of Scalar Capital covering the symbiotic relationship between ETH, DAI and MKR and how he sees it evolving over time (introducing the concept of ethDAI).
Perhaps this will be teaching you to suck eggs, but if you are a founder in this space you should really understand your available sources of capital, and here Joel from Placeholder does a great job at illustrating the differences between hedge fund and venture fund structures.
+ Fred Wilson picked up on this theme in Understanding Your Investors, where he highlights the emergence of hybrid models in crypto (see below in 'new funds').
Yet another insightful piece by Hasu and Su Zhu, outlining the multiple challenges and counterforces potentially playing against the Bitcoin maximalist view of the world.
The talk on CT this week was definitely heated around the topic of funding open source software. Some said that Grin is ending up as the de-facto VC-coin, while the developers writing it aren't really being rewarded at all..
Lots of fun discussions to be had around the topic of OSS funding and the tragedy of the commons.
Handy app built on Settle that instantly compares prices across major non-custodial exchanges and highlights the most convenient.
For now it only re-directs, but one can imagine them moving towards a deeper integration where orders are automatically routed in the background and executed at the best available price, in a way similar to Totle which we have covered in the past.
Coincidentally, a similar DEX price comparison tool launched the same week.
This one is built by Airswap on top of an open source library and seems more focused on building an open API that provides developers with real time prices to feed into their apps.
Wrapped Bitcoin is finally live on Ethereum as an ERC20 token under the $WBTC ticker.
It already counts 72 BTC in custody (Bitgo holds them, verifiable onchain) and an equivalent amount of minted WBTC is being traded on various decentralized exchanges against ERC20 pairs.
It's clearly not as 'pure' as the real BTC, with the collateral being centrally custodied and minted, requiring KYC/AML and the whole project being governed by a DAO of industry partners, but the use cases for BTC grow exponentially, now that it can also live synthetically on Ethereum, and open finance gets a lot more liquidity to build upon.
+ WBTC is already lendable and borrowable in a trustless way with Nuo Network (more in funding rounds).
At The Graph Day last week The Graph launched Graph Explorer, a dev tool that allows developers to create and deploy subgraphs so that their smart contract data is indexed to The Graph and other developers can easily pull it into their dApps via a GraphQL API.
Data from Dharma, Compound, Uniswap, ENS, Origin, Decentraland and Livepeer can already be queried.
This solves a major pain point among the developer community, who's so far been struggling to get data out of the Ethereum blockchain in a scalable and reliable way.
(Scroll further to the funding rounds for Multicoin's investment thesis and why they believe it's a critical piece of the web3 stack).
Out of the blue, the Plasma Group showed up and is giving us the tools needed to easily launch plasma chains on Ethereum. You can read their Node.js implementation notes of the Plasma Cash variant they built here.
The nodes launched have a command line wallet, operator software, node.js client, core utilities, and a block explorer - all out of the box and for free.
MakerDAO and Austin Griffith have been cooking up something particularly cool for ETHDenver.
Austin's xdai.io wallet will come pre-loaded to each participant with a purpose-minted local coin ('buffidai'), accessible via a private key embedded in a QR code. Local (whitelisted) vendors will accept this currency and redeem it for DAI at the end of the event via Wyre.
The concept of 'ephemeral' local economies is fascinating and uniquely enabled by programmable money. We suggest reading Localcoins and micro economies to dig deeper into it.
You can track all of your addresses, interact with them with Metamask and the other wallets, but also access the entire new magic world of DeFi, with access to trading on 0x, Kyber.Network, borrowing on Dharma and Compound, investing with Set Protocol and MelonPort, and finally savings with Proof-of-Stake pooling or DAI lending.
For the more technically minded, here is a zero-knowledge SNARK, Sonic, which supports a universal and continually updateable structured reference string that scales linearly in size.
One to add to zkSNARKS and bulletproofs. Requires just one trusted setup (with just one honest participant).
In this Bloomberg article we learned that Polychain has raised $175M for a fund with a 7-year lockup period.
It's particularly interesting to read about the emergence of hedge funds with more venture-like lock-up periods in the context of Placeholder and Fred Wilson's posts on VC vs HF structures that we linked to above. Some painful lesson learned over the last 18 months for sure on this front.
Pantera Capital, Coinbase Ventures, DCG and others participated in a $4.5M round for Staked, a US firm that is building the technical infrastructure for non-custodial staking services.
Right now it supports Tezos, Dash, Decred, Livepeer, Factom and EOS, with others to launch shortly. Every crypto holder is now interested in passive yield and network participation, so this market is bound to be heating up fast with many service providers, from wallets to exchanges and custodians going after it as well. Staked seems to have secured an early lead.
Nuo Network has closed a $500K seed round with ConsenSys Ventures and other local angels and funds, while launching on mainnet. It's a decentralized lending platform built on Ethereum that allows users to earn an interest on their crypto holdings or borrow some (including WBTC). It looks incredibly well made and we're looking forward to giving it a spin.
As an aside, it's really interesting to see the emergence of accessible #defi products like Nuo and Instadapp coming from the Indian market.
