(1) tBTC + DeFi

Yesterday Matt Luongo announced that Trustless Bitcoin (tBTC) went live on Ropsten, a major milestone before tBTC goes live on mainnet later this year. I would like to see hackers experiment with this new DeFi primitive, because there are a number of exciting new applications that have the potential to be unlocked by it. Bitcoin is an absolute dream for DeFi builders because its $180 billion+ marketcap represents a massive new addressable market of collateral.

Dive into the tBTC code here.

(2) Apps on PoolTogether

PoolTogether is a no-loss savings game that is arguably the most beloved application in the DeFi community. The team will soon launch ticket tokenization called Pods, which will allow users to pool tickets. I believe this will turn PT into a first-class DeFi primitive.

We have barely scratched the surface for creative applications that can be built on PoolTogether. For example, you could create an odds/expected returns calculator or an overall PT leaderboard. Or you could create an alternate PoolTogether interface that introduces additional layers of gamification, such as making users who enter PT through a different website eligible for an NFT prize in addition to the regular PT prize.

If you’re interested in building an odds calculator or leaderboard, check out the PT subgraph here. If you want to interface with their core contracts, you can find those here. And if you’re really feeling ambitious, you can check out the code for Pods here.

(3) New types of oTokens from Opyn, a new insurance primitive

Opyn, which launched on mainnet earlier this week, is the first DeFi platform that protects DeFi users against both technical and financial risks using oTokens. It is also the first place where ETH holders will be able to earn meaningful premiums on their ETH holdings by providing insurance.

Get started with Opyn and oTokens here.

(4) DeFi analytics tools using The Graph

The Graph is a query protocol for getting complex data off of blockchains, which is powerful for analytics because you can query the historical state of entities on Ethereum. I am interested in seeing tools that query for specific block numbers/hashes to help us better understand DeFi applications. Here are examples related to this from the team.

Jump into The Graph on Github and their Discord.

(5) Eth2 Hacks

While DeFi has really captured the hearts and minds of Ethereum developers, Eth2 Phase launches later this year too. If you’re feeling creative and adventurous, I would focus my efforts here understanding the future of Ethereum. I personally would like to see some mobile-first Eth2 tools built this weekend.

Check out Eth2 bounties and example projects here.

I am excited to be joining CSS batch #1 as a mentor, where I’ll be guiding founders who join the program through the process of developing a new crypto company or idea, similar to how I work with our early-stage portfolio founders at dtc.capital.

The timing for CSS couldn’t be more perfect. Crypto asset prices are still down -70% from record highs in January 2018, but from my seat as an early-stage crypto-native investor, the industry’s most important indicators of health have never looked better:

• There are more talented entrepreneurs and technologists entering the space than ever before.
• Infrastructure and tooling are finally mature enough for entrepreneurs to build real businesses on top of decentralized networks.
• Regulatory clarity has improved leaps and bounds, to the point where it’s no longer an insurmountable roadblock for projects.
• Crypto companies are making meaningful progress on user traction and institutional adoption.

Given how today’s prices are clearly under-indexed on fundamentals, entrepreneurs are now presented with a golden opportunity to create an outsized impact in an industry that is poised for mainstream adoption in the coming years. Because of this, I believe that starting a crypto project is perhaps the highest-leverage bet that tech entrepreneurs can make today—and CSS is the perfect jumping-off point.

If you’re interested in learning more about a16z Crypto Startup School, including viewing the course outline and list of mentors, click here to visit the CSS website.

The Internet is filled with Walled Gardens — closed ecosystems controlled by centralized operators who extract as much value as possible. History has shown us that as platforms grow, Walled Gardens become increasingly parasitic to their own users and 3rd parties. Chris Dixon captures this relationship perfectly in his 2018 essay, Why Decentralization Matters:

“As platforms move up the adoption S-curve, their power over users and 3rd parties steadily grows. When they hit the top of the S-curve, their relationships with network participants change from positive-sum to zero-sum.”

Walled Gardens: Good for Business, Bad for Users

I’ve observed the effects of closed ecosystems first-hand as an early employee at event ticketing company SeatGeek. When I joined in 2014 after shutting down my Bitcoin company, we were a fast-growing startup building the Kayak for event tickets — a thin, user-friendly aggregation layer that collated inventory from all over the web and made comparison shopping easy.

The mission to aggregate all of the tickets on the internet resonated with investors like Accel Partners, who led our Series B, and even Kayak’s CEO, Steve Hafner, who joined our company board.

To achieve this, SeatGeek needed to partner with all of the websites that sold event tickets using a relatively simple API integration. Ticket providers would provision SeatGeek a partner API containing their ticket listings, which SeatGeek used to populate its own website. When users attempted to buy tickets, SeatGeek would simply redirect them to the provider’s website for checkout and take a small referral fee.

Convincing most ticket providers to partner with SeatGeek was easy. Websites needed help selling tickets and were eager to grant permission to a new sales distribution channel. Because SeatGeek wasn’t selling tickets directly, it wasn’t viewed as competitive.

However, one company didn’t want to give their tickets to an industry upstart. It was Ticketmaster, the largest provider in the industry, which tickets most of the major professional sports teams and touring artists in the United States.

Already the market leader and sitting at the top of the S-curve for almost 43 years, Ticketmaster viewed SeatGeek as a potential competitor down the line. While syndicating Ticketmaster inventory on other websites could offer a sales lift and make clients and fans happier, it also meant empowering the competition. Collaboration was off the table.

For SeatGeek to realize its vision and unlock an open ticketing ecosystem for fans, it would need to directly compete with Ticketmaster, the industry’s biggest Walled Garden, and open the industry up from the inside. In the years that followed, it did exactly that. The company is now perhaps the fastest-growing ticket provider in the world, working with major clients such as the Dallas Cowboys and Manchester City FC, and the event ticketing industry has made promising strides to become more open.

If this type of story sounds familiar, that’s because it happens regularly between fast-growing technology startups and entrenched incumbents. For companies like Ticketmaster, who already benefit handsomely from the status quo, there is often limited upside in opening up their platforms to 3rd parties.

When it does happen, usually through the provisioning of partner APIs, companies heavily consider business risk. This results in APIs that are limited in functionality and scope and with rules that can be unilaterally changed by the provider on a whim — hardly a solid foundation for new companies to build businesses on.

Open Gardens: The Product of a Permissionless Internet

Recently, however, a major assumption that software is Closed by Default has been challenged by public blockchains like Ethereum.

Blockchains are Open by Default. When someone deploys a smart contract on Ethereum, they have opted into a version of the internet in which technology is available to anyone in the world without restrictions. No permission is needed to interact with an application, nor is there any possibility of your access becoming restricted or revoked.

This new paradigm inhibits Walled Gardens and enables Open Gardens — open ecosystems that cannot be controlled by centralized operators. It has never existed on a global scale before, and it has profound consequences for platforms and their relationships with users.

From Open Gardens to Open Apps

With a foundation of game-theoretical, cryptographic, and community-driven guarantees, applications built on the permissionless internet are deserving of a new classification: Open Applications.

Open Apps are the product of smart contracts being deployed to public blockchains. They are not necessarily decentralized, although they can be, and they have the following core properties:

• Permissionless — anyone can access an Open App’s smart contracts and data. No permission is required.
• Transparent & Auditable — all data and code are publicly available for anyone to view.
• Modular & Composable — Open Apps are themselves building blocks, called primitives, that can be easily combined and stacked on top of one another.

Today, Ethereum’s Open Finance ecosystem (aka DeFi) contains the most Open Applications. The total number of DeFi users is modest, but there are hundreds of millions of dollars worth of crypto assets locked in DeFi smart contracts, which indicates user confidence and skin in the game. In less than a year, a vibrant ecosystem has already emerged:

Open Finance has also produced a fertile ground for early insights about Open Applications:

#1: The barriers to creating an application have the potential to be greatly reduced someday. Infrastructure is publicly available, modular, and composable, which means anyone can easily combine or stack different primitives on top of one another to create their own application. It’s not hard to imagine a world someday in which development feels a lot like playing with LEGOs.

#2: It’s harder to create a defensible business model on the permissionless Internet. Web2 companies like Apple, Amazon, Facebook and Google leveraged multi-sided network effects to build massive Walled Gardens and proprietary data silos, which allowed them to extract handsome profits from users and 3rd parties. This business model is simply not possible in an Open by Default software paradigm.

#3: Users have an unprecedented amount of agency. Open App users can verify for themselves if the rules of a system are being followed, and they can also fork away from a system if it is being abused. This naturally extends to pricing — if companies are charging too much for services, they should expect others to step in, fork their service, and start offering it for a more reasonable price.

#4: Open Apps support rapid experimentation and iteration. Anyone can interact with a smart contract once it’s been deployed, which includes forking the code or taking it in a different direction. A great example of this phenomenon happened recently with Dai, which has seen an entire universe of variations built on top of it emerge over the past few months.

It’s important to remember that today’s Internet, which is dominated by Walled Gardens, isn’t going anywhere. But with the advent of public blockchains, a new paradigm has emerged that provides developers with a permissionless foundation for building Open Applications.

Thanks to Tony Sheng, Cyrus Younessi, and Jacob Arluck for reviewing this post.

Open Gardens was originally published in Provably Neutral on Medium, where people are continuing the conversation by highlighting and responding to this story.

Editor’s note: With Stefano and Yannick in the Dolomites mountains for the 2018 Summer Unplug Retreat, this week’s edition of Token Economy features guest editor, Spencer Noon (that’s me!), an investor at Doggie Tail Crypto Capital, a fundamentals-focused and diversified crypto fund with the best name in the business 🐕. Find me on Twitter and don’t hesitate to get in touch.

☠️ Ether’s rough week

Unless you were living under a rock for the past week, you know that Ethereum’s network value tanked. The price of Ether dropped to $170 on Wednesday, marking a 90% fall from its all-time high, reminiscent of Bitcoin’s epic 87% drawdown which ended in January 2015.

So is Ethereum dead?

It wouldn’t be all that unreasonable to wonder. Narratives are so powerful in this industry, and we’ve recently seen one emerge which posits that decentralized applications are “capitulating” and mass-selling Ether from their ICOs on the open market.

If you dig into the numbers, you’ll realize this isn’t actually the case. Diar’s Larry Cermak published an insightful tweet storm on Monday that largely refutes the idea of an Ether death spiral:

It’s worth noting that projects are still holding 38% of the Ether they raised, and without revenues, they’ll likely be selling on the open market to cover expenses in the future. But the rumors of a mass capitulation were greatly exaggerated.

As investors and operators navigate this market, we have to be comfortable with the fact that price movements are often a function of narrative and market structure (like BitMex offering ETH futures) — not fundamentals.

🎧 To hear more on this topic, check out this recent Venture Stories podcast I recorded on the bull case for Ethereum → Link

Let’s dive into this week’s newsletter!

🔥 Thoughts

Bubbles, narratives, and mass movements

Tony Sheng drops an instant classic with an exploration of environments in which narratives fuel speculative bubbles. He argues that historically these environments have the following three properties:

1. Lack of reliable or relevant historical data to form valuations
2. Conditions that attract retail investors, oftentimes poor regulation
3. Relative strength of narratives to grab attention in an opportunity rich investment environment

We have all observed these properties in the crypto bubble over the past year.

Tony asks whether things will change with future bubbles in crypto. For me, this is unlikely because although we’re making progress with more reliable data and better regulation, valuation frameworks are still experimental and need to be proven out. This will take time.

Debunking Market Narratives: Litecoin Edition

Tushar Jain of Multicoin Capital is back with another cryptoasset analysis — this time doing a deep dive on Litecoin.

The verdict: despite being down more than 85% from its all-time high, LTC is still overvalued.

Here was the most interesting part of the analysis for me. Tushar argues that Litecoin’s security model is broken because, as block rewards decrease over time, the network must be secured by transaction fees. However, since Litecoin’s key value proposition is cheap transactions, the number of transactions needed to maintain security of the network over time will likely surpass the network’s capacity to process those transactions! This is a problem that could apply to other disinflationary Proof-of-Work cryptocurrencies boasting cheap transactions too (e.g. BCH).

PoW is Efficient

Dan Held with a take on why Proof-of-Work may actually be efficient.

This post is noteworthy because it synthesizes the views of many notable Bitcoiners into one narrative that pushes back on Proof of Work’s wastefulness. I’m a fan of PoW–it’s secure, battle-tested, and critiques of its wastefulness often miss the big picture. That said, this romanticized depiction of its energy consumption goes a bit too far for me, and it fails to recognize that other less-wasteful consensus mechanisms may provide better security guarantees in the future.

Borderless Bitcoin: A Dangerous Myth

Speaking of Proof-of-Work, Maximilian Fiege releases an epic post on why he believes electricity consumption makes Bitcoin less censorship resistant over time.

The central point of his argument is that electricity is a politicized resource, and while Bitcoiners will say distributed energy is the future, he says empirically that’s just not true.

A Primer on Mining 2.0

A short but thought-provoking post on Mining 2.0 by Erik Torenberg. Erik ponders some of the most esoteric questions facing crypto VCs today like

• How do you capture the value of decentralized technologies directly?
• How do you participate as an investor when there’s no token or no equity…?

and argues that some firms will differentiate themselves by actively participating in decentralized networks (e.g. by running a staking node). I’ve spent some time with firms who are making Generalized Mining their bread and butter, like CoinFund, and I’m convinced that it’s a winning model and something projects in the space are deeply interested in.

Why Crypto Community Building Matters

🔦Featured on Token Economy, by yours truly (Spencer)

At Doggie Tail Crypto Capital, I’ve helped a number of portfolio companies with their community building strategies. In this post, I break down some of the fundamentals of crypto community building and explain why strong communities are indispensable for the long-term health of decentralized networks.

How to raise a seed round in crypto

Regan Bozman of CoinList writes a helpful post on navigating the crypto investor landscape.

This is an absolute gem if you’re an early-stage company looking for funding or an aspiring VC looking to break into the industry. Bookmark this because you might need it someday.

Complexity Theater

The King of Curation, Nathaniel Whittemore, drops a new term on us called Complexity Theater, which is when ideas are explained in an overly-complicated way to make them seem smarter.

Complexity Theater is pervasive in crypto, mostly because our industry is so interdisciplinary. It’s hard to be an expert in everything, so when we come across domain experts ourselves, we often hesitate to ask for things like clarification.

Personally, I’ve been making a point to ask companies that pitch me to break down technical concepts more slowly. It’s proven to be extremely helpful when evaluating investments.

Single collateral Dai — 9 months in review

Remarkable that Dai has remained stable even though the price of Ether crashed from $1472 to $170 over the past 9 months.

Multi-collateral Dai is quickly approaching and that will only make the system more robust.

Inspired by discussions with Cyrus Younessi, I’ve been thinking about whether there might be a future relationship between the valuations of a native cryptocurrency (ETH), a governance token built on top of it (MKR), and the stablecoin it protects (DAI).

Smart Contract Protocols — Part I

Ash Egan begins his quest to research all of the smart contract protocols.

There are currently 60 ways to deploy a smart contract!

I believe there will be numerous complementary smart contract protocols someday. For the protocols that don’t make the cut, I think they’ll become sidechains of a more secure smart contract platform (e.g. Ethereum) or just die out altogether.

The 4th era of crypto: Crypto-institutionalization

Yaniv Feldman argues that we’ve had three eras in crypto so far

1. Bitcoin
2. Altcoins
3. Utility tokens

and a new era is upon us: crypto-institutionalization, which is led by traditional financial institutions, banks, and even central banks.

We’ve seen numerous developments related to institutional adoption over the past few months. I believe the pace is only going to accelerate from here.

💥 Newsy stuff

• Tezos Launch. After several months in Betanet and largely flying under the radar, the Tezos Foundation made a surprise Twitter announcement on Friday that its Mainnet is set to arrive on Monday morning.
• Manipulation. TrustNodes lays out the case for how BitMex seemingly admitted to price manipulation and trading against its own customers.
• Citigroup. It’s starting to feel like there’s exciting news related to institutional adoption coming out daily. Bloomberg announced that Citigroup plans to develop a new mechanism for trading cryptocurrencies by proxy without direct ownership of the underlying coins.
• Morgan Stanley. More on the institutional front as Bloomberg also announced Morgan Stanley plans to offer non-custodial Bitcoin swap trading for clients.
• Custody. BitGo has received approval from South Dakota regulators to be a qualified custodian for digital assets. Although this approval is only for one state, it paves the way for other states to come on board in the future too.
• Constantinople. Ethereum’s upcoming hardfork, Constantinople, which notably decreases supply inflation by 33%, looks like it will be installed before the end of the year.
• Interstellar. After months of speculation, Stellar finally announced their acquisition of Chain. They are forming a new company called Interstellar.
• Talent. Ripple’s general counsel has left the company. The timing isn’t exactly perfect as the company is in the midst of a class-action lawsuit regarding whether or not XRP is a security.
• ICO Funding. According to Bloomberg, ICO funding has dropped to levels not seen in 16 months.

😎 Cool new projects

Introducing Vault

A new dapp and collectibles wallet hit the App Store this week.

I’ve spent a lot of time trying out wallets and Vault is really freaking good. The UI/UX is sleek and they’re even giving away free NFTs to early users.

A new algorithmic stablecoin

Carbon is the latest algorithmic stablecoin to launch.

I’m personally skeptical that algorithmic stablecoins are going to stand the test of time. Once they get big enough, people will start trying to break them.

There is no shortage of competition either. We currently have algorithmic, fiat-backed, and crypto collateral-backed stablecoins, and I think it’s only a matter of time before government-issued stablecoins make their way onto the scene as well.

Introducing the Gemini Dollar

Gemini continues to play the regulatory game masterfully, this time launching a dollar-pegged stablecoin with backing from the NYDFS.

Say what you want about centralized stablecoins, but the fact that Gemini opted to issue GUSD as an ERC20 token, instead of on Ripple and Stellar (who are supposed to be good at this type of thing), speaks volumes to how far ahead Ethereum is as a digital asset issuance platform.

Paxos unveils stablecoin

We’ve got another dollar-backed stablecoin with approval from the NYDFS!

Lightning Labs launches desktop app beta

The Lightning Labs team has released a redesign of their desktop app that’s super simple to use.

Introducing NOWALLET

Hold Bitcoin in your brain. Seriously.

There have been some high profile cases of cryptocurrency being seized at border crossings.

With NOWALLET, users can securely hold Bitcoin by simply remembering an email address and a passphrase.

We’ve got a new token standard: ERC721x

Loom Network is an absolute powerhouse when it comes to shipping.

They just released a new standard, ERC721x, which is an extension of ERC721 that adds support for multi-fungible tokens and batch transfers, while maintaining full backward compatibility.

Worth noting: one of Ethereum’s most powerful network effect is its token standards.

FOAM goes live on mainnet

I don’t know about you but I’m about to become an amateur cartographer!

Curated on a Product Hunt collection!

😎 New funds

Introducing Primitive Ventures

Eric Meltzer and Dovey Wan announced last week that they’re starting a new cryptoasset investment fund. Details are light at this time but looks like they’ll be long-term investors, market cycle agnostic, and global from day one.

This is a very exciting development from two of the most dynamic investors in the space!

💸 Funding rounds

Bain Capital Ventures leads Seed CX’s $15 million funding round

Seed CX has closed its Series B funding round led by Bain Capital Ventures. It is the first licensed cryptocurrency exchange to offer institutional trading and settlement for both spot market and CFTC-regulated derivatives.

Vault raises $1.5 million seed round from ConsenSys Ventures and others

In tandem with their product release in the App Store, Vault announced that they’ve also raised a seed round from ConsenSys Ventures, FirstMark Capital, Raptor Group, Unusual Ventures, Digital Currency Group, and CoinFund.

It’s probably because nobody has quite nailed the UX yet, but wallets feel extremely undervalued to me in relation to the broader crypto investment landscape.

👮 This week In regulation

France adopts legal framework for ICOs

In a tweet posted Wednesday, France’s Minister for the Economy announced that an article had been passed which allows companies to do ICO fundraising. He said that this will “attract investors from all over the world.”

The global race for becoming the most crypto-friendly jurisdiction is on.

SEC takes action against a crypto hedge fund

In what appears to be the first action ever taken against a cryptocurrency hedge fund, the SEC issued a cease-and-desist and a $200,000 fine to a fund called Crypto Asset Management.

The fund apparently represented itself as the “first regulated crypto asset fund in the United States” even though it wasn’t. Yikes.

ℹ️ About us

Token Economy is normally written and curated by Stefano & Yannick, but this week we handed over the pen to our friend Spencer Noon while we unplugged at the Unplug Summer Retreat ‘18.

🤙 If you’re building a new fundamental piece of technology for the future, please reach out

🙏 We’d appreciate if you could forward this issue to someone who would find it valuable

✍️ If you’d like to publish some of your content on the Token Economy publication, please fill out this form

#66: Ether’s rough week was originally published in Token Economy on Medium, where people are continuing the conversation by highlighting and responding to this story.

Community is about ownership

Let’s first get on the same page about what a community even is — because how can we talk about building something unless we agree on its definition?

I’ve been spending a lot of time thinking about a definition of community that is universal for all cryptoassets. It’s not a straightforward exercise, especially when you consider all of the different types of decentralized networks (e.g. currencies, middleware, smart contract platforms).

Over the past few weeks, I’ve asked a number of operators and investors in the space to define the term for me as well. Here is my favorite answer:

Community is about ownership — feeling not just that I am part of something bigger than myself, but that I have some skin in the game. It doesn’t matter so much whether that stake is economic or not — in fact I think non-economic stake (e.g. reputation) can be a much bigger motivator. (source)

— Lane Rettig, Independent Ethereum Core Developer

I like this definition because it’s not too prescriptive and it captures the essence of what it means to be in a crypto community above all else.

We can also go a level deeper with community to identify three types of stakeholders that have skin in the game:

• Users — those who utilize a network for its intended purpose(s)
• Builders —those who develop, maintain, or contribute to a network
• Speculators — those who purchase cryptoassets in order to make a profit

Decentralized networks are open and permissionless, so their communities will always comprise of these groups. And no matter what kind of protocol you’re building, you should be able to characterize your stakeholders into one (and sometimes more) of these groups.

Note: If you’re looking for specific community building strategies, I’ve written about that here.

Fundamentals of Community Building

Target users and builders

Most people would agree that only users and builders — not speculators — are indispensable for the long-term health of a decentralized network. I’ll dive into the role of speculators later in this post, but for me, a credible community building strategy should place the highest priority on acquiring users and builders.

Intuitively this makes sense. Decentralized networks without builders will not be able to adequately maintain or upgrade their protocol over time — a recipe for death. Those without users simply don’t have a reason to exist in the first place.

There are challenges with acquiring both groups because they are so often highly specialized. As an example, let’s take FOAM protocol, which is building a consensus-driven map of the world:

• Users of FOAM include dapp developers leveraging Proof of Location.
• Builders of FOAM include cartographers who curate, map, and verify the locations of static objects.

As the saying goes — if you build it, they will come — but that really doesn’t apply to finding open source cartographers!

Successful projects will seek out and acquire these people.

Convert speculators

The cryptocurrency community has openly debated the role of speculators for years. There are merits to both sides of the debate. However, in the worst cases, speculators have caused projects to prioritize the wrong things (e.g. short-term prices) at the expense of what really matters — delivering a useful network that can survive long-term.

When projects so clearly target speculators, I’ve found it to be a helpful indicator for identifying projects that are poorly run, or in the worst cases, in it for the wrong reasons. Nic Carter describes some of these projects in a recent post:

The main challenge for the folks on the altcoin team is not technical, but rather social. This is euphemistically called community building. This of course refers to broadening the set of buyers for the token or coin, and getting existing buyers to become more fanatical in the support of their chosen coin.

Now, what Nic describes is not community building, and to be honest, this characterization offended some founders, community managers, and core team members who dedicate time to growing their communities and are in it for the right reasons. But it’s not completely unfair — the industry is littered with projects who do this.

In any case, there is no getting around the fact that open networks invite speculators. Therefore, your community building strategy should be focused on converting speculators into productive users and builders.

Why community building matters

#1 — Fewer contentious forks

Contentious forks are devastating to a protocol. But while it’s easy to fork a protocol, it’s hard to fork a community. Projects that invest in their communities are thus proactively playing defense. When technical and philosophical disagreements inevitably surface, well-functioning crypto communities will have fewer contentious forks than their peers.

#2 — Better governance

Governance is critical to the long-term health of a decentralized network, but a strong community is the foundation of good governance. While many projects focus on establishing good governance mechanisms, these efforts are incomplete at best if you’re not building out your community simultaneously.

#3 — Faster pace of innovation

This should be self-evident. The larger and more diverse the community, the greater the pace of innovation. We can observe this most clearly with Bitcoin and Ethereum, which have benefited from numerous community contributions over the past year related to initiatives such as privacy and scalability.

Closing thoughts

We’re still in the early days of crypto community building. However, the field is growing at a rapid pace. It will only be a matter of time before projects start taking it more seriously and devising community development strategies in earnest.

One thing currently holding us back is that measuring community strength is difficult to do. The community metrics we know of today (Github commits, Reddit comments, Telegram users, etc.) are game-able and incomplete. I caution teams from placing any emphasis on these metrics because they really don’t mean anything.

With that said, we’ll soon be able to accurately quantify community strength. There are a number projects working on these problems, most in the data and CRM space, and there are also relevant industries that have solved similar problems in the past that we can learn from. I’m excited for the future.

Naval on Twitter: "The top two skillsets for blockchain entrepreneurs, in order: Technology development. Community development. That's it. / Twitter"

The top two skillsets for blockchain entrepreneurs, in order: Technology development. Community development. That's it.

It’s time to to start prioritizing community building.

Special thanks to Tony Sheng and Cyrus Younessi for their thoughtful feedback on this post.

Hit me up on Twitter if you’re an early-stage team looking for help with building your community or if you have any feedback on today’s post.

Why Crypto Community Building Matters was originally published in Token Economy on Medium, where people are continuing the conversation by highlighting and responding to this story.

We are witnessing a Cambrian explosion in the number of blockchain projects coming online. Per CoinDesk, we’ve already seen more ICOs in 2018 than in the entirety of 2017, which is 9x the number that launched the year before that. Now put yourself in the shoes of one of the 1637 projects listed on CoinMarketCap — how are you going to differentiate yourself?

I’ve been thinking a lot about this question lately. Sure, executing on your development roadmap or devising a clever go-to market strategy can go a long way towards setting yourself apart from other cryptocurrencies. But there is another strategy that is worth focusing on too — building your community.

Spencer Noon 🕛 on Twitter

Your go-to-market strategy should include creating the most badass, passionate, and diverse community ever.

I believe that building an exceptional community is paramount to becoming a winning cryptocurrency, and there is a playbook for doing so.

The Playbook

Step #1 — Maximize your initial token distribution

There is no better way to organically build a community than to put tokens in the hands of as many users as possible when your project launches. Your early tokenholders usually become your biggest evangelists because they stand to make the most money from your project succeeding. They will also stick with you during times of uncertainty, which can be extremely valuable.

Last year it was relatively easy to maximize your token distribution. Projects like Tezos conducted large public ICOs that sold their tokens to anyone who wanted to participate. But today, this method of broad token distribution is infeasible given the amount of regulatory scrutiny on the space. As a result, many projects have conducted exclusionary token sales (e.g. accredited investors only) in order to be compliant.

This shouldn’t mean we give up on broad token distribution altogether, and in fact, there are still clever ways to maximize reach. For example, Proof of Work coins can do a Fair Launch — this is when a coin launches on a date without any supply issued (i.e. no presale allocation or premine) and allows anyone to begin mining. It’s also possible to conduct a fair and compliant token sale that leverages the latest in Equity Crowdfunding laws, which is something we’ve seen platforms like Republic begin to offer. I suspect we’ll see more projects employ these techniques in the future.

Step #2 — Codify your project’s mission and values

If you’re going to convince free agents to join your community, you need to be able to explain to them why your project matters. Projects should establish their core mission and values and then publish it somewhere.

If you’re looking for an example of this, check out this blog post by Will Warren on the 0x mission and values:

The 0x Mission and Values

Step #3 — Cultivate productive online discussion

Community members should have a place to voice their opinions online and feel like they’re contributing to your project. However, there isn’t a one-size-fits-all solution to online discussion because of two fundamental tensions:

Communication Style

• Some people prefer Synchronous Communication (discussion that happens in real-time) while others prefer Asynchronous Communication (discussion that doesn’t happen in real-time).

Content

• Some people prefer General Content (e.g. new partnerships or business development roadmap) while others prefer Technical Content (e.g. feature development or technical roadmap).

I’ve found the best projects tend to support multiple forums for discussion as opposed to trying to fit as many folks as possible into one chat or message board. One major benefit of this approach is that it allows technical discussion to occur unencumbered by distractions from casual users who sometimes just want to speculate on token price.

Here is an example of a discussion implementation that can meet the needs of a diverse crypto community:

Here are my favorite examples of each quadrant:

• General-Sync: NuCypher Telegram
• General-Async: r/Bitcoin
• Technical-Sync: Decred Slack
• Technical-Async: Ethresearch

Projects should ensure that all discussions stay on topic and are respectful. The easiest way to do this is to find passionate community members who are willing to be moderators for free. If that is not possible, projects should consider hiring moderators because it is worth the investment. Finally, founders and core team members should partake in discussions too, as opposed to simply letting the moderators and community managers handle everything.

Step #4 — Provide support

Your most important community members are the developers building on top of your protocol, so make sure they’re happy by troubleshooting their technical problems. While it’s possible for members of the core team to help out with this type of work when your project is just getting off the ground, at some point it’s probably worth hiring a full-time developer relations person.

You may also want to hire an employee to handle regular customer support. At first glance this role might not seem necessary, but it’s actually a secret weapon in terms of a generating goodwill in your community. If you’re looking for a good example of this, head over to the Decred Slack and check out the #Support channel — the team does a nice job of helping their non-technical users with problems such as setting up a wallet or learning how to join a staking pool.

Step #5 — Set up a grant program

If you have a treasury, consider setting up a grant program that pays tokens for 3rd-party development of your protocol. This a great way to grow your ecosystem while aligning your core team and community even further. One of my favorite examples of a well-executed and transparent grant program is the Zcash Foundation. Each quarter it funds proposals created by community members that support both the mission and values of the Zcash Foundation.

Step #6 — Support community-run organizations

Community-run organizations, which are usually created spontaneously when token holders want to go above and beyond in their support for a project, can be an excellent way to further the your mission as well.

One well-run community organization is the Tezos Commons Foundation. The TCF has done well over the past few months supporting meet-ups all over the world and generating grassroots support for the project in way that is complementary to the efforts of the Tezos Foundation.

Step #7 — Spread the word

Projects should consistently work towards onboarding new community members. There is no better example of this than Vitalik Buterin, who “basically lives on an airplane” and travels to hundreds of events each year evangelizing Ethereum. It’s never too early to hit the pavement and begin spreading the word about your protocol.

Step #8 — Have fun

Finally, have fun. A small window into your team’s personality can go a long way towards making community members even more passionate about your project. My favorite recent example of this is Karl Floersch from the Ethereum Foundation, who recently displayed his creative side with a freestyle rap.

Closing Thoughts

Ultimately, building an exceptional crypto community is just as important as your technical roadmap and go-to market strategy. With this playbook, projects can put themselves in a position to acquire and retain more community members, which will pay dividends in the long run.

Hit me up on Twitter if you’re an early-stage team looking for help with building your community or if you have any feedback on today’s post!

This article was originally published on the Token Daily blog (link).

The Playbook for Crypto Community Building was originally published in Provably Neutral on Medium, where people are continuing the conversation by highlighting and responding to this story.

On Friday, EIP 1011 — the Ethereum Improvement Proposal for Hybrid Casper FFG — was published by Danny Ryan and Chih-Cheng Liang:

Hybrid Casper FFG

The spec is worth reading if you have some time, but if you’re feeling lazy, Trust Nodes (one of my favorite industry publications) summarized it here:

Ethereum's Inflation to be Reduced by 80% Within Months, Hybrid Casper's Specification Launches

I’ve been looking forward to Ethereum’s transition to Proof of Stake for some time, so it’s exciting to hear that we’re only 3–4 months away from the first step of the transition happening.

Here were some of my biggest takeaways from the EIP:

1. Ethereum’s inflation rate is about to be reduced by 80%

In the new hybrid system that utilizes both Proof of Work and Proof of Stake, the PoW block reward will be .6 ETH and the PoS block reward will be ~0.22 ETH — this makes for a new effective block reward of .82 ETH , which constitutes an 80% reduction in network inflation. That’s a staggering drop in potential selling pressure from Ethereum miners.

To put this into perspective a bit more — once Hybrid Casper FFG is live, Bitcoin will have twice as much inflation as Ethereum (4% vs 2%) until its next block halvening in 2020.

2. The minimum deposit size for staking is roughly $1,000,000

The EIP specifies a minimum deposit of 1500 ETH (~$960,000 at the time I’m writing this) to participate in Casper network staking. That’s quite expensive and pours cold water on some of the rumors flying around that the minimum deposit was going to be considerably smaller. With that said, I fully expect to see smaller holders meaningfully participate in Casper staking via pools like 1protocol.

3. The incentives are strong to stake

The authors of the EIP estimate that 10M ETH will be deposited for staking, and in that case, stakers can expect to earn an annual interest rate of 5%:

If we continue on with the assumption that 10M ETH will be staked, that would give Ethereum holders two options once Casper goes live:

Option 1: Participate in staking and make +3% net annual return on your ETH (5% staking return minus 2% network inflation)

Option 2: Don’t participate in staking and make a -2% net annual return on your ETH (0% staking return minus 2% network inflation)

Given this dynamic, I fully expect some of the larger Ethereum holders (especially institutional investors who don’t like being diluted) to participate in staking as soon as it’s deemed safe for them to do so.

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📌 Hybrid Casper FFG was originally published in Provably Neutral on Medium, where people are continuing the conversation by highlighting and responding to this story.

Today, Bitmain-owned mining pool AntPool announced that they are now burning 12% of their BCH transaction fees:

Their official announcement doesn’t really indicate why they’re undergoing such a drastic measure; instead, they’ve opted to give us a largely incomprehensible statement about the “forthcoming wave of innovation” for Bitcoin Cash.

So what’s going on here — why is AntPool reducing the total supply of BCH?

The Optimist

• This is a massive signal of confidence by one of Bitcoin Cash’s biggest mining pools. By burning their tokens, AntPool is demonstrating its belief in Bitcoin Cash’s long-term viability. This should in turn improve overall BCH investor confidence as well.

The Pessimist

• This is a desperate move to pump the price and shows that there is little organic demand for BCH. By burning some of their coins, AntPool is signaling that market demand for BCH is clearly not enough to meet its supply.

The Realist

• Before we get ahead of ourselves, let’s quickly crunch the numbers on how much money we’re talking about here. Here are the latest 24-hour mining stats for BCH:

• So, (15 blocks mined)*(.00609139 avg. tx fees per block)*(12% burn)*($1070 market price of BCH) means that AntPool has only burned $11.84 worth of BCH in the past 24 hours! Ultimately, this nothing more than a token signal of strength for Bitcoin Cash.

All things considered, I’m not sure there’s as much of a story here as we originally thought.

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🤔 Why is AntPool burning BCH? was originally published in Provably Neutral on Medium, where people are continuing the conversation by highlighting and responding to this story.

If you follow me on Twitter, you know that I spend a lot of time thinking about governance. It is a topic that is misunderstood by both investors and makers in the space, and for those who understand it, there are still the questions of (1) what is good governance and (2) how do you properly value it. Because of these challenges, I predict that we will look back on governance in a few years as an obvious investable trend that many crypto investors missed on.

For today’s post, I picked out some of my favorite articles that I would recommend reading if you’re looking to get smart on the subject.

• Notes on Blockchain Governance
• Blockchain Governance: Programming Our Future
• Against on-chain governance
• An Introduction to Futarchy
• Monero: Monero Missive Special Edition - 2015 Year in Review
• Edcon - Ethereum Governance Mechanism
• Why governance matters
• The Governance of Blockchains
• A Call for a Temporary Moratorium on The DAO
• Bitshares is Trying What MemoryCoin Did a Year Ago (to Disastrous Ends) - BTC Geek
• The invisible politics of Bitcoin: governance crisis of a decentralised infrastructure
• Governance - Decred Constitution

Hit me up on Twitter if you have any feedback on today’s post!

📚 Blockchain Governance was originally published in Provably Neutral on Medium, where people are continuing the conversation by highlighting and responding to this story.

While there are some legitimate reasons as to why today’s cryptocurrencies have concentrated supplies, that doesn’t mean that coins in the future should follow the same path. I believe that cryptocurrencies ought to push the limits of egalitarianism and that the long-term winners will have supplies that test the limits of extreme distribution.

Naval Ravikant nails the vision here:

Naval on Twitter

First round of coin airdrops went to devs and miners. Second round to investors and BTC / ETH holders. Third round will try to reach every human on the planet.

So how do we get there — to a future in which every human on the planet gets a coin? Spend a few minutes and think through how you would do this if you were conducting an airdrop to the entire human race. There are so many problems that it gets exhausting to think about for too long:

• You would need a way to identify every person on the planet
• Not everyone has access to the internet or even a cell phone
• You would need to guard against multiple types of fraud
• You would need to protect everyone’s identity
• …the list goes on

Reaching every human on the planet may be impossible to do elegantly. It will probably require software, but it will probably also require blood, sweat, tears, and boots on the ground. And, just like Bitcoin, it will need a near-perfect incentive structure to get everyone in the world to participate.

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📌 Egalitarian Air Drops was originally published in Provably Neutral on Medium, where people are continuing the conversation by highlighting and responding to this story.