When crypto natives start sentences with “Yeah, it’s probably a bubble, however…” and mainstream media outlets scream “Bubble! Bubble!” it makes us wonder whether there are deeper, more rational dynamics at play driving crypto asset valuations other than pure greed, speculation, gambling or the hope of making a quick buck. Of course, this is expected as there has never been a moment in human history where the speed of innovation outpaces our ability to keep track of the heavy hitters in what is to be the next era of computing. With a plethora of articles, blog posts, and project shilling twitter feeds, it becomes harder to focus on any tree in the forest. I have gotten distracted with the new shiny project(s) with a skeleton gitbook and impressive VC backing more than I care to admit.

When it starts to feel like I am drinking through a firehose I like to take a step back and remember why I am passionate about the web3 space, and the frame of mind I was in that led to my best investments. Instead of trying to find good investments, you must first form a good thesis and critically reason about how this technology will develop in uncharted waters. Once you form a thesis you can think about how to expose the portfolio to that thesis.

You can be right about a thesis and pick the wrong horse, be honest with yourself and take the time to understand why that horse was wrong. Have conviction, until a core thesis is disproved don’t abandon it, don’t change your mind because other people disagree with you. Incorporate new information but don’t change it based on public consensus. When deciding to invest I find it helps to identify:

1. Whether this is conviction driven vs. consensus driven (the former is what I take to heart)

2. What type of risk are you underwriting: team, smart contract, market, liquidity etc.

3. Determine the market size (easier to do for existing markets we can draw parallels with)

4. What is the probability of value capture within that market size, over what time horizon?

5. What valuation are you paying (after deciding to invest, you need to look at sizing)?

I try to invest in projects that I don’t just want to hold for 10 years, but ones that I believe will compound indefinitely. Easiest way to make money in the last 10 years would’ve been to simply go long on mobile/cloud. Investing is more of an art than a science and the same can be said about knowing when to exit, I try to look out for the following:

1. Has the thesis played out or been appropriately valued by the market?

2. Is there any new information that invalidates the original thesis?

3. Is there a better investment that fulfills the underlying thesis?

Remember, all returns in investing come on the tails of distribution, no sense in optimizing for anything else, keep calm and hodl on. Let the thesis play out.

Introduction: 4 Theses

Our modern society is built on compounding layers of trust. You trust your bank to hold your funds, whether that “organic” label on your chicken is in fact “organic”, whether your data is being used for ethical means by Facebook… *cough*. For the first time in human history, we have a perfect union of open networks, cryptography, and free-market economics. We can create communities that incentivize specific human behavior without creating new trust assumptions, that will prove to be a fundamental shift in how we think of developing productive economies and societies.

Crypto, or better known as the proverbial web3, is an internet composed of open, distributed ledgers, that are permissionless, censorship-resistant and trustless. It is an internet owned by builders and users where tokens represent a new way to incentivize open network participants and reverse the centralization of the current structure of the internet.

Tokens enable the management and financing of open services. Open systems never had an effective way to manage their services which eventually led to huge architectural disadvantages when compared to their proprietary systems (i.e. FAANG). As Alexis Madrigal wrote back in 2007, it looked like open networks would dominate:

In 2007, the web people were triumphant. Sure, the dot-com boom had busted, but empires were being built out of the remnant swivel chairs and fiber optic cables and unemployed developers. Web 2.0 was not just a temporal description, but an ethos. The web would be open. A myriad of services would be built, communicating through APIs, to provide the overall internet experience.

But with the rise of mobile and smartphones, proprietary networks quickly took advantage and won out:

As that world-historical explosion began, a platform war came with it. The Open Web lost out quickly and decisively. By 2013, Americans spent about as much of their time on their phones looking at Facebook as they did the whole rest of the open web.

Proprietary services were able to create better user experiences and iterate much faster which led to faster growth, greater investment, and revenue, thereby creating a flywheel of product development and further growth. Had token models been present in 2007, network participants would have aligned incentives to work toward a common goal — the growth of the network and the appreciation of the token.

The web3 movement is an homage to the original open-source computing movement led by Richard Stallman in 1983 with the launch of project GNU. If this trend continues, there will be breakthroughs in the design and development of open networks, combining the architectural benefits of proprietary networks and societal benefits from open protocols. Below I will highlight 4 major theses that I believe will disrupt the current paradigm of the internet, and I expect these to play out over the next decade in no particular order of development:

1. Open Finance and Lego Castles: Although efficient, capital markets are nowhere close to being universally accessible in both developed and developing economies. By composing programmable open ledgers and different units of value (stocks, real estate, currencies, tokens etc.), open finance (DeFi) will disintermediate existing rent-seeking institutions, provide complex products that were once only possible via investment banks, and be accessible to everyone on the planet.

2. The Tridimensionality of NFTs: A big part of our futures will be spent living in global, virtual, interconnected worlds where NFTs will be the primary building blocks of everything. NFTs will not be limited to unique representation of digital media and real-world assets, but instead move towards an evolving primitive that will unlock new forms of liquidity, social coordination and utility.

3. Web3nomics and the DAO: The DAO will allow humans to coordinate on a global scale without a centralized intermediary and express any form of organization as code. Architecting systems where the desired outcomes are the emergent results of uncoordinated participants acting in their own mutual self-interest presents a paradigm shift in human coordination and will unlock massive opportunities for value creation.

4. **Abstraction, Tooling, Abstraction: **Blockchain systems are currently like isolationist nations limited by transportation systems and international trading agreements. For these systems to scale, all mechanics around cross-chain activity must be abstracted away from end-user. Similarly, developers must build in environments with robust tooling and predictable pricing to create useful applications for end-users.

**Thesis 1: **Open Finance and Lego Castles

Kyle Samani of Multicoin Capital noted that decentralization is not the goal, but a means to an end. The goal is credible neutrality and open access. It is for that reason that I also adopted the term of open finance over decentralized finance (DeFi) as it better encapsulates the movement of universally accessible trustless financial services.

Right now, the money system is *literally* a bunch of heterogeneous mainframes running old COBOL. For those that don’t know, COBOL is a legacy object-oriented programming language deployed on mainframes for large scale batch and transaction processing jobs. US Banks to this day are still buying mainframes and the Federal Reserve may even be running older code than what these US banks have. The government has editing privileges on the money database, and they use those privileges to make money whenever the want, which increases the error in the database that is money.

Money should be viewed from the lens of information theory. Almost like an internet connection, we need to look at what is the bandwidth, bit rate, latency, packet drop, and errors in network communication. If we adopt this perspective the next question is what system — from an information theory perspective — allows an economy to function best. Blockchain (open, distributed ledgers) technologies are an attempt to reduce the error in money that is contributed by government diluting the money supply and takes us into the 21st century with actual systems that allow you to move value and allocate capital resources as frictionlessly as information flow on the internet. The plumbing and rails behind the financial world will be replaced.

The US M2 money supply currently sits at $20 trillion; it is the single, most important US export. The US dollar is internationally revered as a beacon for stability. But as competition increases with the fears of a digital Chinese renminbi being leveraged for international trade, it will be more imperative to look at the utility function of the currencies and accessibility…… Enter Stablecoins. Stablecoins have grown to a supply of well over $120 billion in 2021, an 1100% increase in supply from 2020, and it’s all in US dollars. For the first time anyone in a developing country with an internet connection can open up a metamask account and gain exposure to the US dollar via USDT, USDC and other centralized/algorithmic alternatives. Before, this would only be possible through opening a bank account at your local subsidiary and pay exorbitant fees for the transaction, depending on your host country. This of course, does not include the global population of 1.7 billion adults that remain unbanked and never had that option to begin with.

The USD rails around the world are a point of strategic geopolitical control, and there is no more natural strategic weapon for the US than stablecoins. Why create a CBDC (central bank digital currency) like China when the private industry has already created various alternatives that are backed 100% by Federal Reserve issued T-bills and are at the forefront of mass adoption. Within the next decade I expect the following to take place:

· The largest coin by market cap will either be a centralized or algorithmic stablecoin.

· Stablecoins will disintermediate the money transfer market valued at $700 billion (in 2020). No longer will you need to pay a 1% fee on principal transactions over $5k (#Western Union).

· Stablecoins will be the catalyst in enabling 8 billion people around the world to actively and frictionlessly participate in financial markets. At least 10% of US M2 money supply will be demoninated in stablecoins, and each major economy will have a stablecoin equivalent.

The most important aspect of open finance will be throughput and composability. The throughput (trx/sec) does not matter if protocols are unable to natively compose with each other. Similarly, the throughput of the chain must be able to support users engaging in new financial primitives with predictable pricing. If these two functions are present, the combination of different protocols will create something more valuable than the underlying sum of its parts.

A strong visual analogy for open finance is a lego castle. Take for example a chain like Solana, where crypto primitives like Serum (a centralized limit order book) acts as the framework for price discovery, upon which other primitives like Jet (lending protocol) and Mango (derivatives exchange) can be built, thereby creating a flywheel of composability where algorithmic stablecoins like UXD — backed by a 100% delta neutral position using derivatives — could now exist, where before would be technically impossible to implement. The magic will come from the way teams combine existing legos, and not necessarily having to create new ones.

Composability will bring a renaissance to the open finance sector and has already introduced new innovations like “protocol-controlled value.” Although the initial mercenary liquidity providers were critical during the bootstrapping period of open finance, their role has diminished in value as they provide “hot” capital that move between project to project chasing yield and creates a costly expense to protocol treasuries, not to mention relentless sell pressure.

Protocol-controlled liquidity is a subset of protocol-controlled value. If protocol-controlled liquidity is about DAOs provisioning liquidity using their token treasuries, protocol-controlled value is about DAOs monetizing their balance sheets more broadly. There will be a shift in mindset in liquidity acting as the bandwidth of open finance with DAOs functioning as a new form of LLC that coordinates humans to accomplish the operation of shared goals (i.e., growth of a network).

It is of no surprise that with the growth of stablecoins and flywheel of composability that the TVL (total value locked) in open finance protocols increased over 1200% to $246 billion in 2021. As open finance remains universally accessible, real-world assets will become tokenized to unlock new forms of liquidity, while smaller firms/protocols will be able to tap into the same form of liquidity as US banks (such as Goldman Sachs), in order to create a multitude of primitives that deliver experiences that weren’t possible before with the legacy rails of finance. Thereby, its not far off to expect:

· Open finance will replace US capital markets in this century because they are natively global, permissionless, and universally accessible to anyone with an internet connection.

· Within the next decade open finance will take at least a 10% market share away from global equity market (valued at $120 trillion as at 2021) and that at least 10% of the notional value of outstanding derivatives (valued at $610 trillion as at 2021) will be denominated in crypto tokens.

**Thesis 2: **The Tridimensionality of NFTs

Unless you’ve been living under a rock this past year, it’s been hard to ignore the advent of NFTs. Beeple’s Everyday’s was auctioned off for $69 million followed by an explosion of frothy valuations for PFPs (photo for profile). Currently, the floor price of a Bored Ape or Cryptopunk is over $200K. NFTs reached $22 billion market cap for 2021, compared to just $100 million in 2020, with platforms like OpenSea generating over $1 billion in revenue. If the physical art market is a $1.7 trillion asset class, then NFTs currently account for 1% of that pie.

Does that mean a Bored Ape or Cryptopunk PFP is currently undervalued? That depends. If you consider those PFPs to be a core atomic unit of the value of the underlying community, and an entry into an NFT gated community that’s growing, maybe it’s undervalued. If you just see this as a copy paste JPEG with no economic narrative, then to say it’s overvalued is an understatement. Irrespective of the perspective you take, we can all agree that these prices are getting quite frothy, and at terrifying velocity. South Park summarizes all that hype eloquently:

https://twitter.com/levie/status/1476377424329732098

Let’s back up a bit and look at what an NFT is at its core. An NFT is a blockchain-based record that uniquely represents a piece of media, this piece of media contains cryptographic documentation of its history and origin. A piece of media can be anything digital like art, music, games or be a digital media referencing an asset in the real world. These NFTs can have code attached to it that would enable any functionality developers dream up.

Web3 is unlocking a path of ownership in which the next generation of platforms will be built, operated, and owned by users directly. This idea of user ownership is at the core success of Bitcoin and Ethereum. NFTs will make it possible for creators to retain ownership of their content and engage their fans in individualized ways. This will invert the ownership model of media — offering creators, and their fans, an alternative to platform driven monetization.

There are three reasons why NFTs offer fundamentally better economics for creators. The first, is by removing rent-seeking intermediaries (i.e., record labels). Second, the logic behind the blockchain is once you purchase an NFT, it is yours to fully control, just like owning an IP or buying shoes/clothes in the real world. Third, blockchain-based ownership shifts the power back to creators and users, you can shop around and force the marketplaces to earn its fees. Their take rate will be someone else’s opportunity. It is with this that I expect in the next 10 years:

· NFTs as an asset class will be more valuable than physical art (valued at $1.7 trillion as at 2021).

· We will finally see a decentralized record label that disrupts the major labels who take in over 23 billion in revenue as of 2021. Record labels will survive up to the duration of their artist contracts.

· Creators will leverage social tokens to redefine business models on the internet and add a new dimension of interacting with fans. Creators will be able to tokenize their time, exclusivity to events, experiences etc. For example, a musician will be able to reward super fans by saying an NFT will be dropped to accounts who listened to 5 songs in the last 5 days as of Jan 1st. This type of customized interaction is only possible in an open permissionless system with programmatic logic and composability. That will be the true killer of bots.

NFTs are still early and will evolve. Their utility will increase as digital experiences are built around them. Taking lessons from the internet revolution, I’ve broken down NFTs into three dimensions:

Base Design: I consider these NFTs to be tokenized representations of the “real-world.” This would be a deed to your house (which is verifiably scarce), you would be able to prove ownership to your insurance company by signing a transaction in a wallet that hold the receipt of your deed (digital representation of the property), you could then take out a home equity line of credit and pledge the NFT as collateral on a lending platform.

Skeuomorphic: This is the rationale of emulating the physical world in a digital world. For example, in the early stages of the internet there were websites that represented a “better” newspaper or magazine. We took what we knew from the physical world and pasted it into the digital. A perfect example of this is introducing scarcity behind digital media like art, music, games, books etc. The plethora of PFPs being shoved down your throat everyday fall within this category.

Neuomorphic: The potential here lies in the combination of physical elements with digitally native interactions. All the unknown unknowns fall into this category which makes it so exciting. With the internet, no one could have expected that a bunch of computers connected to each other would be able to communicate through text and video, in an instant the world got a lot smaller. It’s difficult to outline what experiences an NFT will bring that would be considered “neuomorphic” as they have yet to be created. I spend most of my time trying to think what will fall into this category as those are the markets that have yet to be created. This could include the tokenization of things we once considered intangible (i.e., reputation, identity, brand, time), a new infrastructure or standard that allows NFTs to own other NFTs and be taken onto different platforms (i.e., your WoW avatar owns a sword and shield that can be taken between games/metaverses), or linking your tokenized reputation across chains, apps and DAOs.

I consider NFTs to be the first tridimensional asset class that will act as the port of entry onto any future internet media. This leads us to everyone’s favorite theme of 2021….. The Metaverse. Now many have a romanticized a “Ready Player One” view that the Metaverse is a massively scaled interoperable network maintained by 3D rendered virtual worlds that can be experienced seamlessly. I take a more simplistic view in that the Metaverse is not a place but a time, a time where our digital lives hold more value than our physical. With this view you could say there are already some people out there who are living in the Metaverse.

In our lifetime it is safe to say that the average person will spend at least 25–50% of their day in the Metaverse. When you look at the average American, they spend 5.5h a day watching TV, the average senior watches 7.5h. The average time spent on social media apps has averaged over 2h a day. The Metaverse theme will grow from a combination of reasons including but not limited to escapism and our desires as humans to connect. It will be a much better substitute to escapism than a solo-passive version via TV or scrolling through your daily Instagram feed. Tim Sweeney (CEO of Epic Games and creator of the Unreal Engine) broke down the importance of the Metaverse in one disruptive quote:

The Metaverse is going to be far more pervasive and powerful than anything else. If one central company gains control of this, they will become more powerful than any government and be a God on Earth.

I would also add that they would define the physics as atoms are to physical world, data and bytes are to the metaverse. If a big part of our future lives will be spent living in a global, online, interconnected and semi/fully virtualized world, then it safe to conclude that:

*· *NFTs will transcend their underlying blockchains and metaverses and will be the primary building blocks for everything in the digital world.

· The Metaverse as a place where the majority of time, leisure and productivity are spent, will require similar structures of the real world. Property rights, individual ownership of goods, and free movement of labor and capital.

Thesis 3: Web3nomics and the DAO

As we thought the hype would end with NFTs, there’s a new hype cycle emerging with DAOs. If you spent any time on twitter following key figures in the web3 space, you would’ve heard plenty of predictions that 2022 will be the year of the DAO. Now everyone and their grandmother are in a race to start one of their own….

A DAO (decentralized autonomous organization) can be looked at in a few ways. It’s a new type of company (or community/organization) that enables bottom-up economic organization, or just simply a digitally native community that coordinate around a shared mission or protocol. It allows for a new form of coordination of human economic activity by allowing individuals from around the world and different walks of life to finance projects, govern communities and share value. Instead of the top-down hierarchal structure, they use blockchains and evolving governance and incentive systems to distribute decision-making authority and financial rewards. This is typically done by issuing tokens based on participation, contribution, and investment. These token holders can submit proposals, vote, share in the value accrual and provide other forms of utility specific to the protocol.

That was quite the mouthful…. so why does any of that matter? First, it’s important we look at the last 500 years of history. Without analyzing all events that contributed to the rise of the renaissance, age of exploration and colonialism, the scientific and industrial revolution, they all have a few things in common. There was a big pivot toward using logical reasoning instead of divine intention as the way to explain how the world works, for the first time there was widespread contact between many different people and the shrinking of the world, all while creativity and commerce reinforced each other to produce an economic boom and great advancements. Second, the Dutch invented a new system in the 1600s by creating public equity markets so savers can effectively transfer their buying power to entrepreneurs who could put that buying power to productive and profitable use. This revolutionized how resources were allocated and was a huge boost to nation states as it produced new buying power. Now we know this “system” as capitalism.

Overtime capitalism become reclusive and closed off to the world, 80% of the human population to this day does not own an equity, a farmer in Uganda with an internet connection cannot purchase a share in Apple Inc. Although the standard of living has improved over the centuries, the wealth gap has gotten far worse than anyone could have ever anticipated. There are several contributing factors to this, but I believe the two largest being the labor market (innate ability and education) and a closed financial system.

Web3 is redefining how global talent pools their knowledge and financial resources to work together. Communities of smart, passionate “hobbyists” are gathering in discord channels to come up with a new set of primitives to build groundbreaking products and experiences. Those communities are being organized today with DAOs as the coordination primitive. The term DAO is romanticized and personally I don’t think it’s the best name. These organizations are not always decentralized, or autonomous, in many ways you are just building communities and corporations on the blockchain, not all DAOs are a democracy and not everyone is going to have a choice. Sometimes a DAO is simply a discord channel with a multi-sig. **However, what is amazing is that anyone anywhere can join and participate. **Jesse Walden (Managing Partner at Variant Fund) succinctly summarizes the potential:

The internet built Wikipedia, with no economic incentive. Don’t underestimate what the internet can build as DAOs.

DAOs are all about maximizing shareholder value. The users and contributors are also the investors and owners. Community ownership is a more natural model than a few outside investors and board members dumping a bunch of money into a company and deciding what it should do. The reason it’s been done this way, until now, is because it was nearly impossible to coordinate having a small set of stakeholders who all get a say in the decision making. It’s important to stop and think about it in reverse. What would happen if we had started with broad community ownership and tried to introduce the current model of outside community control? People would probably scoff and tell you to f*** off.

Here are some of the different forms DAOs have taken on today (with some notable examples):

· Protocol DAOs, most common type often found behind Defi protocols. These DAOs are used as an ownership and governance mechanism for protocols like Uniswap, Maker and Compound.

· Investment DAOs, similar to traditional investment that’s that operate with pools capital, but instead of one party calling the shots, investment DAO token holders vote on what the pool of funds is invested in. Examples are LAO DAO and Meta Cartel.

· Grants DAOs, these are designed to fund and foster new ventures or projects within the web3 space but may also exist on their own. Examples are Gitcoin and Moloch.

· Collector DAOs, an art curation community that pool capital to purchase collectible items such as NFTs, real-life art, music and more. Examples are PleasrDAO and Flamingo.

· Social DAOs, can be thought of as a country club where members enter a social circle by paying a membership fee via tokens. Examples are Friends with Benefits and Bored Ape Yacht Club.

*· ****Other DAOs, ***recently, there was a DAO formed to bid on and purchase the US constitution and as I write this, a new DAO has formed to purchase the last remnants of Blockbuster Inc.

Right now, DAO tooling is an essential and existential need across web3 communities. You have tools like Gnosis Safe used for managing community treasuries, Snapshot for off-chain token-based voting, Discord as the defacto communication framework, Coordinape which determines which contributes deserve the token, Tally to track on-chain voter history, Boardroom for token holder management, the list goes on and on. To say that DAO infrastructure is fragmented is an understatement. If you take a 10-year view that open, token-governed communities will challenge the global market capitalization of centralized corporations, then there needs to be a 100x improvement in collaboration tools to operate more efficiently and understand that every DAO treasury transaction is essentially subject to a board-level proxy vote. If an operating system exists to integrate treasury management, token holder engagement, governance, communication, and other key functions (listed in the graphic below),** it will serve as the holy grail for DAOs**. We essentially need to find the SAP for DAOs.

If you’re still with me, congratulations, here are some predictions on what I expect over the next 10 years:

· The mass market consumers who don’t care about privacy or data ownership will still switch over to web3 DAOs and applications for utilitarian reasons.

· The largest venture capital firm by AUM (assets under management) will be structured as a DAO.

· Within the next two years we will start seeing M&A activity as DAOs created initially under different visions, see synergistic qualities in merging communities, and token utility.

· SPDs (special purpose DAOs) as an homage to SPV (special purpose vehicles) will be a thing. As I write this, a DAO has already formed to purchase Blockbuster Inc. There will be DAOs that purchase a web2 company or large plots of land for specialized purposes.

*· *The preferred method of organization *as an end-state* for any finance or tech-driven venture will be in the form of a DAO and not a traditional top-down hierarchal structured corporation.

Thesis 4: Abstraction, Tooling, Abstraction

I will keep this one simple, if we are to see mass market adoption of web3 protocols then nearly all current operations needs to be abstracted away from the average person. If you have money on Ethereum but you want to farm on Solana you would essentially need to collateralize on Ethereum, convert into a synthetic (pay fee), bridge the asset via wormhole (pay fee), swap into the asset you intend to farm via Raydium or any other AMM (pay fee), and now you can start your farming. If you want to bring that yield back into Ethereum you would swap back to the synthetic via AMM (pay fee), bridge back via wormhole (pay fee), and un-collateralize to bring it back into your wallet (pay fee).

If you think the average person is going to tolerate that type of UX, you’re either willfully ignorant or special. I think the only reason crypto natives have been able to tolerate the abhorrent UI and UX for years is simply because they either own the underlying asset or have skin in the game through some other form. If blockchains and web3 applications are not optimizing for end-usability and abstraction, it will be the end of the web3 movement. Bridges and the promise of a multi-chain future are at the forefront of this topic.

In the immediate future (next 12–24 months) there will be many chains. Web3 VC funding has topped $30 billion for 2021, and it will take some time for these protocols to use up all that funding before the well runs dry. What’s more interesting is looking at what happens between 24–72 months. If we take the web2 movement as a base case, we may even see a duopoly play out in the web3 space. However, I believe there will be a lot more consolidation between chains and naturally we would operate in a more oligopolistic environment. Bridges are a great intermediate technology for this space, but they add a layer of complexity, trust assumptions and reduced composability. Everything would be a lot simpler without that layer, and that all interactions take place within one shard.

Cross-chain interoperability will likely standardize around a small number of trusted, widely integrated protocols that have proven the test of time. The immaturity of today’s solutions creates significant user and developer friction, but a bridge that is credibly decentralized, battle-tested, and well-integrated across chains would emerge as the preferred source for cross-chain liquidity. As the multi-chain ecosystem grows, cross-chain bridges will facilitate enormous amount of data and asset transfer volume, it is with this that I believe in the next five years:

· The most popular layer 1 and layer 2 bridge protocols will have higher daily volumes than the most popular centralized exchange(s).

· Users will prioritize security, connectivity and statefulness over capital efficiency and speed.

· There will be a hack compromising the integrity of liquidity and state between two major layer 1 chains. It will be huuuuuuuuuuuge (#Donald Trump).

· Any trusted bridge where users are mainly relying on the reputation of the bridge operator, where actors do not post collateral and users do not recover funds in case of system failure or malicious activity, will all cease to exist. Trust-less bridges where the bridges security is equal to that of the underlying layer 1 chains will be where all the volume take place.

Currently, there are well over 40 different bridge projects focusing on various layer 1 blockchains and if you have spent hours, days, maybe even weeks researching the current fragmented landscape and are still confused. Don’t worry I’m there with you. Bridges are a very complex topic to understand.

There are 4 different types of bridges (asset, chain, application, general) with 3 types of designs (external validators and federations, light clients and relays, liquidity networks), and 4 different security levels (trustless, insured, bonded, trusted). Of course, the breakdown of all these elements is not in the scope of this post and deserves a special breakdown. Luckily, Dmitry Berenzon of 1kxnetwork has already done all the heavy lifting for us:

https://medium.com/1kxnetwork/blockchain-bridges-5db6afac44f8

If we prioritize end-user usability, then this would be my take on a multi-chain future:

· Bridges will be completely abstracted away from the user and will solely be used by the underlying applications/protocols. The user does not care what bridge is being used in the exchange.

· Applications that exist on multiple chains will also be abstracted away. Applications that are large enough may opt to create their own browser wallets to abstract away which layer 1 contains your funds. Of course, trustless, and secure bridges are a prerequisite to reach this level of abstraction.

*· *When using applications/protocols, the user will not need to know anything about crypto or web3. It will be as simple as opening your amazon app and making a one-click purchase.

Lastly, the chains that will win out in the long run are the ones that place great emphasis on developer usability. Without developer activity and new projects, you have a dead network. Applications should be seamless to create for developers, they should use familiar languages and patterns during the development process and have robust tooling available to effectively build, test and deploy applications. If we are looking to onboard the next wave of developers over the next 5 years, I would place priority on the chains that provide the following:

· Nodes should run Web Assembly (WASM), which can be compiled from a host of popular languages. Smart contracts should be built using Rust and possibly also supported in AssemblyScript. I take the view that Solidity / EVM will not onboard the next wave of developers.

· Transactions and executions on the platforms must have predictable pricing and less cognitive load when using the platforms. Predictable pricing for fees is equally important for the end-user.

· Platforms that take developer business models into account like build to earn or allowing them to monetize open components by rewarding them through usage will be a competitive advantage long-term. This way not every key piece of infrastructure or application would need a token.

Conclusion: We are so so early…..

I have 99% conviction that within the next decade, web3 will be an order of magnitude larger because the user economics here are an order of magnitude more attractive. We’re on a brink of a total transformation of the global economy, one that will be bigger than mobile and the internet itself.

As these open networks are built on free market assumptions and are bounded by cryptography. Humans can for the first-time coordinate on a large scale without introducing any trusted intermediaries prone to abusing that trust (looking at you Facebook). Now we can revisit all our preconceived trust assumptions throughout many sectors of the economy and look at alternative and more robust forms of design using a first-principles approach, basically we are creating are own economy within this web3 space and are cutting all the bullshit overhead.

This transition from a trust-based economy to one of self-sovereignty will be behind one of the largest wealth transfers in human history. Trust is the foundation of all human relationships. The greatest investment opportunity of our lifetime will be betting that it doesn’t have to be.

Now I am sounding a bit preachy, but the reality is that many will lose faith and won’t be able to stomach the soul crushing multi-year “crypto winter.” Critics will froth from the mouth as they announce, “told you it was a bubble,” “the government might regulate this out of existence,” and “it’s too early, society isn’t ready for these products.” People will take huge losses and go bankrupt due to overleverage; degeneracy of the space will eventually catch up with everyone’s hope for a fantastic future. Funding runways will dry up and individuals will quit promising projects, those that lost 90% of their savings will need to find a real job again. At times like this I like to reflect on the words of Baron Rothschild:

The time to buy is when there’s blood in the streets, even if the blood is your own.

But the first order of business shouldn’t be to FOMO into everything post-crash but instead reflect on:

1. Whether you believe web3 offers a more optimistic and fairer future than a centralized world?

2. Is there still abundant capital available to fund the building blocks of the next frontier?

3. Conviction aside, are you investing with money that you cannot afford to lose?

**Never invest money you can’t afford to lose. **That is the golden rule, and you should learn it or even have it tattooed on your back if it helps you protect your assets from risk and volatility. But that’s enough morbidity, I will leave you with some of my favorite quotes for this movement 😊 Keep calm and hodl on.

One of the most common ways mega-trends emerge is as new tech that opens up massive new design space of opportunity. Examples: The industrial revolution, railroads, oil, cars, semiconductor, the Internet and now finally crypto.

— Kyle Samani, Managing Partner at Multicoin

Our intuition about the future is linear. But the reality of information technology is exponential, and that makes a profound difference. If I take 30 steps linearly, I get to 30. If I take 30 steps exponentially, I get to a billion.

— Ray Kurzweil, Inventor and Futurist who first pioneered pattern-recognition technology

Any time a country transitioned to a fiat currency, they collapsed. That’s just world history; you don’t have to know about cryptocurrency to know that.

— Nipsy Hussle, Rapper and Community Activist (RIP)