A core function of the financial system is to transfer risk to the parties most willing to bear it. It should therefore be no surprise that two of the most successful products in DeFi, stablecoins and DEXs, address the key risks of using and holding cryptoassets. But these systems face uncertainties of their own. While limited counter-party risk and full transaction auditability have been rallying cries for DeFi, history reminds us that risk isn’t eliminated, but transposed. In fact, increasing complexity of products and complacency of market participants can magnify rather than reduce systemic risks.
Read moreIn the technology market, a shift in the development paradigm has always shuffled the deck and created opportunity for new entrants and new tools. We are thrilled to announce today that Placeholder led a $2.5mm investment in 3Box, a company based in New York and Berlin dedicated to the proposition that users should have an interest in their data.
Read moreThe majority of cryptoassets are shaping up to be capital assets in nature, whereas many early examples like bitcoin are better characterized as commodities, with a subset poised to become commodity monies. Within the burgeoning capital asset field of crypto, some closely resemble equity, others more closely resemble debt, and others have a bizarre enough mix of capabilities and value streams to be unrecognizable from prior renditions of capital assets. As part of explaining why governance assets have value, Joel has done an excellent job of laying out foundational principles behind capital, which is a piece that should be read before continuing here.
Read moreAs the potential of open financial protocols becomes clearer, some applications are gaining adoption faster than others. Maker dominates in terms of value locked and volume transacted. Compound and Uniswap trail, but are well ahead of 0x, Dharma, Augur, and dydx when it comes to liquidity. The rest have yet to show up on the radar. Looking at the three dominant protocols reveals a design advantage with respect to liquidity: none of them require users to find a specific peer to take the opposite side of a trade.
Read moreSince launching Single-Collateral Dai (SCD) in December 2017, Maker has become one of the most widely used protocols on Ethereum. A diverse ecosystem of borrowers, currency users, keepers, and speculators continues to drive rapid growth of the system. This report presents Maker as a network of heterogenous actors, examining the activity of each of its key stakeholders in an attempt to isolate the key economic drivers of the system. The focus will be on analyzing SCD’s first fourteen months of operation, while providing a few projections on the network’s future. The analysis is broken down by stakeholder group: CDP Creators, Keepers, MKR holders, and dai users.
This is not intended as an introduction to the inner workings of the Maker system. Readers unfamiliar with the Maker system should consult the MakerDAO Whitepaper and Placeholder’s Maker Investment Thesis prior to reading this report.
Read moreLocation 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 moreCapital 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 moreInteroperability of state and value is likely to place downward price pressure on layer-1 blockchains that have no monetary premium, while enabling strong middleware protocols to achieve cross-chain, winner-takes-most dominance in their respective services. While not a perfect mapping to traditional use of the term middleware, these protocols can be thought of as anything sitting just below the interface layer (i.e., the applications the end user interacts with), but leveraging the lower-level functionality provided by layer-1 blockchains and interoperability protocols.
Read moreCryptonetwork 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 moreCredit 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.
Read moreWhen 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 moreCryptonetworks 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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