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Crypto

Principles​

Value Proposition​

Crypto matters because it combines generative technology and new capital formation in a way that is participatory and decentralized, bridging digital and physical worlds. This has the potential to create abundance, give users more choice and ownership, and solve problems in new ways.

Generative Technology​

Crypto as Generative Technology

  • Crypto is a generative technology that creates new users, marketplaces and things, meeting participatory capital formation.
  • Generative tech by definition creates abundance and cannibalizes the market for scarcity, as seen with the printing press.
  • The Renaissance succeeded because it had generative tech (print, double-entry bookkeeping) combined with new capital formation that was participatory.

New Capital Formation​

  • Crypto enables new ways to build businesses and solve cold start problems that weren't possible before.
  • Tokens are a new economic formation to solve cold starts, e.g. Helium incentivizing a network infrastructure build out for a fraction of the cost of incumbents.
  • Crypto fulfils the internet's promise by allowing users to earn from participation, not just equity holders. Value accrues to network users.

Decentralization and Choice​

  • Decentralized tech breaks apart centralized control and opens up choice, which is messy but net positive.
  • Successful movements open up a spectrum of options rather than just replacing one monopoly with another.
  • Crypto will enable a plurality of options for identity, privacy, and utility in different contexts.

Bridging Digital and Physical Worlds​

  • NFTs can serve as a bidirectional bridge between the digital/synthetic world and the physical/IRL world.
  • Owning digital items (NFTs) tied to physical goods enables much more rapid and liquid trading without having to ship the physical item each time.
  • Helium is an example of using crypto to improve a local community IRL, e.g. renovating a historic building using proceeds from a node.

Summary​

  1. It replaces the need for trust with verifiable truth.
  2. Self Sovereign Identity: guard against a breakdown of trust.
  3. Decentralized AI: not your model, not your mind.
  4. Human Coordination: incentives and network effects to align intentions and motivate actions.
  5. Ownership Economy: end crony capitalism.
  6. Risk Free Rate: protection against market manipulation.
  7. Capital Formation and Efficiency. The purpose of capital is support ideas that produce value.
  8. Loyalty Programs: a token is a web cookie on steroids https://devourgo.io/

(Identity), Payments, DeFi, DePIN - Dan Smith

tip

Show me the incentive and I will show you the outcome - Charlie Munger

Blockchains are new open source code platforms. Anyone can fork code but you cannot fork culture.

Reality​

The industry is currently infrastructure-heavy, with a lack of user adoption and applications compared to the technical progress made. There's an ongoing debate about whether crypto is primarily for infrastructure (financial rails, payment systems) or if it should focus more on consumer-facing applications. The current cycle is unusual, with prices running ahead of user adoption, which is a deviation from past patterns.

Venture Capital and Funding Dynamics

There's been a shift of capital from public to private markets in crypto, leading to more VC and angel investors but less retail participation. This has resulted in tensions between retail investors and VCs, affecting the overall industry dynamics. Despite concerns, some argue that more VC money in crypto is generally positive as it provides funding for founders to take risks and experiment.

Future Directions and Challenges

The industry is grappling with finding the right balance between decentralization and practical application development. There's a growing recognition that crypto might need to focus on use cases that don't require users to deeply care about or understand crypto technology. The concept of "restaking" and shared security is evolving, with ongoing debates about its implementation and necessity. Some argue that the industry needs to return to basics, focusing on achieving global-level payments as a "hello world" application before moving to more complex use cases.

Questions​

What is holding back progress in delivering decentralized applications that make a real world impact? How can capital be directed towards projects that help people to live more fulfilling lives, rather that funding uncontrolled casinos?

Attachments​