“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.“
“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.“
“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.”
“The Cryptoeconomic Circle describes a three-sided market between miners (the supply side), users (the demand side), and investors (the capital side). Miners opt-in to the consensus protocol and coordinate their resources to provide the network’s service in a decentralized manner, users consume the service, and investors facilitate exchange while capitalizing the network.”
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 powersRead More
We published the Placeholder investment thesis. A lot has happened since we first shared it with our investors in September 2017. It's a "summary" because each section is a subset of a larger body of work and thought which we'll expand via our blog posts as a market develops.
"The relationship between protocols and applications is reversed in the blockchain application stack. Value concentrates at the shared protocol layer and only a fraction of that value is distributed along at the applications layer. It's a stack with 'fat' protocols and 'thin' applications."
"Imagine a global database (or a set of global databases) that every application plugs into. That’s the general idea behind the Shared Data Layer. As the name suggests, it’s a data storage layer that is decentralized and open to everyone."
"Companies like Ebay, Facebook and Uber are very valuable because they benefit tremendously from the network effects that come from keeping all user information in centralized in private silos and taking a cut of all the transactions. Decentralized protocols on top of the blockchain have the potential to undo every single part of the stacks that make these services valuable to consumers and investors."