On my latest conversation with Teemu, we warn people off the vaporware of crypto + AI tokens, go over how the market is changing - including how ETFs may provide a path to something that scans like IPOs - and discuss the Eigenlayer grants to prominent critics at the Ethereum Foundation.
Over at BlueSky, Dell Cameron brought up that Facebook’s involvement in crypto, VR, and GenAI aren’t working out because they are only secondary to their main business purpose: surveillance. (link)
I disagreed. Cameron was right in that it failed because their main business is surveillance, but I suspect they screwed it up because it was such a great fit that they got too greedy.
Crypto would have been for them - if Libra had taken off, Meta would have gotten access to their users' transaction information, something they don't necessarily have right now.
They luckily came out the gate too hard and scared everyone off by making it too obvious it was a supranational currency.
— Ricardo J. Méndez (@ricardo.bsky.social) Jun 4, 2024 at 9:08
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Would it have been different if they’d seen it as a technology investment?
Two projects grew on the compost of Facebook’s Diem open source dump: Sui and Aptos. As of June 4, 2024, their combined fully-diluted valuation is about $10 billion. Facebook could have captured that value if they had spun it out from the start, even as a subsidiary where they control most of the token supply.
But Libra was never a tech investment. You don’t get to have an arms-length independent company and share data.
When all you have is surveillance, everything looks like a data trove.
Over breakfast in Costa Brava, back in May 2023, the CEO and founder of an AI startup I know told me that he was worried because for the first time things were progressing too quickly, and he couldn’t tell where they were going.
It made me realize that I was perfectly comfortable with it, because crypto has inoculated me against future shock. There are buses hurtling all around you, so you can’t freak out about it - you need to figure out if any of them is headed your particular way, and what’s the smallest change you can apply to get out of its way.
Anything beyond that is overcorrection, and may get you into a different bus’ path.
Teemu and I discussed the possibility of Avalanche no longer requiring subnets to validate the main network.
At the time, I did not see the value - why wouldn’t you just build on Cosmos?
Teemu mentioned the possibility of raising from capital that needs to invest in an otherwise barren ecosystem.
I now suspect they may end up sucking air off L2s instead of Cosmos.
Also, I think Avalanche has the advantage that they can tell any EVM story to those were looking to L2s.
It is something I hadn’t considered.
It might not pull away teams that are looking into Cosmos, but will impact those that look at the L2 landscape and decide there is not enough there for them.
Markets are a series of bundling and unbundling, and whomever does the cleanest job, wins.
A clean unbundling makes it easier for others to build upon you, to integrate, to build businesses around you. It’s why people used S3 instead of other more elaborate mechanisms.
A clean bundling makes your whole stack look solid, integrated, like what Apple used to be.
In both cases, you get the advantage of reduced cognitive overhead.
Back in 1999, David Bowie spoke about how music used to be subversive, but had since become merely an information delivery mechanism - it was the Internet that was subversive.
Fast-forward, and the Internet is an information (and disinformation) delivery mechanism - it is crypto and other areas that are subversive.
The thing that is subversive now is the what will make money in a few years.
TL;DR: I don’t see any practical path forward for decentralized stuff other than abandon the pretense of cross-chain value transfer and embrace balkanization, while letting the centralized stuff handle the cross-chain value transfer.
I don’t currently see a clear path towards making a bet on undifferentiated Ethereum layer 2s.
Generally speaking…
So unless one is fully involved on ETH L2-land, it seems like the best way to bet on L2s winning (as opposed to fast L1s) would be an ETH bet.
One can make short-term bets based on TVL, where there is a clear power distribution emerging, but that’s it - and chances are that by the time there is a clear winner, it will be relatively late to make a bet.
The main outlier seems to be Polygon, who keeps striving to be something more than just an L2, so at least one could make a bet on one of their efforts surviving whatever L2 extinction level event is likely to hit eventually.
The only reason to invest in them is that they will likely have a higher beta, but that also means you can pick the wrong horse and underperform.
The only sensible way I see is some sort of portfolio that invests in the Top N and skews the amount based on TVL, rebalancing every so often.
Otherwise, I think if you aren’t involved in the communities you may miss moves that could cause them to bleed devs and TVL in a “gradually, then all at once” way.
Some thoughts on a 1996 paper by Narayana R. Kocherlakota.
Fully private systems, like Aleo, will be mostly memoryless systems (memory will be provided only by an individual’s viewing keys).
These systems will allow for a class of application we haven’t seen online before - UTXO/records as rai stones that just happened to materialize along with a zkp.
Given that fully private systems will be memoryless black boxes with zero-knowledge proofs, one cannot verify that a contract path got executed in the exact same way that you would have wanted. Therefore, it makes no sense to cling to the notion of traditional execution, and one should focus on the result that one wanted to achieve.
This would seem to indicate that private systems lend themselves to intent-based approaches.