One way to think of the design choices within the layers is the lower down the stack we go, the more we need small machines to be able to verify the truth. By ‘small machines’ we mean a set of requirements that are widely achievable, allowing nearly anyone to verify the truth if they so desire, keeping collusion at bay. So long as these smaller machines are publishing and verifying “the truth,” then bigger machines can run execution at levels higher up the stack, achieving greater performance but not sacrificing decentralization where it matters. Intriguingly, this design means Eclipse’s transaction throughput capacity could surpass that of the Solana L1, allowing it to be home to a diverse ecosystem of its own.
Read moreSaga: Open Blockspace for the Multiverse
Saga’s virtual blockchains are called Chainlets, and Chainlets are designed to be dedicated to single applications, though they could host multiple applications if preferred. Each Chainlet is a fully decentralized, proof-of-stake chain with all the properties of a L1, except the requirement for a native staking token. Current throughput of each Chainlet is 6.8 million transactions/day, or ~80 transactions/second (TPS). If an application needs more throughput, additional Chainlets are spun up to accommodate the surge in demand, allowing for elastic scaling that grows infinitely with the application’s performance needs.
Read morePlaceholder is Hiring an Analyst
Placeholder is a venture capital firm that works with entrepreneurs and decentralized information networks to better distribute data, wealth, and power. We are seeking a highly motivated Analyst to join our team for a 2-year term. As an Analyst, you will work under our Head of Research, Mario Laul, to analyze private companies, public networks, and emerging trends in our industry. You will also regularly interface with the Partners – Brad Burnham, Chris Burniske, and Joel Monegro – on deal and portfolio specific items.
Read moreInternet Financial System: Infinity Exchange and Beyond
When we combine expert knowledge from TradFi with an intimate understanding of blockchains, we can better tackle the institutional shortcomings of the current financial services industry. Infinity holds the core tenets of IFS central to its product roadmap, which include transparency, efficiency, and scalability. At the same time, its regulated KYC/AML front-end will open up the IFS to new pools of institutional capital. Once interest rate markets are sufficiently mature, we unlock the market for at-scale, efficient, and transparent credit, which may ultimately be benchmarked off Infinity’s yield curves.
Read moreAcross Thesis
Across is a bridging protocol on Ethereum that transfers value between Mainnet and Ethereum layer-2s, and soon will connect to any EVM chain. It differentiates from other bridges by its fixation on efficient value transfer, and combination of financial and technological engineering to make the experience seamless for the end-user. In a space that has a tendency to over-engineer solutions, the protocol is refreshingly minimal in its approach while also providing strong security properties.
Read moreGyroscope Thesis
Nearly four years after releasing our MakerDAO thesis, we believe another stablecoin, this one powered by Gyroscope, has the potential to complement Maker & DAI’s formidable achievements. With the US government proposing to ban “endogenously collateralized stablecoins,” crypto would do well to get more serious about resilient, decentralized stablecoin designs, if it doesn’t want to eventually rely on central bank digital currencies (CBDCs) or centralized stablecoins for stable value transfer. Everything in the Gyroscope protocol has been designed with long-term stability in mind, from the resilience and liquidity of its decentralized stablecoins, to the forms of governance that are implemented to sustain the system.
Read moreScaling Ethereum with zkSync
zkSync best preserves the properties that have made Ethereum successful thus far: decentralization, security, composability, capital efficiency, and instant withdrawals. At the same time, it minimizes the disruption faced by developers who are used to building contracts for the EVM. As a result, we believe zkSync is the L2 that paves the smoothest path to scaling DeFi, NFTs, and all other innovations happening on Ethereum. Before we get into specifics, it’s worth reflecting on how we got here. This discussion points to the conclusion that the challenge ahead is not only to scale, but to do so in a way that safeguards the core properties that got Ethereum this far.
Read moreThe Original Sin
We are working to build permissionless, open tech. Most of the process is open, but the part that remains the most closed and shrouded in secrecy is the early-stage financing. While this is in-part regulatorily and social norms driven, the more sinister component is insiders can disproportionately tilt the scales in their favor while keeping the details hidden from public view. The more early-stage investors get away with edgy behavior, the more emboldened and empowered they become, to the point where this power becomes detrimental to the health of the space as a whole.
Read moreZcash Thesis
Many folks in crypto today think about privacy backwards; instead of making sure their assets are private, they make the mistake of solely fixating on transactions being private. This is why we see people sending assets through mixers or coin-tumblers, only to return to transparent and trackable addresses, defeating the point of the mixer. Zooko Wilcox, a core contributing member of the Zcash community, voiced the confusion as follows: “You have to *store* your crypto in a private cryptosystem if you want privacy. Then it is safe to *move* it through a transparent system! Unfortunately, almost everyone has this backwards.”
A Superior Financial System
In the process of capitalizing itself into relevance, this boom of crypto capital has built a native financial system to account for its very own bootstrapping. While the other revolutionary technologies no doubt led to evolution within the existing financial system, none of them built an entirely new financial system from scratch. Instead, they remained reliant on existing financial systems, placing power in predictable hands. Blockchains can be thought of as 21st century accounting and production systems owned by “the people,” and so it follows that the space has pioneered a new financial system to displace the old.
Read moreAragon (ANT) Economics
Over the last three years, Aragon has built a suite of governance tools that allow any organization to legitimately and transparently manage activities like community voting, treasury management, organization ownership, and contributor payroll. It takes less than five minutes and a few dollars to set up your own entity, with six templates to choose from and governance as simple as drag-and-drop. Organizations using these tools exist within Aragon’s digital jurisdiction. To further establish the rules of its jurisdiction, and resolve disputes within and between organizations, the team built the Aragon Court, which is now live on mainnet. To govern the jurisdiction, incentivize jurors in the court, and operate the infrastructure processing transactions, Aragon has a native governance asset (ANT), as well as derivative capital assets designed for specific purposes (ANJ, ARA).
Read moreZcash's Network Upgrade 4: The Final Stretch of Decisions
Placeholder recently withdrew its governance proposal for Zcash’s Network Upgrade 4 (NU4), choosing to review and endorse other candidates based on our due diligence. For the uninitiated that may be reading this, NU4 will define the Zcash network’s allocation of block rewards to researchers, software contributors and other non-miner laborers. These policies will apply during Zcash’s second coinbase reward epoch, October 2020 to October 2024, and set a precedent for what Zcash’s stakeholders can expect from the network going forward. We think of the governance components of NU4 as a type of constitutional amendment to the Zcash protocol, and have been impressed with the rigor of ideas and debate that community members have displayed through this process.
Read moreFire before Growth: The Likely Fate of Ethereum Killers
In the coming quarters, a high density of “Ethereum Killers” (EKs) plan to launch their mainnets, and in so doing, release their assets to the public crypto markets. The transition of price discovery from the private to public markets will be an important one to watch and understand, especially considering many EKs carry billion-dollar anticipated launch values.
To follow, I’ll reason through my expectations for asset prices and the prices of services offered by EKs. While maximalists may dismiss this as hopeless investigation of shitcoins, I expect the behavior of newly launched EKs to impact the development of the sideways market we’re currently in, as well as the bull market to come.
Read moreProtocols as Minimally Extractive Coordinators
A recent Flipside Crypto post alarmed me when it stated the following: “Despite labeling themselves as decentralized networks, protocols, foundations, and frameworks, cryptocurrency projects are, in fact, businesses – that will fail to succeed if they don’t start thinking of themselves that way awfully fast.” I respect Flipside and what they’re working towards with the Fundamental Crypto Asset Score (FCAS), but fear that encouraging protocols to think of themselves exclusively as businesses will defeat the promise of protocols in the first place.
Protocols provide structure for businesses, but are not businesses themselves; they are systems of logic that coordinate exchange between suppliers (businesses) and consumers of a service. As coordinators of exchange, protocols should be minimally extractive, whereas businesses are incentivized to be maximally extractive (that’s profit, and a business is valued as a multiple of its profit).
Read moreResources, Governance, and Legitimacy in Zcash's 2020 Network Upgrade
In October 2020 the Zcash network will undergo its first halving, slicing the annual rate of ZEC inflation in half. Halvings are important moments in any cryptomoney’s maturation as they double the marginal cost of producing each incremental unit (at constant hash rate), moving the asset further along the scarcity curve. Concurrent with this halving, Zcash will undergo its fourth network upgrade (NU4), in which key decisions (especially re: the Founders Reward) need to be made that will shape the next four years of Zcash’s life.
As ZEC coin holders, Placeholder recognizes that NU4 will be a critical upgrade for the Zcash network, and therefore have chosen to submit our thoughts about its contents.
Read more here.
Value Capture and Quantification: Cryptocapital vs Cryptocommodities
The 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 moreThe Defensibility of Middleware Protocols
Interoperability 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 moreMaker Thesis
Credit 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 moreCryptonetworks are not Companies
Joel was the first person that stuck the word cryptoeconomy in my mind. It was mid-2017 and the idea struck me because most everyone was thinking about cryptonetwork valuations (most commonly ICOs) in the context of company valuations. Which is partially why they were considered so obscene.
What the crypto market vaguely understood, though could not fully articulate, is that the prices being paid were for emerging economies. Emerging economies using a protocol in place of the government, specializing in a single (digital) service, and capable of global scale from inception. The good ones, at least.
Theory Follows Price, Price Follows Theory
Humans have an innate desire to first understand, and secondly reason, about what they see in the world. We go from observing things (facts), to reasoning about those facts (theories), to then applying those theories back on present facts to predict future facts. This habit pattern explains the birth of religion. It also explains how we can expect quantitative models to be formed, evolved, and applied by cryptomarket participants in the years to come.