You might ask “why do we need yet another blockchain?” and you would be right to ask that.
The answer is that Dapper has built several games on Ethereum, one of them a top-three smart contract this year (CryptoKitties) and they have found it challenging to build the games they want to create on that platform. They looked around at all of the other options and could not find a blockchain that addressed all of their issues. So they are building Flow.
Flow’s technical architecture balances three priorities: Scaling with Full Composability: Flow improves throughput without breaking up the network shared state. This preserves a developer-friendly environment for applications, making it much easier to write secure and composable code. Speed and Efficiency: Flow is capable of handling the transaction volume needed to support modern consumer applications while consuming a tiny fraction of the computing resources needed by current networks. Decentralized Participation: The security of a decentralized system is directly related to the number of independent participants working to secure the network. Flow supports large numbers of participants with a range of technical and financial commitments, resulting in a system that’s cheap to join while being costly to subvert.
If you are building a game, a collectibles experience, or some other mainstream consumer decentralized application, you should check out Flow. You can do that here.
And if you want to engage with Flow and the Flow community, you can do that here.
The crypto sector is in an interesting phase right now.
The market has rallied from its lows this past winter and is up a lot in 2019:
But Bitcoin now makes up almost 70% of that aggregate market cap.
In some ways, Bitcoin is the one protocol that has found lasting product-market fit. In terms of a censorship proof digital store of wealth, there is nothing that comes close to Bitcoin. There are some protocols, like the privacy-focused ones, that offer similar and in some cases better use cases. But for the most part, Bitcoin is our digital gold.
Ethereum, as many of you know, confounds me. It has shown the way to so many important things; smart contracts, programmable trust-free computing, potentially proof of stake, and a lot more. But it remains hard to build on, scaling issues abound, and many developers are looking elsewhere.
Stablecoins, including Facebook’s plans for Libra, are a bright spot. There has been much innovation in this sector and more is coming. There is no doubt that technology can provide a stable programmable crypto asset. We are still early days in the use cases but it is not hard to imagine why one would want to own and use stable programmable digital money.
But there is also plenty of disappointment to be had in crypto right now.
Regulators and banks in many parts of the world are downright hostile to crypto and have pushed much of the liquidity to Asia and the innovation has followed it there. Many of the most interesting things in crypto right now have emanated from Asia.
And many of the most promising and best-funded projects are massively delayed in getting to market. Some of this is that building scalable secure and decentralized protocols is not easy. But it is also true that the decentralized development approach that many of these projects are taking is not well suited to deadlines and ship dates.
And maybe most of all, crypto has not gone mainstream. Very few people earn in crypto. Very few spend in crypto. Very few use Dapps. Very few do anything with crypto other than buy, sell, and mostly hold.
I am an optimist. I am convinced that many of these disappointments will be overcome in the next few years. But it is easy to be bearish on crypto right now. The reality is well below the hype and challenges abound
I am long crypto and USV is long crypto. And we are putting more capital into the sector and will continue to do so. But it is not without risks and setbacks. Actually it is full of them.
Some crypto projects are developed from scratch. Bitcoin, Ethereum, and our portfolio company Algorand are examples of this. The developers have a vision and they go out and build it.
Other crypto projects evolve from something else. Kin and Props, both created by USV portfolio companies, are examples of that.
A particularly interesting example of the latter model is Numerai>Numeraire>Erasure. USV is an investor in Numerai which is a hedge fund that sits on top of the “The hardest data science tournament on the planet”.
But as the Numerai tournament gained scale and the adoption of Numeraire grew, the Numerai team “realized that the primitives Numerai has built could have a wide range of applications beyond the tournament”.
The Erasure protocol is now live on the Ethereum Mainnet and you can build things on it. The Numerai team has already built two applications on Erasure:
Erasure Quantis a tournament used to crowdsource data on the Russell 3000 index. Participants submit daily price predictions on US stocks and are rewarded for contributing while building an immutable track record. Erasure Quant is a template that can be used by others to build their own tournaments. ErasureBay is an open marketplace for information of any kind. It can be used to create credible signals over possession of local knowledge and attract a buyer willing to pay for it.
These crypto projects that evolve from something else are more focused and benefit from a real use case and market need. That does not make them more likely to succeed or more valuable. In the current market, almost all of the most valuable crypto projects are ones that started from scratch.
But I don’t think that will always be the case. Many of the most important technologies evolved from something else and I think that will be the case in crypto as well.
My partner Nick put together a deck outlining USV’s approach to crypto investing earlier this year and we have been using it with founders and investors since then.
One slide I particularly like from that deck is this one which describes how we think the crypto market will develop over time.
We have already seen an explosion of assets issued on blockchains and a number of very large and profitable custody/brokerage/exchange businesses built. We expect we will see continued innovation in the open finance (finance 2.0) sector in the next few years while the open data (web 3.0) sector will take longer to develop.
We also think that open finance will inevitably lead to open data as users (both consumers and businesses) will start to understand and appreciate the benefits of increased user control, lower transaction (and other) costs, and other benefits of decentralization.
Brian Armstrong, CEO of our portfolio company Coinbase, gave this talk to the Company at a recent all-hands. In it, he describes the founding story for Coinbase, and then goes on to describe the Company’s Mission, Vision, and Strategy.
I’ve written on this blog about extensible blockchain games, the ability to own the virtual goods you earn or buy in your games, and the idea that these virtual goods can move from game to game. I think this is a big deal and possibly the thing that brings blockchains and crypto tokens to the mainstream user.
So, here’s an awesome example of that. Our portfolio company Dapper announced today that it is building a blockchain game with the NBA called Top Shot.
Here is the idea behind the game:
NBA Top Shot will feature a social experience built around digital collectibles as well as a complementary head-to-head game designed to create a fun, authentic and accessible fan engagement on blockchain. Like other sports games or fantasy brackets, fans who play the game are tasked with creating their ideal squad, but in this game, their rosters are built by acquiring live in-game moments from the NBA season. These moments, such as a Kevin Durant 3-point shot, or Joel Embiid dunk, which are acquired as digital collectibles or tokens, can then be either owned forever or used to compete against other players in online tournaments and leagues.
NBA Top Shot will start offering crypto-collectibles in the fall, with the game to follow in early 2020. You can get early access by leaving your email address here nbatopshot.com
This Kickstarter project is for a circuit board that makes it easy for developers to create IOT devices that work on Blockchains. It currently supports Ethereum, Whisper, and IPFS. I backed it this morning and am sharing it with all of you in case you want to as well.