• Optimism Collective Governance Fund Cycle 4 is comprised of nine proposals representing 2.4% of the Governance Fund $OP token allocation. This is ~$9.0m USD at time of drafting (July 29, 2022)

• I voted for five of the nine proposals, which represents 2.99m $OP tokens or ~$4.8m USD at time of drafting

• Proposers are not required to match incentives, however, multiple proposals express a matching budget which delegates are relying on when evaluating FOR or AGAINST. The Optimism Collective should work with approved proposal teams to put a framework around the matching mechanism BEFORE $OP tokens are funded, so that this does not become a point of contention

• I think a positive feature of public blockchains is that protocol performance and activity should not be a mystery. If delegates know how to access archive nodes or on chain analytics platforms (and time permitting for customization), back and forth commentary about protocol size and historical performance can be triaged with purpose built dashboards (shared publicly or token gated for delegates)

If you like my process, or if you hate it, let me know! Reply to the companion TWEET to this post.

Optimism Governance Fund Overview

For more information on the Optimism Governance Fund, see my first post on the topic HERE or the Optimism Collective documentation HERE.

For the results of cycle 3, refer to the Optimism roundup HERE.

Cycle 4 / Phase 1 round 3 overview

Cycle 4 voting concludes on August 3, 2022 at noon PT. Cycle 4 is comprised of nine proposers who are requesting 5.59m $OP tokens, which represents 2.4% of the total Governance Fund token allocation or ~$9.0m (@ $1.61 OP) at time of drafting this post.

The Optimism roundup for cycle 4 can be viewed HERE.

Scorecard approach explained

As previously highlighted in my cycle 3 post, my goal with the scorecard approach is to hold myself accountable as a delegate and put forth a transparent framework as to how I evaluate proposals. Both the topical factors I evaluate and the evaluation output are clearly subjective, but I think this approach will prove less controversial than an opaque evaluation and a declaration along the lines of:

I like the protocol! Glad to see them on Optimism. I vote to approve this proposal.

Anon delegate

There is some REAL magic internet money on the line in the Governance Fund. I want to see the Optimism community be very thoughtful about how growth is fueled on the network and ideally set the stage for very large and productive rounds of Retroactive Public Goods Funding (RPGF).

The parameters evaluated may change over time depending on what the following parties view as most important for the long term growth and viability of the Optimism Collective: (i) the Citizen House (or Optimism Collective “leadership”), (ii) delegators who delegate to me, (iii) other delegates (if their views are persuasive), and / or (iv) me personally.

Again, subjective parameters and application, but some additional context on my current score card parameters and evaluation approach:

Optimism “suggested” parameters

• Project deployed on Optimism - This is highlighted as a binary requirement to get a proposal [ready] for a vote. A 5 score means the proposer is live on Optimism. The range from 5-10 is a subjective evaluation of how active a protocol is on Optimism

• Plan for how tokens will incentivize growth - I view this as a full spectrum topic (score range from 0-10) based on my subjective judgement of good vs bad plan. If a proposer can make the case, and support with historical data, why their proposal is expected to drive long term growth on Optimism, the proposer will get a high score. For example:

  • If a multi-chain protocol is able to show a case study that it’s user base follows the protocol from a previously existing chain to a newly deployed chain, but users do not simply hop back once incentives run out…that’s great evidence of strong proposer brand which may lead to Optimism user growth

  • If on chain evidence is not provided, generalized assumptions will have to be made, for example:

    • Gasless transactions which directly incent users to use protocols are probably highly rated

    • LP / whale liquidity incentives which tend to be more mercenary are probably lower rated, etc.

• Commitment to match $OP with proposer funded incentives - Not an express “condition” or requirement, but matching is identified as a favorable element at the end of the Governance Fund overview. Generally, the score will be the match ratio (i.e., 50 cents match : 1 $OP dollar = 5 score, 1:1 match = 10 score, 1.1:1 match = 11 score, ceiling of 15 score)

My subjective parameters

• Proposal size and duration / timeline - I suspect this factor will be easier to rate over time, but is quite subjective with the small sample size of grants thus far. Generally speaking, my preference is to start with smaller grants and shorter durations (especially for a proposers initial proposal). A second proposal should be an easier process on repeat proposers as (i) delegates already know the proposer from initial grant and (ii) proposer can now show results on the Optimism chain and clearly support it’s value proposition and responsible use of $OP grant tokens. At this point, much larger and much longer duration proposals should be welcomed by the delegate community to maximize growth and reduce governance friction. Full 0-10 scale is in play for this factor

• Core product or offering is new - As a general rule, I’d prefer to give some extra credit to a product or service that does not already exist on Optimism. New products and services should generally draw new users to Optimism more than a second, third, or nth version of an offering that already exists. Ranking is binary in that a “new” product starts at a 5, and ranking scales up from 5-10 if the product or offering seems unique not only on Optimism but relative to other chains as well

• Addition of product or offering fills a need - Even if a similar product or service is already on Optimism, if the product is in high demand I think it is still beneficial to support new versions of the product. It is also generally beneficial to have multiple competing offerings so costs to users are minimized. Full 0-10 scale is in play for this factor

• Token rewards / incentives distribution is verifiable - A commonly referenced benefit of blockchains is transparency and visibility. To me, the default should be to optimize use of grants / incentives in a verifiable way. If a project and proposal is designed well, $OP grants on chain (i.e., gasless transactions, yield, bribes, etc.) will drive protocol growth which will accrue value to the protocol treasury for general use. While there are cases where $OP grants can be used to fund marketing or go directly to developer wallets, my preference is to use the majority of Governance Fund grants to drive protocol activity and rely on the value accrual mechanism / business model of the protocol to take care of the rest. If a protocol does not have a good design for value accrual, perhaps looking into the Optimism Seed fund is a better fit. Full 0-10 scale is in play for this factor, generally should follow the ratio of what is perceived verifiable (e.g., 50% going to developers for untraceable time and 50% going to fund traceable gasless transactions = 5 score)

• Supports a money on chain activity - THIS. I hold a strong belief that getting consumers (e.g., Jane Doe) and non intermediary producers (e.g., Peloton) on chain is key. I skew towards producers, but like it all. My belief is that Jane doesn’t really care how money gets to Peloton and Peloton doesn’t care how they get paid. The system of intermediaries was a necessary evil and served a productive purpose prior to blockchain and crypto, but not anymore. Any protocols that further a money on chain evolution will get my vote (I’ll probably scale up the weight of this factor as well). Making fiat conversion to crypto easier / cheaper / decentralized, enabling direct settlement between Jane and Peloton, enabling direct settlement between Peloton and AWS, etc.

• Team professionalism and perceived integrity in the open - Very subjective, but generally I think of this as: does the proposer engage productively with the community and respond to criticism with data and evidence instead of hearsay and conjecture. There will be competitors or those who feel aggrieved for one reason or another who try to sabotage a proposal, I will try to look past this tactic and focus on how the proposer responds as the factor I rank. If a proposer is a verifiable and proven bad actor, the entire score card is likely thrown out and an AGAINST vote applied. Full 0-10 scale is in play for this factor

• Team professionalism and perceived integrity in private (bonus) - Similar concept to in the open, but just for visibility in the event interactions are not observable in public forums. As this is likely uncommon, purely an extra credit score. Full 0-10 scale is in play for this factor

Cycle 4 proposals

Rocketpool

Rocketpool is a permissionless staking node operator protocol which enables staking as a service via the rETH ERC-20 token. I’m an rETH holder and plan to node operate on Rocketpool post merge, so am glad to see Rocketpool support the Optimism ecosystem.

I voted FOR this proposal, scorecard output:

Highlights:

• Plan for growth of / on Optimism (-/+) - I’d like to see more incentives to create use cases (i.e., rETH as collateral, lending, etc.) for rETH in DeFi on Optimism vs basic liquidity pool incentives. However, building liquidity is important at this stage

• Money on chain (+) - rETH has a strong APY (which is expected to get higher post Ethereum merge). I like yields which are backed by network fees and not based on issuance / inflation or ponzinomics. As ETH and rETH prices stabilize in the future (fingers crossed), I can see a scenario where rETH is the primary asset held by users and high staking yields backed by actual transaction fees provide a nice shield to purchasing power with minimal effort

Boardroom.io and Discourse, for reference.

Boardroom

Boardroom is a governance aggregator helping members make faster, smarter, and more informed decisions. I am supportive of the delegate profile and multi organization view of a users governance activity, I see long-term value in that feature. I haven’t had much luck using the vote mechanism and have ultimately navigated to snapshot to execute governance votes.

I voted AGAINST this proposal, scorecard output:

Highlights:

Ultimately, the proposal seems fine and I won’t be upset if it passes, but I don’t currently see it as a key growth driver. The $OP tokens may be better used for other proposals

Boardroom.io and Discourse, for reference.

dHedge

dHedge is an automated investment strategies platform which tracks performance of proven crypto portfolio managers and enables aspiring portfolio managers. I don’t know much about this platform, but it is one that I plan to spend some more time with in the near future.

I voted FOR this proposal, scorecard output:

Highlights:

• Incentives match (+) - Great incentive matching package. Although incentives matching is not a requirement for a Governance Fund proposal, one thing I have been curious about is how the match should be verified prior to $OP token funding. Delegates are voting for or against based on an express promise to match incentives, honoring the commitment is important and on chain we prefer trustless whenever possible. It may make sense to request all or a portion of the $DHT match be funded in a multi-sig. The $OP grant could then be funded into the same multi-sig. Relative value over the term of the match is an interesting question as well (i.e., if $OP increases significantly in value and $DHT decreases in value, is a top up needed or is match value frozen at multi-sig funding date? Proposal date?)

• New product / high demand / money on chain (+) - I think this brings a new and interesting offering to Optimism, however, my personal view is this probably isn’t an offering for the masses. Use will probably be limited to pretty well capitalized / sophisticated investors. Still generally positive on these dimensions, but not critical / key from my POV

Boardroom.io and Discourse, for reference.

xToken

xToken is a user friendly UX for liquidity mining across multiple incentive strategies on Optimism and Gamma is an active liquidity management protocol which (in the context of this grant) will focus on improving liquidity of $OP on Optimism.

I voted AGAINST this proposal, scorecard output:

Highlights:

• Project on Optimism (-) - Combined projects only have about $27k of ~$9m TVL on Optimism. This may be an opportunity, but does not currently show a focus on the Optimism network

• Incentivizing growth (-) - All rewards are for LP incentives, which tends to be mercenary capital and tough to retain once incentives are reduced

• Proposal size (-) - The proposal size is quite large, especially considering limited activity on optimism and no incentive matching

Overall, I wasn’t passionate about specific for or against elements, but the scorecard output results in an Against vote.

Boardroom.io and Discourse, for reference.

Byte Masons

Byte Masons is a developer collective and the creators of granary.finance and reaper.farm (most relevant for this proposal). The proposal also distributes incentives via Reliquary, which is testing on Optimism, but not yet launched.

I voted FOR this proposal, scorecard output:

Highlights:

• On Optimism / plan for growth (-/+) - Byte Masons are building on Optimism, though current TVL is relatively small. Masons present as interested in sustainable growth (this is the goal of Reliquary, to minimize mercenary capital), which is positive

• Incentives match (+) - The 1:1 match of $OATH to $OP is great to see. Securing the match (i.e., via multi-sig or similar as previously mentioned) would be ideal

• Transparent incentives distribution (+) - 95% of the incentives should be on chain rewards and easy to verify. 5% for educaitonal content is also valuable, but challenging to verify and confirm content is Optimism related

• Professionalism (+/-) - I am uncertain about some accusations in the proposal comments, but I did think that the proposer team stayed pretty measured all things considered and did not throw stones back. In my experience, the louder voices tend to be less confident in their position and trying to simply make waves. At least one well respected Optimism community member with first hand knowledge across multiple interactions with the Masons spoke highly of the team, which is reassuring. Additionally, the fact that the team is 1:1 matching incentives de-risks a lot of the economic exposure to providing a grant.

Boardroom.io and Discourse, for reference.

GARD

GARD is a multi-faceted DeFi platform focused on (i) overcollateralized, fully decentralized stablecoin (ii) fixed yield products and (iii) stable staking opportunities.

I voted AGAINST this proposal, and I did not produce a scorecard for the proposal as the protocol is not live on Optimism (which I understand to be the only binary prerequisite for a Governance Fund proposal.

Boardroom.io and Discourse, for reference.

Beefy.fi

Beefy.fi is a DeFi yield optimization platform, which claims to emphasize security as a differentiator. the Beefy.fi UI presents yield strategies across the 16 chains it operates on side by side, which may be a great opportunity to draw users from other chains to Optimism.

I voted FOR this proposal, scorecard output:

Highlights:

• Project on Optimism (+) - Beefy.fi already has over $10m TVL on Optimism, which is a pretty high amount (I think this is probably a top five protocol / platform TVL on Optimism, it’s tough to source clean / comparable data)

• Growth on Optimism (+) - Beefy.fi has over $350m of TVL across multiple chains, claims it’s vaults are sticky and users remain post incentive periods, and presents yield strategies across multiple chains in a single place (which should induce users to move to Optimism if yields are competitive)

Boardroom.io and Discourse, for reference.

BarnBridge

BarnBridge is an interest rate, derivatives, and general risk management focused protocol.

I voted AGAINST this proposal, scorecard output:

Highlights:

• On Optimism (+/-) - The protocol is technically on Optimsim, but it sounds like the proposal is really related to v2 of the protocol which is not yet live

• Growth on Optimism (-/+) - As the protocol is unlauched, the growth prospect are uncertain

• Incentives match (-) - It seems like there are good intentions to match incentives, but I’m really not sure how to interpret the value of the match proposal

Generally, consistent with many other delegate comments in Discourse, the proposal needs a bit more refinement before going up to vote in my opinion. The protocol had a lot of traction ($500m+ of TVL) at one point, it would be great to see similar traction with the v2 protocol. I know fixed rate products are critical in TradFi and would likely be a good product addition to Optimism, I hope to see BarnBridge back in Season 2.

Boardroom.io and Discourse, for reference.

Qi DAO

Qi DAO is a stablecoin lending platform where users can lock crypto assets in a vault as collateral and receive $MAI stablecoins (Similar to the Maker / $DAI model). Maker is targeting launch of Maker vaults on Optimism in 4Q 2022, but good to see Qi DAO already on Optimism and some competition coming to keep yields high, fees low, and / or collateral levels competitive to the benefit of Optimism users.

I voted FOR this proposal, scorecard output:

Highlights:

• Incentives match (++) - Very robust incentives match program at $QI 1.7 : 1 $OP. Similar to my comments on other proposals, delegates are relying on the match promise being made by proposers when evaluating proposals, so the more defined, secure and less ambiguous the match mechanics are the better in my opinion

• Appropriately sized (-/+) - The proposal still feels a bit large to me at 750k $OP tokens ($1.2m USD @ 1.61 $OP at time of drafting on Jul 29, 2022) and considering Maker will launch in 4Q 2022, but incentives match alignment supports the case

• New to Optimism / addition fills demand (-/+) - I debated considering Qi DAO as “new” or unique to Optimism as Maker doesn’t have native vaults on Optimism yet. Ultimately, the main product (stablecoins) are not new, but certainly stablecoin volume is demanded on Optimism

Boardroom.io and Discourse, for reference.

Cycle 4 outro

Certainly some exciting protocols in the Cycle 4 cohort as well as some which I voted AGAINST which I hope to see back in the queue in Season 2.

I for FOR five of nine proposals in cycle 4, which would unlock 1.3% of the total Governance Fund worth ~$4.8m at time of drafting this post.

If you think my approach could use some refinement, be a reply guy / gal to the companion TWEET to this mirror post.

Optimism fund Season 2

Cycle 4 marks the end of Governance Fund “season 1” and sets up a reset ahead of season 2.

One thing that I have observed in my role as a delegate is that there is room for improvement in the proposal due diligence process. In an ecosystem which postures about the benefits and availability of public blockchain data, it’s not common for proposal teams to provide compelling rudimentary dashboards presenting protocol performance on Optimism or other chains.

I think objective and unbiased due diligence / performance analysis would be very beneficial for the Optimism community and the proposal evaluation process. I plan to use the time between Season 1 and Season 2 to learn how to dev on Flipside Crypto and Dune so I can apply my years of M&A due diligence experience to the Governance Fund process. I think long-term this is a service which the Optimism Collective would benefit greatly from and ideally would be willing to factor in to cycle token allocations (e.g., x% of each proposal would be set aside to fund the work of an objective due diligence team).

For more on the Optimism Governance Fund and my thoughts from cycle 3:

https://mirror.xyz/0xdb92c5C91a5D81Bd9865a07A42c7dD3F35bDA225/UvjcKqO-tNaOOQYDuia9S7rzzaxgSFdInUDTbJQh7vI

About the author:

https://mirror.xyz/0xdb92c5C91a5D81Bd9865a07A42c7dD3F35bDA225/lnFQ5wj4FfNKK0wcyOYt974y-9lnaD3M-iUAqS1bRe4

https://twitter.com/rasmuky

https://linktr.ee/rasmuky

• Voting cycle 3 (or round two Phase 1 of the Optimism Governance Fund) concludes on Jul 20, 2022. Nine proposers requested ~4.1m $OP tokens worth ~$3.1m USD at time of drafting this post

• As an Optimism delegate, I voted FOR four proposals and AGAINST five. For this round of proposals, I’ve beta tested a scorecard methodology to evaluating proposals (explained within this post)

• Although not relevant to the Governance Fund, I want to support the Optimism ecosystem due to what I perceive to be a sound “one commandment” commitment to Retroactive Public Goods Funding (RPGF)

Optimism governance voting takes place on Snapshot, governance overview information is organized on Boardroom.io, and proposal submission and feedback takes place on Discourse.

If I got anything wrong or for anyone who would like to collaborate to improve or influence my governance approach as an Optimism delegate, reply to this companion TWEET.

Optimism token and governance fund overview

Why Optimism for me

My current favored L1 nation is Ethereum and I’m in the process of making Optimism my L2 neighborhood. I am drawn to the Optimism commitment to maximize Retroactive Public Goods Funding (RPGF). If Optimism is able to maximize “good” MEV capture and remain economically and technically competitive to other chains, I think that would be a great outcome for the network and ecosystem writ large and create public goods for the masses. Providing economic incentives to build public goods should support mass adoption and long-term use of the ecosystem.

I plan to spend more time with Arbirtrum, Polygon, and the zero knowledge L2’s coming online soon, but Optimism appears to be committed to a “one commandment” (a la the Network State) focus on RPFG. I like RPGF as a single commandment.

I also plan to dive deeper into Cosmos and it’s app chain / IPFS ecosystem at a future date as it sounds like there are a lot of interesting possibilities with that architecture as well.

The Optimism token allocation

The Optimism token dropped end of April 2022 and is broken down as follows:

For the purposes of this post, I’ll focus on the Governance Fund (GF, 5.4% slice) under the Ecosystem Fund (25% slice) above. Live proposals on Boardroom and Discourse all relate to phase one, which ends in two days (Jul 20, 2022).

Governance fund phase 1 overview

General guidance

There is a good overview of the GF and more specifically Phase 1 HERE. The highlights are:

• Any project launched on Optimism is eligible to submit a proposal

• Proposals must include a plan for how the tokens will incentivize growth on Optimism

• Although not a strict requirement, the Optimism Foundation recommends that each project submitting a Governance Fund proposal include a commitment to match OP token incentives with their own project incentives

• Proposals are reviewed and approved by the Token House (OP holders, or their delegates)

• When a project gets a proposal approved, they are still eligible to apply for further proposals

  • Recommendation is that projects distribute their initial allocation of tokens before requesting further tokens

  • Projects are also encouraged to reference data from the success of their initial distribution to strengthen their case in future proposals

Amount of tokens requested by proposers

Below are two tables I created to frame the magnitude of the nine proposals in relation to the total governance fund:

Assuming I’ve interpreted the various governance docs correctly, phase 1 proposals currently up for vote (cycle 3) represent 1.7% of the total GF (for a total of ~$3.1m USD at time of drafting on Jul 18th, 2022). After cycle 1 (phase 0), cycle 2 (phase 1 round 1), and assuming all nine cycle 3 proposals pass; 81.3% of the GF is available to allocate in future phase 1 cycles.

Overview of delegators and the token house

The token house is comprised of all $OP token delegates. Holders of $OP = delegates if the holder agrees to the responsibility of acting as a delegate and participating in governance. If a holder of $OP chooses to not participate in governance, that holder may delegate their tokens to a proxy delegate. I have self delegated and plan to participate in governance going forward.

Here is an overview of how the token house fits into the broad Optimism governance structure, for reference:

Rasmuky’s proposal evaluation scorecard approach

Scorecard overview

In an attempt to evaluate proposals in a consistent way and in line with guidance provided by the Optimism core team, I developed a basic scorecard:

I’ll iterate on the approach for future processes, but conceptually:

• Factors developed based on guidance from Optimism Collective, reading through comments on Discourse from other delegates, and considering factors that matter to me personally or that I feel are positive for the network

• Weights were subjectively developed and will be reevaluated for future phases or future proposals

• I plan to rank each factor on a 0-10 scale, with a hurdle of 5.0 for a FOR vote.

• For parameters which appear more binary (i.e., project on Optimism)

  • No will render as 0

  • Yes as 5 so as to not negatively impact hurdle score of 5.0

  • If it’s obvious the project is heavily invested in Optimism, can scale up from 5 to as high as 10

• The respective weights will be applied to the 0-10 score and then aggregated to produce a weighted score

All of this is very subjective, but this approach is likely less subjective than just saying “I like the project, yes vote from me.”

Expected evolution of scorecard process

I only recently began to immerse in the Optimism governance process, so this scorecard and broad approach will be refined for future phases or proposal cohorts. Ideally, I would have spent more time engaging on Discourse with the proposers for this tranche, but alas.

With more time to research and engage more with proposers, I would likely include other factors like protocol decentralization, open source codebase, chain of custody of digital assets, approach / emphasis on security, evaluation of grant size request relative to other historical proposals, robust assessment / diligence of on chain metrics (across all chains), etc.

The diligence of on chain metrics is factor and value add to the Optimistic Collective I’m most excited about. I believe I could provide an objective analysis of proposer protocol use and growth which all Optimism delegates could use for their proposal evaluation process. Data and analytics diligence is what I currently do in Web2, so I’m very comfortable objectively analyzing data, engaging with management teams to stress test my interpretations, and then packaging outputs for intuitive interpretation by a wide range of user profiles.

If other delegates choose to deploy a scorecard style approach, ideally delegates would decide the parameters that are most important to them, develop their own weights, etc. A diverse set of approaches to governance is healthy, this is simply the approach I chose for this round.

Overview of phase 1 proposal evaluations

As I was late to the party for this round of proposals, I’ll be brief. Also, at snapshot I only held 1.6k $OP tokens and had none delegated to me, so no vote I cast will move the needle on proposals in this round.

I expect to increase my future phase vote impact (i) as I accumulate my own $OP stake and (ii) by earning $OP token holders support as a prudent and thoughtful delegate. DM me on Twitter if you would like to discuss delegating to me.

Proposal A | Superfluid

Superfluid is a protocol which enables payment streaming (e.g., high frequency settlement, like salary payments every day). I voted FOR for this proposal, scorecard output:

Highlights:

• Plan for how tokens will incentivize growth (+) - Products like Superfluid tend to be very sticky once organizations / people begin to program payments or streams. I’m not sure of the adoption or competitor set, but relative to more mercenary capital / temporary use cases, I think there is more potential for long-term Optimism adoption and growth with Superfliud

• Transparency of proposer to end recipient (+/-) - A portion of $OP tokens will be utilized to subsidize fees to set up and execute streams, which should be pretty easy to observe and directly benefit Optimism. A separate portion will be allocated to developers to support migration of treasuries and other activities to Optimism. It would be very challenging to validate or verify that use of GF grant is to the benefit of the Optimism network in the case of developer compensation (the developer could have been working on a different chain)

• Money on chain / alternative to TradFi (+) - I’m a big believer that creating boring use cases to lure retail users away from TradFi banks and get them on chain will drive adoption. I don’t think I’ve ever met someone who genuinely likes their retail bank, huge opportunity. Creating set it and forget it programmed payments and receipts platform which would improve money fluidity and access is in line with this concept

For reference, Boardroom.io and Discourse.

Proposal B | Kromatika

Kromatika is a swap DEX with an optimized approach to limit orders. I voted FOR this proposal, scorecard output:

Highlights:

• Growth on Optimism - I do think that limit orders are a relatively basic building block of finance and markets. I haven’t used the product (I will soon), but if the platform works well I can see it being a sticky protocol

• Rewards / incentives transparency (+/-) - Marketing and especially influencer marketing tends to carry a negative connotation in Web3, but I think it is important and leveraging high quality educational influencer material is a good choice. While the ecosystem is very small, organic growth based on word of mouth is achievable. As the ecosystem continues to grow, I think fluency in marketing will be very important. However, I don’t have a clear view of how influencer marketing spend or early user drops will be traced into actions on Optimism

• Money on chain alternative to TradFi - As mentioned, limit orders is a relatively basic use case so I suspect many retail users would benefit from Kromatika. If I thought more average retail TradFi users were actively trading with limit orders this factor would have carried more weight

For reference, Boardroom.io and Discourse.

Proposal C | Hundred Finance

Hundred Finance is a lend borrow protocol for DeFi. I voted FOR this proposal, scorecard output:

Highlights:

• Growth on Optimism (-) - Incentives appear to be majority based on yield farming emissions which generally attracts mercenary capital

• Proposer funded incentives (+) - Proposer committed to substantial co-incentives to generate attractive yields for users. Ranges provided where quite wide, so some refinement or monitoring of co-incentives would be a good check

• New to Optimism (+) - Slight positive based on cross chain lend / borrow activity as that sounds like a unique product to me. Unclear how that may impact activity on chain (is cross chain positive for Optimism or not?), but sounds interesting to test

For reference, Boardroom.io and Discourse.

Proposal D | Biconomy

Biconomy appears to be a diversified Web3 / Crypto exchange and dApp creator. The proposal appears to center around Hyphen (bridge protocol) and Gasless (partner protocol test subsidizer). I voted FOR this proposal, scorecard output:

Highlights:

• Growth on Optimism (+) - Liquidity incentives to support bridging to Optimism and gasless incentives to incentivize testing of dApps on Optimism has potential to be a tailwind for growth. Also, the fact that the Biconomy is open to collaborating with the token house to select worthy dApps is a good gesture as well

• Proposer match (+/-) - Score is simply the match ratio as stipulated by the proposer

• New product / demand need (+) - The Gasless product is very versatile in that it can incent users to migrate to Optimism to utilize a wide variety of dApps, presumably many of which would be new to the Optimism network

For reference, Boardroom.io and Discourse.

Proposal E | Dope Wars

Dope Wars is an MMO (massively multiplayer online) game in line with Grand Theft Auto. This is not an area of the ecosystem which I’m fluent in, though Dope Wars presents as committed to making Optimism it’s home base. I voted AGAINST, scorecard output:

Highlights:

• New product / additional demand (+) - Blockchain gaming is not prevalent on Optimism to my knowledge, but can definitely drive a lot of volume if the respective game achieves solid traction

• incentives / rewards transparency (-) - A portion of the incentives are slated to go into the project treasury, which is likely to be very opaque and hard to correlate to growth on Optimism

For reference, Boardroom.io and Discourse.

Proposal F | Infinity Wallet

Infinity Wallet is a multi-chain desktop focused crypto wallet with robust native integrations with various dApps. I voted AGAINST this proposal, scorecard output:

Highlights:

• Growth on Optimism (+) - A dApp native integration approach could be very sticky if the UI / UX is positive. I have not used the product, but do see value in the concept

• New product (-) - There are multiple wallets operational on Optimism. The native dApp integration sounds interesting, but I’m underwhelmed about the braggadocio of being desktop focused. Humans are mobile

• Incentives / rewards transparency (-) - 80% of the incentives / rewards are earmarked for developers, which is generally great. Validating what developers are working on is no easy task, so I suspect confidence of prudent spend would be challenging to verify or get comfortable with

For reference, Boardroom.io and Discourse.

Proposal G | Dexguru

DexGuru is a crypto trading platform. I voted AGAINST this proposal, scorecard output:

Highlights:

• Growth on Optimism and incentives transparency (-) - Incentives primarily go to developer resources in the DexGuru DAO. Understanding how those incentives translate into time and attention on developing the Optimism ecosystem would be a challenge in my opinion

For reference, Boardroom.io and Discourse.

Proposal H | Overnight.fi

Overnight.Fi is the creator of USD+, a high yield rebasing token backed with USDC. I voted AGAINST this proposal, scorecard output:

Highlights:

• Growth on Optimism (-) - Proposal plan is to provide incentives to increase LP liquidity / yield farming, which tends to attract mercenary capital. I think the long-term growth on Optimism from these types of strategies is uncertain at best

• Proposer incentives - USD+ (-) - Produces yield as a result of yield farming strategies, but the proposer team has not matched incentives to further drive growth on Optimism

For reference, Boardroom.io and Discourse.

Proposal I | Saddle Finance

Saddle Finance is a token swap platform focused on stable coin liquidity and which caters to traders and LP pools. I voted AGAINST this proposal, scorecard output:

Highlights:

• Incentivization of growth of Optimism (-) - The incentives are largely liquidity mining incentives, which typically are more mercenary in nature. It sounds unlikely these incentives would result in meaningful long-term growth for the Optimism ecosystem

• Rewards transparency (+) - Although the stickiness of the rewards are uncertain, transparency as to use of funds should be clear if visible on chain via yield farming

• Forum engagement (-) - It’s hard to conclude in many cases with no background knowledge, but my general thought is that when an organization is asking for a grant they should go out of their way to to be as cordial, productive, and positive as possible in the discourse. Everyone absolutely deserves the right to defend themselves and their organization, but reiterating data driven positive elements of their proposal and staying on topic is what I look for from a proposal team

For reference, Boardroom.io and Discourse.

Outro

There are definitely some protocols / projects which appear to be value accretive to Optimism in this Governance Fund cohort. I look forward to engaging with the next cohort of proposals in cycle 4 and refining my evaluation approach.

Let me know what you think I got wrong in this companion TWEET! I want this approach well oiled to do my part to contribute to the Optimism ecosystem.

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This post is a few days late for the start of 3Q 2022, but my broad intent for use of the Objectives and Key Results (OKRs) framework is (i) to memorialize my personal OKRs at the beginning of each quarter (this post, for 3Q 2022) and (ii) reflect on performance relative to goals at the end of each quarter (future post).

• There are so many Web3 organizations to explore, it’s overwhelming. I initially kept a very wide aperture and was trying to be a sponge, but I think I have a good enough lay of the land and should now focus my time much more narrowly to feel like I’m accomplishing something and to build the right network

• I tend to be a bit of a cat on a laser at times and my curiosity can quickly get the best of me. Deliberate focus and measurable accountability is a useful tool for me.

• For 3Q 2022, my objectives are:

  • Attain proficiency with on chain data and analytics tools

  • Make Optimism my L2 neighborhood and network with my neighbors

  • Continue to consume and create Web3 ecosystem content to build knowledge and reputation

  • Be an active member of the Mfers and Mfers Ahead communities

• In my experience, many Web0-Web2 organizations are not very good at goal setting and performance monitoring. Organizational accountability is a struggle, and individual accountability (daily, weekly, etc.) is just as bad

• I think OKRs are a useful way to create goal and incentive legos top to bottom throughout (centralized and decentralized) organizations and could be an excellent tool for Web3 organizations

If you possess domain expertise or are generally interested in my objectives topic areas, please (i) read on and (ii) interact with the companion TWEET to this post. I’d love to learn from other Web3 community members experiences and network with individuals on a similar Web3 path to the one I’m walking.

Overview of Objectives and Key Results methodology

There are many different frameworks to choose from for goal setting or performance measurement, the flavor I favor is OKRs. I generally stick to the the Measure What Matters framework based on the book authored by John Doerr as there is good free and paid content to help deploy the framework. I try not overcomplicate or over customize the process, I just stick to a proven model and focus more time on the execution and outcomes.

I’ll keep the overview very basic, but measure what matters frames Objectives as the “what”, or:

An objective is what you want to do. It describes your mission-supporting goal and sets a deadline for achieving it.

Measure what matters 101

Key results are framed as the “why”, or:

Objectives must be paired with a roadmap that will help you know whether or not you’re on the path to meeting your goals…Key Results…are the benchmarks you can measure that track your progress toward the Objective.

Measure what matters 101

Currently, many of my key results are more akin to “tasks” and are quite subjective in measurement (or even binary). This essentially underutilizes the power of OKRs, but is still useful until more measurable goals are achievable.

For example, once some traction is achieved related to creation of analytics dashboards, I could have more measurable key results of (i) tweet interaction counts (i.e., 10,000 impressions on analytics dashboard tweets) or (ii) flipside crypto profile follows (i.e., 1,000 new followers). My daily tasks could be to “create more dashboards” or “tweet / retweet dashboard outputs and key insights”, “reply on other Flipside / Dune users tweets or dashboards”, “join more Dune groups”, etc. If well thought out and successful, tasks should drive the measurable outcomes I seek which in turn support the objective.

Objective 1 (O1): Attain proficiency with on chain data and analytics tools

I’m a data and analytics professional IRL and one of the major pain points I have when analyzing Web0-Web2 companies is a very wide range of data availability and data quality, skewing towards data unavailability and / or terrible data hygiene. Aside from all of the ideological and new financial system drivers I like about Web3, data availability and decipherable structure is also a big draw to Web3 for me.

That said, most of my career experiences were more finance and accounting focused to evaluate company performance (i.e., excel jockey). I recently shifted focus to applying data and analytics to my business performance and unit economics analysis lens, but have primarily leveraged code free tools and don’t currently consider myself a developer or a data engineer / data scientist (though I plan to get there).

Most of my time is spent using tools like Alteryx (data structuring, blending, enhancing, general ETL) and PowerBI (business intelligence tool for dashboards). I’ve lead teams which utilize MySQL, Databricks, Python, R, etc., but I have not had an opportunity to learn the fundamentals of these tools personally for various reasons.

My primary objective for 3Q 2022 is to equip myself with the right tools to enable the creative data and analytics driven analyses I do IRL, on chain.

Key Result 1 (KR1): Complete BI Foundations on Coursera with SQL, ETL and Data Warehousing Specialization

The goal is to enable on chain much of the know how I currently have off chain. I’m initially focused on the Dune Analytics and Flipside Crypto platforms, which are primarily SQL based with relatively basic visualization output options.

KR2: Create two Flipside Crypto dashboards and publish on Twitter

Getting started is the key.

KR3: Create two Dune Analytics dashboards and publish on Twitter

Getting started is the key.

KR4: Get access to the Flipside Crypto Shroom DK (SDK) and structure two queries (bonus for a dashboard)

I’m not exactly sure how the packaging of an SDK output feeds into dashboard outputs, so this one will probably require more baseline research. I’ll start small with just figuring out how to query the SDK with the Shroom DK NFT.

May be a carryforward KR to 4Q 2022.

KR5: Evaluate if Flipside “God Mode” NFT is worth buying (Bonus if purchased)

The God Mode NFT enables ungated access to all bounties on the Flipside Crypto platform. Bounties are budgets provided by various networks, dApps, protocols, etc. and typically operate on a first come first serve basis (i.e., if you don’t complete the bounty quickly, you may not earn). God Mode allows the holder to complete any bounty at any time, thus increasing their ability to participate in the emerging work-to-earn movement.

It probably makes sense to try a few bounties before purchasing the God Mode NFT.

May be a carryforward KR to 4Q 2022.

KR6: Inquire into the Messari + The Graph collaboration and how to get involved

Not likely anything actionable in 3Q 2022 on this topic, but it would be very interesting to be involved in developing a set of industry / ecosystem standard data tables and analyses for use going forward, which I think is the genesis of the Messari + The Graph collaboration. The closer a data analyst is to the design choices made in development of these standards, the greater their understanding of how to interpret the data and what the ecosystem values (in my opinion).

May be a carryforward KR to 4Q 2022.

O2: Make Optimism my L2 neighborhood and network with my neighbors

I think that Optimism is going to be my L2 neighborhood in the suburbs. I like the concept of regen finance and using MEV from transactions on chain to finance retroactive public goods funding.

As Jinlang Wang so eloquently said on the Bankless Podcast (around 46:00 and 51:00), the Optimism team wants to reward and engage with anons who:

Give a F about [Optimism]…We want to create a body of citizens who give many Fs about the protocol.

Jinlang Wang

I do need to do some more research to better understand the technical nuances of the network, but I’ll dive in headfirst while I do as I’m Optimistic that I’ll find alignment based on what I’ve read thus far.

KR7: Complete Optimism token ($OP) delegate profile

I delegated my governance tokens to myself, but I need to figure out how to refine my delegate profile to appear more official (it was not obvious…).

KR8: Vote on all governance events in 3Q 2022

I don’t hold many tokens, but I plan to show up and begin to build credibility and show that I give many Fs.

KR9: Read, research, comment, and engage on the top ten discourse threads

Top 10 based on trailing quarter at time of research.

O3: Continue to consume and create Web3 ecosystem content to build reputation

KR10: Post 3Q 2022 OKR plan and results

This mirror post, and end of quarter mirror post.

KR11: Post more “This Web3 Life” content on Mirror

Post five new pieces of content outside of OKRs. Continue to write and better comprehend my Web3 journey so far and create a space where my ideas can incubate.

KR12: Read “The Network State” by Balaji

I’ve been waiting for this to drop for a while. I find Balaji to be very thought provoking and always a good read / listen.

KR13: Curate a list of thinkers to explore in 4Q 2022

This list will lead to multiple content consumption KRs in 4Q 2022. Who are your favorite thinkers? I tend to lean heavy Ethereum ecosystem, but will read anything that is insightful.

At this point, I plan to track down seminal long form content from:

• Vitalik

• Bankless team

• Optimism founding team

• Punk 6529

• DC Investor

• Eric Connor

Also, now that I’ve immersed in the ecosystem for about eight months now, I’d like to revisit:

• BTC whitepaper

• Ethereum whitepaper

• Ethereum yellowpaper

O4: Be an active member of the Mfers and Mfers Ahead communities

The #Mfers community has been quietly buidling in the bear market and organizing ideas for what “community led” is going to mean for the collection going forward.

Will community led mean (i) a basic 4/7 multi sig with signors who are trusted to genuinely engage with holders or (ii) a scream into the void one token = one vote platform where every proposal requires a vote and no one takes the time to understand the framework they are making a proposal into (e.g., see Prop House Mfers proposal 425, which received the top number of votes but makes zero sense in the context of Nouns DAO seeding builder projects with ETH [as a nice gesture]).

I hope community led for Mfers ultimately means something in between romanettes i and ii above.

#MFA is the best Mfer derivative I’ve come across. Solid group of degens with a healthy mix of regen tendencies. Also counts 6/7 Mfer multi sig signors as active members in the discord 👀.

KR14: Engage with tweets, mirror posts, discord discussions or other proposed Mfer governance discussions

Now that the Nouns DAO Prop House voting has ended, there aren’t any imminent governance interactions that I’m aware of. I suspect we’ll see a discourse space for proposals or ideas, but in the mean I’ll be primarily reactionary this quarter given other priorities and generally actionability.

3Q 2022 OKR scorecard

I’ll recalibrate my approach as I iterate this OKR process quarter to quarter, but here are the priority weights by key result (and rolled up to objective).

Typically, 75% OKR attainment is considered very good. If 100% attainment is achieved, the OKRs are probably not audacious enough.

Broad OKR use in Web3

I’m currently using OKRs as a tool for my own self accountability. However, OKRs are generally optimized for flat organizations with lots of measurable data. I think that the current abstraction of Web3 organizations fits into that framework quite well.

One concept I am still wrestling with is the incentives overlay with OKRs. I believe the conventional wisdom is that OKRs are not directly tied to incentives. However, if well structured, OKRs should provide maximum visibility into what everyone in the organization can do to optimize the enterprise value (or network value / equity value) of an organization. As token / network / protocol ownership is a key promise of Web3 users and builders, this should result is positive value accrual to all users and builders.

For example, it’s easy to visualize a scenario where an organization’s DAO has four or five objectives which then spawn sub-DAOs to attack the key results. The key results for a sub-DAO could be reworded into an objective for that sub-DAO, and then community contributors create key results to achieve the sub-DAO level objective. This can continue to web down for as many layers as an organization has and the OKRs can be defined both bottom up and top down.

Given the on chain nature and decentralized workforce, much if not all of the key activities should be directly measurable.

If you want to hold me accountable as well or would like to drop some knowledge on me, be a reply guy / gal on this TWEET!

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I’ve now been immersed in Web3 for about eight months and have learned a lot about many of the fundamental technologies, frameworks, protocols and theories of the space. Throughout this time I’ve explored a number of use cases in my mind and considered how some may interconnect to strengthen network effects and general value propositions of individual protocols.

This post is my attempt to organize these thoughts into a Frankenstein’s monster apparatus and chart the path to research the technological, psychological, and economical challenges to creation of such an apparatus.

The foundational attributes of the monster which I’m most excited about are:

• I think creation of a user self reported and managed “economic profile” is important to a healthy and optimized financial system on chain. Building credibility over time with responsible behavior enables users and protocols to interact more fluidly and efficiently while remaining permissionless, trustless, and undercollateralized (or most importantly not overcollateralized)

• An economic profile does not have to equal identity…even anons can build financial credibility and creditworthiness simply by behaving responsibly

• A dApp which enables robust programming of future money inflows and money outflows between and among various end use parties (i.e., with no intermediaries) would be new economic information not currently captured in the off-chain CeFi or TradFi environment. This could scale on-chain and be a valuable input to credit extension and the flow of commerce

• A network of dApps which benefit from visibility into an economic profile can leverage features / data from one another and pay rewards in a common utility token. It’s possible that value accrual to a common utility token alone would incentivize a broad range of dApps to participate, or dApp to dApp payments for data could be an option as well

• For dApps with common utility token, individual protocol governance could be driven by dApp use instead of basic hodling of an individual dApp’s utility / governance tokens. This drives influence to the users of the respective protocol instead of the hodlers of capital

• Larger dApps within the common utility token apparatus will likely hold more of the primary utility token within an individual dApp treasury to facilitate periodic rewards funding, thus increasing governance influence over the common utility token for the larger dApps in the apparatus

The mosaic idea within this post is essentially unresearched at this point.

This apparatus is simply thoughts from my head now on digital paper. My commitment as a next steps is to do the research on technological feasibility, existing protocols in development, psychological / economical / political traps, and general evaluation of the major concepts to assess if there is something more to explore and build.

Any thoughts, feedback, critiques, memes you may have are welcomed in the replies to the companion TWEET to this post. #Learning.

The set-up

I don’t know why, but when I let my mind wander I tend to dream up complex interconnected systems. I know, I have a problem…but it’s a thing I do.

So, I dreamt up this monster I call the Apparatus:

I think of it as a first draft which combines (i) my interpretation of some Web3 ecosystem fundamentals and (ii) what I initially want from the technology (which is also what I personally think will help to drive broad adoption).

Some context:

• All of the protocols / dApps in the image above are introduced / explained below. I thought it might be helpful to the reader to get a basic visual of the full apparatus for reference

• The image above displays a single chain architecture (e.g., what you would see on Optimism L2)

  • Expectation is the apparatus would be made composable or adoptable across all chains to provide a chain agnostic view of a Trsry parent account economic profile

  • Added benefit of chain agnostic composability is ability to bridge cross chain through protocol / smart contract layer Trsry treasury via “bridge” liquidity partner loans

    • Is the safest way to bridge between chains to not bridge at all?

Leap of faith assumptions

This is not a comprehensive list of the pros and cons, but highlights a few topics which seem most radical relative to current ecosystem user expectations and / or critical to usefulness of the apparatus:

• Anons, retail users, and enterprise users will agree to link wallets or account numbers to create an economic profile and will receive rewards for utilizing dApps and credit availability benefits in return for participation

• Institutional and retail users will embrace self custody accounts, account substructures, single signor and multi signor key application and key management best practices to optimize security

  • Or, at least be open to an alternative to custody solutions between self custody and centralized custody. It seems current conventional wisdom doesn’t leave much room for an alternative framework to self custody or centralized custody

• Enough activity can move and remain on chain to make settlement effective, efficient, and economical.

  • No need for a separate payroll direct deposit option if employers are settling all types of payments on chain

  • No need for cheap fiat on-ramps and off-ramps if a lot of end use settlement can occur natively on chain

• Protocols will see enough value in leveraging parent account match tables and programmed transaction information to adopt a common token for rewards

• It is technologically possible to store on chain (or via a private chain or zero knowledge chain) various new states or parent account attributes which can be called / evaluated in real time (efficiently) to enable decision making

  • If a responsibility or credit score is maintained, where is the state of the parent economic profile stored? How is state transition processed? How do other apps call the state or recent trend in the state? etc.

  • Similar questions for how to store, maintain history, process state change, and call on for other dApp use other information (e.g., programmed future payments)

• A common rewards token treasury can be used across all chains as a secure alternative to bridging

• Productive coordination with various governmental institutions is achievable in order to (i) support investigation of bad actors and (ii) facilitate private, human rights enabling, transactions from good actors

The multi-protocol apparatus

The outline below introduces a number of theoretical protocols / organizations which can generally operate independently. There could even be multiple competing versions of the individual topical organizations. However, all protocols (with the exception of Confidntl) foundationally leverage as key information (i) the economic profile enabled by Trsry and (ii) programmed money inflows and money outflows enabled by Prgrmd.

Trsry (trezh-uh-ree)

Protocol enables wallet address / account number aggregation to an economic profile (referred to as “parent”). Child accounts sign access control to parent account similar to a blind signing concept. Parent accounts can rescind access control or “revoke cash” to a child if requested and approved. A child account can only have one parent, but parent accounts can have multiple children. A parent account with children can be a child account to an ultimate parent (i.e., a sub-DAO “parent” account can have child accounts and an actionable economic profile at that sub-DAO level, but said account can also be a child to the top DAO parent account).

Protocol enables complex parent account <> child account signor access rights (i.e., single signor for transactions below x money, 2/3 multi sig from x > y money, 4/9 multi sig above y, etc.). Parent accounts set conditions and can change conditions. Use of NFTs could give a signer wallet address unique access rights for various accounts within an overall parent structure. For example, a signer wallet address can hold an NFT with a trait providing 1/1 authority at a sub-DAO level but only 4/9 authority at the ultimate parent DAO level.

Protocol enables two way management of money balances to sweep money to a parent cold wallet when not in use or to keep hot wallets funded to certain predetermined levels (if there are regular non programmed money outflows).

The parent economic profile importantly enables aggregated money outflow and money inflow settlement (which would probably occur as part of the Prgrm protocol, discussed in more detail below).

For example, instead of an enterprise or retail parent economic profile sending 20 wires and receiving 30 wires in a single day, these programmed events could be aggregated into batched netted transactions and potentially send one money transfer transaction out and receive one money transfer transaction in. The reduction in transfer transaction fees and possibly currency swap fees may be significant.

One off or ad hoc activities could still be executed at the parent or child level throughout the day, but normal course programmable transactions could be optimized to reduce network fees and congestion.

Rewards for optimizing activity are paid in a commodity or utility token, $TRSRY. When other protocols use the parent <> child match table for various activities, it costs $TRSRY paid to Trsry to do so.

$TRSRY is the governance token of Trsry. There is also a citizen house to guide the long-term agenda of the Trsry ecosystem.

Unclear if the parent <> child match table is a dApp on an existing L2 or a dedicated L2. I’ll table this as part of my next steps to understand technological feasibility, but will assume it’s possible to solve (we’re landing rockets on drone ships in the ocean now…so, should be solvable).

KeyMkr (kee mey-ker)

Essentially a security education and / or consulting services organization. Not a protocol or tech platform, but an important element for the apparatus.

Could be multiple levels of service and delivery, but would provide guided educational content for self sovereign security (i.e., basic retail users or SMB level of sophistication). Learn to earn model, paid with $TRSRY rewards as well as reduced Jeprdy costs.

Enterprise or complex retail level key management design and consulting services organization. $TRSRY rewards and reduced Jeprdy costs for participation in initial security assessment and design, annual security consultation and quarterly business reviews of design / architecture. Individual users would also participate for reduced Jeprdy costs. For highly sophisticated users or organizations which prefer a managed service, compensation to KeyMkr may be required.

Prgrmd (proh-grammed)

Protocol enables the sender of funds to program or schedule a future payment (essentially by blind signing a transaction, but → magic → it is super secure) from a child account (or parent account) based on appropriate sender / signer rights. Parent <> child accounts can view all programmed future payments and manage accordingly.

Protocol enables receiver of funds to view pending programmed payments and get visibility into future cash receipts.

Protocol enables both sender and receiver to utilize whichever currency they prefer.

Protocol enables both sender and receiver to pick which L1 / L2 they prefer to send from / receive on.

Protocol enables optimization of settlement execution along three primary axis: (i) reduction of transfer fees by batching sends and receipts to the parent level, (ii) reduction of swap fees by matching batches of send / receive currencies based on a waterfall instead of swapping each individual transaction from one currency to another, and (iii) reduction of bridge fees / bridge security risk by going through the $TRSRY treasury between and among chains. Essentially, all senders send a single transfer (which could cover x individual programmed payments) to a contract address on the respective chain → magic → then all recipients receive a single transfer out of the contract address (which could cover y individual programmed receipts) on the respective chain.

Protocol could also optimize overall network use by running programmed transactions in historically low volume dayparts and by delaying programmed transaction batches if fees are significantly elevated at a certain point in time. Senders and receivers will understand programmed transactions are not instant settle, which is the case with most bill pay or other normal course transactions in TradFi (which is generally fine with me / most financial system users). Prgrmd settlement events could happen throughout the day, multiple times per day or multiple times per hour, or as frequently as settlement volume requires.

Protocol could also enable optimization on one-off or account sweep transactions (e.g., for hot wallet normal funding balances as previously mentioned) by batching them up with regularly scheduled programmed settlements if the sender doesn’t need instant settlement or would like to receive rewards. To some extent, it’s almost like Prgrmd is creating a large mem pool that goes far into the future, but are only sequencing or actioning against the portion of that mem pool that is eligible to settle in the next 12-24 hours for optimization purposes.

As more settlement activity is consolidated on Prgrmd, economies of scale will continue to improve presumably to the point where daily settlement may be economical (i.e., employees receive their salary daily from employers and pay netflix daily for subscription). This level of fluid settlement may remove a lot of complexity and friction around timing of money flows / peak to trough credit needs, and the TradFi ability of entities to exert payment term dominance as a financial value extraction vector (i.e., large companies requiring payment in full up front for one year of service and paying employees every two weeks or vendors every 60+ days).

Even though transactions are batched up to minimize transaction fees, at time of transaction a market clearing fee is charged by Prgrmd and the net amount (after actual network fees) is held in the Prgrmd treasury until periodic rewards are paid (rewards would reflect optimized transaction costs based on use of economic profile to reduce transfers, swaps, etc.).

Other dApps would value historical programmed and unprogrammed money outflow and inflow activity (and mix thereof) as well as programmed future money outflows and inflows. Prgrmd could charge for this information essentially as an oracle or in collaboration with The Graph or a similar decentralized indexing protocol.

Prgrmd’s primary treasury / utility token is $TRSRY, which would be used for rewards payments.

It’s unclear if the programmed future transaction table is a dApp on an existing L2 or a dedicated L2, but this information table is a valuable output (not only for the parent sender and receiver to use, but also for other dApps to leverage).

Number of programmed transactions / value of programmed transactions (both sent and received) could be used as a governance “token” proxy mechanism. Perhaps a Trailing 28 days (T28d) and Trailing 364 days (T364d), or other defined periods, could be used to reward higher levels of recent and / or longer-term engagement. Citizen house would additionally be used for governance.

Jeprdy (jep-er-dee)

Protocol provides ongoing risk insurance at the parent <> child level based on multiple on chain variables (e.g., use of Trsry security structure, KeyMkr level of service, parent Rispnsble score, Rispnsble score of frequent transacting counterparties, interactions with nefarious accounts as defined by Confidntl research, mix of programmed vs non programmed transaction activity, past claims history, etc.

Claims will be assessed to understand if the impacted party was targeted and victimized, or if there was a security flaw / general operator error.

Protocol is not permissioned in the sense that you MUST use Jeprdy to transact, but parents with limited history or history of bad behavior may have a very high premium or activities deemed uninsurable.

Insurance for any crypo assets held in CeFi or TradFi or generally off chain will be extremally high, if even available at all. On chain is the way.

Premiums and claim volume will function as a “token” proxy for governance. Citizen house also used for governance.

Rispnsble (ri-spon-suh-buhl)

Rewards system to incentivize parent level entities to behave responsibly on chain and develop a standardized Rispnsble scoring mechanism. Unclear how the score would be stored in the state <> state transition context of blockchains, but presuming primarily programmed settlement activities it could be handled in a pre batch settlement evaluation or something along these lines.

KeyMkr participation increases score, Jeprdy participation increases score, absence of Jeprdy events increases score, higher mix of programmed vs non programmed transactions increases score, T28d vs prior 28 days prgrmd total inflow volume growth and outflow volume decline increases score, T84d vs prior 84 days Prgrmd total inflow volume growth and outflow volume decline increases score, etc.

Participation and positive history interacting with credit extension protocols (introduced next) increases score as well.

API or on chain subgraph account calls (as a user of Rispnsble scores) and calls to community members parent account (as the subject of Rispnsble score evaluation) could be used as a governance “token” proxy. Citizen house would additionally be used.

Flowt (floht)

short term borrowing protocol to extend credit to senders or to modify payment terms to senders preferred frequency.

In the case of normal course credit extension, if a sender has a payment programmed or wants to make a one time payment, but doesn’t have funds on hand, Flowt analyzes programmed future money inflows and outflows at the parent account level and assesses non programmed inflow and outflow history to develop a risk adjusted short term rate. Should be considerably lower than TradFi credit card rates as real time account balance and money flow data is available on chain. The rate could even fluctuate daily if new inflows or outflow are programmed or assets are brough on chain or into the parent structure.

As it relates to sender selection of payment terms, if a sender has an annual subscription one time payment, but would prefer to pay it monthly (or daily), Flowt could pay the recipient on their preferred payment terms (annual up front in this example) and then receive the periodic payments (plus interest) from the sender over the senders preferred payment timeline.

Flowt could probably operate adequately without the benefit of a Rispnsble score given general short term nature and relatively small individual transaction size, but high Rispnsble score could also be a factor for interest rate pricing.

Trsry community members can opt into Flowt pools to receive $TRSRY rewards / yield. Rewards required to be paid in $TRSRY for Flowt to leverage the (i) parent <> child account match table and (ii) future programmed payments information.

Value of loans outstanding (as a lender) could be used as a governance “token”. Citizen house would additionally be used.

Revlvr (ri-vol-ver)

Enterprise grade short term borrowing solution in the event payment cycles are less frequent or have greater cash flow peak to trough amplitude than Flowt can price reasonably.

May require securitization into Revlvr + borrower multi-sig account for portion of liquidity, review of off chain financial profile and decentralized oracle data feed to balances, etc.

Trsry community members can opt into Revlvr pools to receive $TRSRY rewards.

Value of loans outstanding (as a lender) could be used as a governance “token”. Citizen house would additionally be used.

Invst (in-vest)

Enterprise grade credit facility for longer duration financing needs to fund investment in future operations greater than short term liquidity needs. Would likely require some pledge of off chain assets, perhaps posted as NFTs into a multi-sig with borrower and Invest as 2/2 signers.

Trsry community members can opt into Invst pools to receive $TRSRY rewards.

Loan “paper” may be represented as NFTs collections with the traits of the individual NFT reflecting the terms (i.e., notional amount is par value, coupon rate is interest payment, fixed vs variable rate, maturity date, amortization payment cadence, interest payment cadence, current vs default, etc.). Risponsble score will be a trait and metadata will update frequently, creating a more easily valuable security for liquid trading via DEX.

Value of loans outstanding (as a lender) could be used as a governance “token”. Citizen house would additionally be used.

Liqd (lik-wid)

Liquid staking as a service and / or liquid mining as a service protocol with a key mandate of promoting decentralization across all networks it participates in security / block production / consensus.

$liETH, $liDAI, $liBTC, $liUSDT, $liUSDC, etc. Protocol would use native coins (i.e., $ETH) to stake PoS, provide swap pool liquidity, low risk loan lending, mining operations, etc., to back liquid tokens to generate attractive unlevered yields on major crypto assets.

$liXXX liquid assets would be preferred assets used across all dApps within the apparatus and receive $TRSRY rewards for use (in addition to native token yield, where applicable).

Crypto community members have raised concerns about liquid staking as a centralization risk vector, so Liqd would use economic disincentives / incentives or governance mandated altruistic actions to promote diverse staking community. For example, if Liqd $liETH becomes too concentrated (i.e., greater than 15% of staked ETH), Liqd will (i) reduce $TRSRY rewards on $liETH, (ii) increase Liqd commission on $liETH (reducing yield to holder), (iii) unstake ETH and use to buy stETH or rETH, etc.

A long-term goal for Liqd would be to create a portfolio of tracker tokens which seek to reflect purchasing power in various jurisdictions. For example, instead of simply a stable coin that is pegged to a fiat currency, creation of a tracker token that reflects changes in purchase power or inflation in a country or region, with a collar around movements to allow for drift and promote general price stability. No clue what this mechanism would be or if it’s possible, but this does seem like an better alternative to fiat stable coins as the related fiat currencies can be debased or generally not track actual purchase power.

Token house governance could be led at the individual liXXX token level based on holders (i.e., 1 token = 1 vote), which would operate almost as sub token houses. The Liqd protocol total token house would be an aggregation of al sub token houses (i.e., total tokens across all liXXX tokens. Individual liXXX and Liqd in total would have a citizen house.

Confidntl (kon-fi-den-shuhl)

Alternative to Tornado cash. Goal is to engage with regulators to develop a set of parameters whereby if adequate evidence of fraud or wrongdoing is provided related to an account / transaction, Confidntl would provide the breadcrumbs for researchers to match the input amount to the resulting confidential output amounts / accounts.

This wouldn’t provide an actual KYC name or personal information, but presumably would enable the researcher to trace those accounts to interactions with other accounts / CEXs to discover government identity. You know, good old fashioned police work.

For example, if an evidence threshold is met and the community votes to provide support, a private chain or some sort of zero knowledge proof could be called on to provide the algorithm configuration at the time of the subject transaction (i.e., the algorithm was (i) split into seven accounts, (ii) based on an arithmetic sequence, (iii) starting at 10% of the total, (iv) adding 3% with each progression, (v) with the remainder going into the seventh account, (vi) settled 189 minutes after deposit into Confidntl. Based on this knowledge, the government researchers should be able to review the on chain activity and piece together the seven resulting account numbers and continue to do good old fashioned police work.

To fund the project and to deter bad actors from using Confidntl, fees paid into this protocol should initial be meaningfully greater than less altruistic protocols. As such, community members that deeply care about confidentiality and not simply trying to evade authorities will happily pay the higher costs. Everyone else will likely choose cheaper alternatives.

The higher fees will be used to (i) refine the tech, (ii) coordinate with regulators to activate cooperation framework, (iii) fund broad ecosystem research across all protocols and mixer tools to support community self policing (i.e., track and trace activities inbound and outbound of other mixer protocols to support authorities with investigations of wrong doing around those protocols).

Once the tech is well developed, framework set with regulators, and ecosystem research approach well oiled, fees can be reduced to a very small amount. However, now that bad actors know they can be exposed to authorities, they will likely continue to avoid use of the protocol.

It’s likely that very few good actors will ever be probed within Confidntl, and that an even smaller subset of them will reach the required evidentiary threshold for cooperation with authorities. As a result, the protocol enables confidential transactions rivaling the current option of fiat currency cash with the benefits of self custody and on chain convenience.

That was a lot to digest, I’m sure. Here is an attempt at a matrix to summarize

Is this apparatus even technologically possible?

I have no idea.

As I continue my Web3 journey, I’ll be researching this question, re: the apparatus, among other topics. The technological questions I currently have are:

• Do the Trsry (parent account match) and Prgrmd (future payments) proprietary data tables need to exist on isolated L1s / L2s / other? Could the state → state transitions of these table live on existing block chains?

• Are there actually savings from pooling lots of payments into a single settlement event?

• If pooling transactions is economical, it seems like it would still be a huge sequence of transactions subject to MEV, so would it need to be fully settled on a single chain? And wouldn’t that lead to extreme centralization? Or the need to rebuild the security of sequencing and validating for this use case?

• Can Rispnsble scores or real time credit extension in Flowt be managed in a state <> state transition environment when settling a large amount of transactions (i.e., maybe Flowt credit is not needed so no assessment is required, perhaps a parent <> child is not paying for Jeprdy insurance so Rispnsble score is not relevant, etc.)

• Can loans between Trsry treasury and Trsry parent accounts facilitate cross chain bridging with an optimized security footprint?

I’m sure I’ll develop more as I progress, but this are my current quagmires.

Structure of future mirror posts

So far my mirror posts have essentially been a stream of consciousness with very limited research to support my assertions or conclusions. In the next phase of my exploration I will spend more time looking for existing research, solutions, and conclusions on three batches of topics:

The apparatus

I’ll look for current or proposed solutions which address the various protocols or tools I’ve introduced above, which are:

• Trsry

• KeyMkr

• Prgrmd

• Jeprdy

• Rispnsble

• Flowt

• Revlvr

• Invst

• Liqd

• Confidntl

Minimum Viable Bank on Chain (“MVBoC”)

In a previous post, I outlined a few problems which I think would be great to solve in the short term to accelerate adoption. These problems were:

• Fiat on-ramp fees

• Direct deposit options

• Net yield on capital

• Settlement of key payments

• Fiat off-ramp fees

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Key products or services to get to TradFi parity

In a previous post, I defined the features that I value from TradFi and compared them to Crypto / Web3, which were:

• Physical / digital asset security

• Catastrophic event insurance

• Asset portability and transmissibility

• Access to credit

• Permission / validation of credible parties

• Ability to transact anonymously

• Reasonable compensation for use of funds

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There is a fair amount of overlap between these three sets of topics, so as I progress I will address multiple topics from these three topic groupings per individual post, as applicable.

What did I leave out and need to address? Reply to the companion TWEET to this post so I’m on the right path!

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• Post explores some of the pain points I’ve observed as I've searched for a sustainable way to do more on chain

• If the Web3 community can focus on developing practical use cases to enable basic financial settlement on chain and / or significantly reduce on-ramp and off-ramp fees, retail users will get comfortable migrating on chain

• I think focus on (i) driving adoption of seamless and fee light direct deposit on chain of income earned off chain and (ii) settlement of high dollar low volume payments on chain will entice Web3 curious users to explore the ecosystem more seriously and will lead to increased exploration of other protocols (NFTs, Metaverse, DeFi, DAOs, etc.).

These are my opinions. What are the products / services / features that you MUST have to migrate away from TradFi and into the Web3 ecosystem? Feel free to reply to the companion TWEET to this Mirror post. #Learning.

My previous post comparing a number of financial system features that are important to me as a retail user is also relevant to the content in this post.

https://mirror.xyz/0xdb92c5C91a5D81Bd9865a07A42c7dD3F35bDA225/lo97EMZy-uTM7ncBdBDXbCZLW4JWxNH0GjzCHSFlV4E

Core set of tools to enable much of what TradFi retail banks do to pull new users on chain

I would like to identify, evangelize, and ideally help build (if the components pieces don’t already exist) a Minimum Viable Bank on Chain (“MVBoC”) collection of dApps. I’ll approach these selfishly for my own desired use cases, but I also think this MVBoC will be broadly applicable and help to drive adoption of Web3. My MVBoC will be different than other users, but hopefully covers enough surface area to get prospective users exploring the ecosystem more productively.

Reasonable fiat on-ramp

Depending on the Centralized Exchange (“CEX”) used, transaction fees and spread fees can cost anywhere from 0.4%-2.0%+. There is an additional fee to transfer tokens to a self custody wallet. Most CEXs currently only transfer to ETH mainnet (within the Ethereum ecosystem), so if you prefer to operate on L2s (Optimism, Arbitrum, etc.) there are additional bridging fees. These fees add up quickly and are quite steep when compared to my typical monthly fees of $0.00 or 0% in TradFi.

If I plan to bring assets on chain and make monthly payments for goods or services while still receiving some yield, I need to cover that 2.0% fee with offsetting yield just to break even, which implies I can find a dApp or DeFi protocol with an APY of 27.3% and assumes I don’t have to off-ramp the assets. This level of yield is not easy to find, especially with low risk.

Alternatively, I could break even (fees paid vs yield earned) if I earn yield at a lower rate over multiple months on savings or surplus assets, but I don’t think that is an assumption that should be made given many prospective global users don’t have savings sitting idle and would therefore be excluded from using the network economically.

Direct deposit options

My current employer does not enable direct deposit into crypto, so I have not been able to experiment with this option. I know some options do exist (e.g., OnJuno), but until I can actually test and follow the cash to see all of the fees I’ll abstain from speaking to the economics. I suspect that there is a fee structure similar to the CEX fiat on-ramp for using these services to swap from fiat based paycheck into Cryptocurrencies.

Ideally, employers would start to adopt $USDC / $DAI / $BTC / $ETH, etc., and pay compensation directly in these tokens so fiat conversion and transfer fees can be avoided altogether.

Yield on assets

Lets briefly set aside fees and focus on yield. It appears we’re about to exit a 20-30 year period of abnormally low interest rates and time will tell what the impact is to retail user account interest rate yield. I suspect that since retail users are well conditioned to receive near zero yield on their deposits and TradFi has a lot of power over retail users (i.e., access to a financial system is useful and switching TradFi banks is a pain), I don’t expect to see meaningful increases to retail user account interest rates even as market rates rise. Incumbent TradFi banks may compete based on retail account interest rates, but I’m suspicious retail will noticeably benefit (benefits likely will go to preferred customers, e.g., high net worth individuals, corporations, financial institutions, etc.).

However, the compounding effect of interest over any extended period of time is powerful. To illustrate an extreme case, the following chart displays 30 year growth of $1,000 USD (but could be applied to 1,000 of any units).

In practice, users will likely redeploy at least some amount of interest earned for other purposes, but the chart above helps to frame the magnitude of value capture that is in play.

The principle bar is constant at $1,000 throughout. The TradFi interest bar compounds to a total of $251 or 25% (at 0.75% APY, my current savings account interest rate) over 30 years. Pre merge incremental compounds to a total of $2,494 or 249% (at 3.75% APY, 4.5% APY excluding 0.75% APY from TradFi) over 30 years. Post merge incremental compounds to a total of $9,521 or 952% (at 4.5% APY, 9.0% APY excluding 3.75% APY on pre merge incremental and 0.75% APY from TradFi) over 30 years.

I will break this down in more detail in a future post and the pre and post merge vernacular could be substituted for any sources of stacked or leveraged yield, but the way I think about this is as of right now retail users are giving the gray and yellow bars to TradFi in return for products and services provided. I’m optimistic that as more activity migrates on chain, idle capital can be staked to earn yield for liquidity pools, network level PoS security, peer to smart contract lending, and likely many other use cases.

I do ascribe some value to the products and services TradFi provides, but that seems like a lot to pay for services which haven’t changed much in my lifetime (especially when Web3 is progressing towards high quality decentralized alternative products and services).

This example does assume that TradFi banks can earn a net interest margin of 8.25% (9.0% less 0.75%). Based on some quick research, it looks like net interest margins in recent years are closer to 3%-4% on average, though there are some individual institutions in the high single digits.

Settlement of key payments

In a given month, my household cash outflows are probably 90%+ contained in three transactions: (i) mortgage and property tax payment, (ii) car payment, and (iii) credit card payment. I’m sure this is not the same for many potential Crypto users, but I do think focusing on (i) disbursement or settlement of monthly rent / mortgage, (ii) transportation (vehicle or public transit), and (iii) credit card payments significantly limits the number of entities Crypto would need to embed with (i.e., you don’t have to go for the long tail of every point of sale storefront). Focusing on these high dollar value low frequency events would significantly reduce the number of transactions that need to be settled and keep network congestion low as on chain activities continue to scale.

I suspect this is a challenging strategic task as TradFi has their hands all over these three events and will likely be against change. That said, there are no doubt opportunities to get started, for example TradFi has outsourced a lot of mortgage servicing to third parties and many rental property management companies are using or could likely use software platforms to receive rent payments. Integration with these types of non TradFi or TradFi adjacent companies to enable Crypto rails for settlement could be very productive. I was recently targeted on Twitter by an organization called Spritz Financial which appears to be working towards this goal and will be in beta soon.

If a solution could be sorted out where I could use on chain tokens to settle these three payments monthly, I would continue to move more of my assets on chain. Similarly, If I am able to receive direct deposits in a minimized fee environment and settle key payments in a minimized fee environment, the headwind of a fiat on-ramp and off-ramp are also minimized or possibly obsolete.

This approach is obviously imperfect in both the short and long term as (i) many users aren’t able to get a TradFi credit card and would still have to fund a lot of financial activity via TradFi cash withdrawals, debit cards, checks, etc., and (ii) use of a TradFi credit card as a key tool still subjects users to a permissioned financial system via legacy payment rails.

A quick aside, I have seen some product offerings leveraging Visa or other legacy point of sale rails bundled with Crypto entities. I am suspicious of this long term as (i) settlement still requires permission from a centralized entity (e.g., Visa), (ii) swap rates and fees will likely be overly punitive to retail users, and (iii) the more embedded Crypto gets with these centralized permissioned TradFi entities the tougher it will be to roll out Crypto native point of sale rails in the future.

Reasonable fiat off-ramp

To complete the fiat on-ramp fee example previously noted, if an off-ramp is required to settle payments for goods or services, one month break even yield increases to 61.2%. This level of yield is nearly impossible to find.

To drive the point home on the relationship between fees and yield, here are a couple illustrations of yields and break even points.

The table above illustrates the total yield generated based on (i) 3.0% APY (not easy to find in TradFi), (ii) various levels of ramp fees (down the column on the left), and (iii) different time horizons of leaving assets unused and accruing interest. For example, 1.2% ramp fees and funds held for 365 days at 3.0% constant APY compounded daily produces a total yield of 0.5% on capital round tripped onto and off of chain. Pretty straight forward and I don’t suspect any outputs stimulate much of a reaction. Lets look at the same analysis presented on an annualized rate basis.

The lower the fees and the further out in time you go within the matrix, annualized yield will start to converge on the 3.0% APY, which should not be surprising. What may be surprising to many is the annualized loss suffered by users when the on-ramp / off-ramp fees are high and users aren’t able to park assets for long periods of time to earn yield. If users attempt to use Crypto as a replacement for TradFi banks, pay fiat on ramp fees, earn yield for 15-30 days, and then take those assets off chain or settle a payment on chain, and do this every month as many users do in TradFi…there will be a lot of upset users essentially experiencing credit card or payday loan level fees.

This is a significant barrier to increased use for me. Even if there wasn’t 6-20 day round trip to bring assets on chain and then get back into TradFi to buy goods or services off chain, the fees for on-ramp and off-ramp are too punitive for everyday use. This won’t be solved by any L2 or Alt L1 scaling solutions that reduce on chain fees. This likely is not a focus for many current users as speculation or much longer term investment horizons can absorb these gatekeeper fees, but I think to realize the network effects that I’d love to see there will need to be a solution for this issue.

One additional visualization I find useful is to look at how long it takes (in days) to break even (yield earned covers fees) based on the relationship between ramp fees and APY at various levels

If a user can find 20.0% APY with just a 0.4% on-ramp and off-ramp fee (e.g., typical of FTX and Robinhood based on observed opaque spread fee), the user will hit break even in 18 days and begin to accrue positive net yield thereafter. This assumes zero on chain fees.

Alternatively, if a user can only find 2.0% APY, and uses a higher fee CEX (e.g., typical Coinbase fees are 1.5% transaction fee and 0.5% opaque spread fee), the user won’t cover the on-ramp and off-ramp fees until 753 days. This assumes zero on chain fees.

MVBoC use case summary

Don’t get me wrong…I enjoy figuring out how to stake ETH into stETH, borrow ETH against that stETH to stake into more stETH, then do it two more times to get from 4% APY up to 8% APY…and given on-ramp fees, transaction fees, and off-ramp fees I need to lock up for six plus months to break even…and hope the centralized platform I’ve given custody to doesn’t freeze withdrawals…but I personally think the velocity of adoption will only start to move meaningfully when some basic common sense use cases are ready for broad use.

I highly doubt this is lost on many folks in the ecosystem and I know much of the focus even up to current day has been on foundational network infrastructure, but selfishly I hope leaders in the space think the time is right to focus on these fundamental challenges instead of other shiny object style dApps. Shiny objects are cool, but they’re not for everyone or even most people.

If I’m able to settle all of my major monthly payments on chain, I’d be willing to move significantly more of my financial assets on chain and even receive Web0-Web2 employment compensation direct deposited on chain. It’s not sexy, but I think it would be a compelling narrative to get prospective users interested.

Ideally, the fiat on-ramp and off-ramp requirements essentially go away in the near term as more settlement activities move on chain. The definition of “reasonable” is subjective, but I think the fees to get assets on and off chain for general use shouldn’t be greater than the yield earned in a short period of time (e.g., less than a month. Otherwise, why bring them on chain at all other than purely to speculate?).

My hope is that the Web3 ecosystem starts to move more towards a money system instead of a speculation engine as developer time refocuses to dApps once L1s, L2s, and network security are on solid ground.

A future state where point of sale settlement occurs on crypto native rails is ideal, but doesn’t seem like a the most productive first step in my opinion to make meaningful progress towards a blockchain money system and to onboard the next billion users.

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In this post I’ll introduce the features and services that I value from a retail bank and explore compare and contrast my perception of legacy TradFi solutions and technology relative to the promise of Web3.

• TradFi financial institutions do provide valuable products and services to retail customers, relative to a totally bankless (e.g., pre 1900) construct

• Retail TradFi value proposition peaked decades ago and has been primarily value extractive (minimal innovation and non existent yield on deposits) from retail customers ever since

• I think Web3 is fast approaching a point where infrastructure across multiple networks is established enough to create a portfolio of dApps and provide the key solutions many anons use every month for the vast majority of their financial system transactions

• There are use cases where TradFi continues to rely on human intermediary permissioned actions where programmed smart contracts would be superior. I’ve been on M&A closing calls where hundreds of millions of dollars were released by escrow agents based on verbal confirms from 30 humans on a conference call and associates frantically triple checking checklists.

• There aren’t many examples of killer Web3 apps that have achieved diverse customer acquisition and broad adoption. NFTs and stablecoins with attractive yields have had some success as new crypto users can understand these use cases more easily than complex DeFi and yield farming concepts. Could a more robust bank on chain be the killer app that onboards the next billion users?

These are my opinions. If you have a different perspective on any of these takes or there are different takes which you find to be more compelling arguments for or against TradFi relative to Crypto for retail banking customers, feel free to reply to the companion TWEET to this Mirror post. #Learning.

Ask what your bank can do for you

The crypto economy / Web3 ecosystem is already quite complicated and will only get more complex with time. There are so many different topics from DeFi, to NFTs, metaverse, blockchain games, DAOs, soul bound tokens, L1s, L2s, countless protocols / dApps, etc…it can be very overwhelming. I personally enjoy trying to figure it all out, but there are not enough hours in the day and I doubt most crypto curious or crypto sceptic anons share my sentiment.

As such, I think a lot of soon to be red pilled users that (I hope) will onboard in the coming years will not care about 90% of the Web3 topics or protocols. However, different users will care about different 10% bundles of various Web3 topics and a lot of innovations will eventually find a scaled user base. That said, I do think a permissionless, trustless, decentralized, self custody enabled crypto financial system (or “Crypto”) could get broad adoption when compared to the current TradFi financial system (or “TradFi”).

The flow of value between and among users / humans / entities is a proven global use case that isn’t going anywhere and Crypto removes a lot of unnecessary friction or legacy tech debt from that flow.

The purpose of this post is to:

• Explore the features of TradFi which are key to my financial system experiences and why TradFi innovation was valuable in a historical context

• Make the case from my perspective and personal experiences as to why TradFi banks in their current evolved form simply don’t deliver value to retail users relative to the innovations of the near term realizable crypto financial system

• Consider if a bank on chain could be the catalyst to drive mass adoption and be the first pervasive killer app of Web3

The retail bank value proposition

I am not old enough to to remember a time when the services provided by retail banks were innovative or perceived to be of great value. I can imagine that there was a time this was the case, and I think it likely went something like this:

Physical / digital asset security

Prior to pervasive digitization of the financial system; currency notes, precious metals, gemstones, and other valuables were primarily physical in nature. Before to the advent of banks for retail customers, individuals had to custody their own physical assets in safes, under mattresses, hidden in walls, holes in the back yard, etc. Bank safes, money account systems, and safe deposit boxes were a great innovation and was obviously a more secure alternative for physical security of assets for the retail user.

Catastrophic event insurance

The FDIC provides insurance for USD currency held in bank accounts on account balances up to $250,000 in the case of institutional failure or large scale bank theft. Banks do pay premiums into the FDIC insurance program, however, I suspect that tax payers (or, retail TradFi users) are at least partially responsible for funding or backstopping the program as well. Fraud protection on credit card transactions is a good insurance product as well, though that is fully funded by very high APYs charged by credit card portfolio managers. These are valuable insurance features of bank accounts and credit cards in TradFi regardless of who funds it.

Asset portability and transmissibility

TradFi bank networks and branch offices provided convenient access to assets across various geographic locations. Retail customers were no longer limited to physical assets at their residence or locked only in the local bank safe initially deposited to, and were able to access assets regionally, nationally, or globally. Checks, wire transfers, debit cards, credit cards, payment networks are additional innovations which continued to make money easier to use and removed friction from retail users interactions with TradFi.

Access to credit

Innovations around FICA scores, analytics on customer account activity, as well as the ability to closely monitor actual account balances within an individual TradFi institution’s footprint made it easy for TradFi banks to provide credit to retail customers. Credit extended is typically in the form of high interest credit cards, auto loans, mortgages, home equity loans, etc. Retail customers historically would receive optimal credit terms from their primary TradFi bank based on visibility to financial history and desire to lock retail customers in their banking platform as much as possible.

Permission / validation of credible parties

TradFi banks are intermediaries by design. Retail or commercial account holders ultimately transact with one another, but banks custody the assets and also provide a level of validation of account holders (based on KYC and the assumption that an account holder must be credit worthy if they are a customer of a TradFi bank).

The ultimate goals is to ensure that when an exchange of value occurs, all end use parties (i.e., not intermediaries) receive what they’ve agreed to. TradFi banks in many cases act as the intermediaries underwriting the creditworthiness and trustworthiness of various end use parties.

Ability to transact anonymously

TradFi banks enable retail customers to withdraw cash from branches and ATMs and use those funds to transact completely anonymously. Cash withdrawn could be used to make an anonymous donation to a local charity, support a peaceful political protest, pay for goods at a local store that prefers to evade taxes instead of pay them, gamble at a casino and not report winnings, buy illegal narcotics, etc.

TradFi banks and global governments are completely ok with this reality and, as I understand it, typically only start to ask questions if (i) cash in and out is in extremely high volume or (ii) if they don’t like a user for virtually any reason at all (financial or non financial related).

Reasonable compensation for use of funds

The benefits above are pretty solid. Probably something I would be willing to pay for, actually. That’s not the approach TradFi banks choose to take, though, and instead rely on net interest margin and various penalties and / or fees to fund the cost of products and services delivered to customers. In return, customers surrender their deposits for general use by TradFi institutions.

As TradFi banks settled on the net interest margin approach, all retail users are essentially equally funding the full bank infrastructure. Said differently, If I deposit savings into the bank but don’t use online bill pay, reduced interest rates on mortgage benefits, favorable rates on auto loan benefits, etc., interest I receive on my savings deposit still reflects costs associated with those unused benefits.

A return on cash at the rate of inflation plus a share of interest income earned by the bank seems reasonable. I do not plan on analyzing checking and savings account yield relative to inflation rates, risk free rates, or TradFi return on equity rates, but I suspect that retail customer’s share of the overall pie has trended significantly down overtime.

Again, my focus in this post is retail only and these are generally the features that I value from retail TradFi. I am certainly not a financial services expert so the preceding is simply my perception or opinion based on my experiences and / or observations.

Can Web3 provide a parity or better retail banking experience?

Each of these individual topics will be further explored in future posts, but here are my current summary views as to Crypto comparability to TradFi:

Physical / digital asset security

I think Crypto generally enables superior fungible currency security vs TradFi, as long as users follow some very basic steps to transact securely.

Crypto fungible tokens exist on globally accessible virtual machines and can be accessed and utilized by activating a seed phrase / private key (which can be memorized, written down, or stored digitally depending on your risk tolerance and security best practices). This reduces stored asset physical footprint of nearly infinite value down to the size of a flash drive which can be easily secured and moved as needed.

Self custody empowers Crypto users to safely store assets digitally (minimized risk of physical theft) with digital authority limited only to those granted access (no employees at institutions can be influenced to transfer, freeze, or do anything unwanted to the assets if retail users never share seed phrase / private key access).

Security of non fungible tokens is similar. Non fungible tokens as replacement for physical legal documents to prove ownership is an obvious innovation that will likely come in the future, but will require judicial systems adapt before we can get rid of our file cabinets.

Catastrophic event insurance

Crypto is behind on this topic as far as I am aware. Progress around defining what is negligent user behavior vs victimized exploitation (which should be covered by an insurance program) seems very achievable and would help with TradFi vs Crypto disparity on this topic. I know of slash insurance for staking node operators, but I have not seen wide spread adoption of a purchasable insurance for individual users related to (i) smart contract bugs / vulnerabilities / exploits / hacks, and (ii) phishing exploits, etc. I will research this further prior to a future post on this topic.

Asset portability and transmissibility

Crypto financial system is clearly superior in this respect. Transfer of fungible and non fungible assets is simple, fast, and essentially limitless as to which two parties can interact.

In Web3, fungible currency value transfer no longer requires gate keepers to enable withdrawal of large amounts of physical currency, to certify checks, to wait days for wire transfers to clear different banking systems, or for users to write or deposit checks which may bounce. Perfectly portable, perfectly transmissible. Fees at the individual transaction level in some cases appear to be more punitive in Crypto, but this can be a tough comparison to do accurately based on the TradFi approach of charging fees for certain activities and using net interest margin to cover the rest at a portfolio level.

Access to credit

Crypto is also behind on this topic to my knowledge. While credit is available, it is typically overcollateralized and expensive relative to TradFi. I think this can easily improve as users scale (i) financial activities executed on chain and (ii) assets held on chain. Additionally, willingness of users to connect all of their wallets into a mosaic view of their on chain profile (across L1s, L2s, etc.) will enable a complete picture of user creditworthiness.

Permission / validation of credible parties

At the basic level I think Crypto is superior to TradFi on this topic. When users are transacting, if a user cannot commit the fungible or non fungible tokens required for the smart contract or transaction to execute, then the transaction fails. So, the smart contract or the network layer is acting as the intermediary to verify the users can transact satisfactorily.

I’ve been on the phone in TradFi when anons were looking at various checklists and legal docs to simultaneously release wires for hundreds of millions of dollars at an M&A closing. It was pretty intense. This is an extreme example for this retail user context, but the concept is the same in that humans programming and stress testing the conditions which must be met to clear a transaction seems at least as good as trusting that humans under work stresses have adequately verified all necessary requirements correctly before clearing a transaction.

While I aspire not to transact with users which may have acquired fungible or non fungible assets maliciously, I have to focus on what I can control individually and understand that definition of bad actors is subjective. If all users take security serious, develop best practices, and ideally have access to an insurance program, risks of retail users transacting with bad actors should be minimized and the impact to victims also minimized. Continued improvements in smart contract security, smart contract audits, bug bounty programs, etc., should continue to minimize risk, enable transaction scalability, and reduce overall costs to users.

Ability to transact anonymously

I’m sure you’ve heard plenty of Web3 naysayers pontificate about how there is so much fraud and nefarious activity transacted on the blockchain. It can’t be proven, but I suspect that the vast majority of illegal activities are settled in suitcases full of $100 USD or 100 EUR notes, completely anonymously. Unlike crypto transactions, there isn’t a blockchain we crypto natives can point to and highlight the issue when a bribe is paid in cash or when a large shipment of drugs is paid for in USD…so it’s a convenient straw man argument TradFi can make as Crypto exploits can be quantified and observed on public blockchains.

In that context, I think Crypto currently does enable transmission of much larger amounts of value than can be more easily transported in suitcases full of currency notes or value dense commodities (which is bad), but it also provides many more breadcrumbs which enable tracking of funds and potential to identify who the bad actors are (which is good).

Reasonable compensation for use of funds

I think Crypto is a high performer relative to TradFi on this topic. Basic liquid staking yields and liquidity pool provider yields alone offer a relatively low risk way to earn yields backed by the fees generated by protocols (i.e., liquid staked ETH is backed by Ethereum network fees, liquidity pool fees are backed by swap activity within the respective pools, etc.).

These types of yield opportunities on chain are essentially democratizing some of the very basic activities that TradFi is still charging users for, even though the processes are easily automatable with technology. TradFi’s fees for these types of activities were likely justified even a few decades ago, but the technology now exists to enable value accrual based on capital to go to the providers of capital, individual retail users (not to TradFi institutions in the form of net interest margin to be reappropriated to shareholders, high net worth clients, corporate clients, or other preferred entities).

I’m sure that TradFi banks deliver a lot of value to high net worth individuals, corporations, asset managers and traders, etc. However, that is outside of the scope of my current exploration as I think (i) there is a lot of low hanging value to retail users from going on chain and (ii) that Crypto is more fluid than TradFi which will remove friction from the system and continue to unlock global commerce. As retail users push for on chain settlement, I think non retail non intermediary entities will be pulled on chain once network effects are obvious and broader adoption of public blockchains is more widely accepted.

A key assumption made in the commentary above is that essentially all financial activities can be done on chain and that a cumbersome fiat on-ramp / off-ramp is not required. This is not currently the case, but continuing to enable more on chain activity and / or significantly reducing the cost of on and off-ramps is key, in my opinion.

Can a retail bank on chain be the killer app that drives adoption of Web3?

All of the exciting and new innovations that will sit on top of the blockchain will have a much larger addressable market if the Web3 community can structure and evangelize a basic and compelling reason for users to get on chain.

PFP and 1/1 NFTs, for example, are a fun and highly volatile use case for a certain user profile, but in current form I personally don’t see PFP or 1/1 NFTs as a 1 billion+ user use case with any sort of regularity. NFTs enabled me to get comfortable with transacting in Web3 as I think the UX is currently better than DeFi or other more technical uses, but many users are much more close minded than I am and won’t be ok with spending thousands of dollars on a stick figure JPEG. Metaverse and continued NFT tokenization of physical assets could certainly expand user adoption in this area, but there is still a lot of work to do there.

The Anchor protocol also achieved a lot of success onboarding users with a boring savings account that appealed to those with a basic understanding of personal finance and the power of compound interest. Unfortunately, users perception of a low risk high yield stable dollar pegged token ultimately was a gross overpromise and the resulting death spiral was very sad to see. I spent a little time exploring the Terra ecosystem prior to the de-pegging and will say it struck me as the ecosystem most focused on creating a money system on chain, which is what I want to see as step one for Web3. Money systems are essentially a user TAM of the population of earth plus an additional user profile for every organization of humans (DAOs, LLCs, Government entities, charities, etc.).

I’m am broadly more excited for all of the other innovative uses cases outside of a simple bank on chain, but I think a compelling alternative to the TradFi retail experience could really accelerate adoption of Crypto / Web3 more broadly. I’ll explore what I’d like to see in a useable retail bank on chain in a future mirror post.

Why do you think a Crypto financial system is better or worse than TradFi? I want to hear about it in the replies to this TWEET or in my twitter DMs (@rasmuky).

About the This Web3 Life collection:

https://mirror.xyz/0xdb92c5C91a5D81Bd9865a07A42c7dD3F35bDA225/PMr7U1cp5LhxphP7bsSDg0kQYpEoPlirE0EN8kdg90c

Why rasmuky is a Web3 settler:

https://mirror.xyz/0xdb92c5C91a5D81Bd9865a07A42c7dD3F35bDA225/-U4jX1cQcHOlOu1zn3fui-CTbpD3fnxF0XB4KLPQWK8

About rasmuky:

https://mirror.xyz/0xdb92c5C91a5D81Bd9865a07A42c7dD3F35bDA225/lnFQ5wj4FfNKK0wcyOYt974y-9lnaD3M-iUAqS1bRe4

https://twitter.com/rasmuky

https://linktr.ee/rasmuky

The purpose of this post is to evaluate the concepts and features of Web3 which pulled me deep into the rabbit hole. There are a lot of topics outside of number go up which I think are important, but I’ve highlighted my current top five conviction drivers in this post. In summary, I think:

• The ability for an individual to transact is a requirement to experience any basic human rights. If corruptible centralized authorities are able to exclude individuals from the financial system, all other rights are at risk

• Web3 has an opportunity to more optimally and transparently program incentives. I believe this will increase motivation, productivity, and outcomes for workers, token holders, and network participants

• User self sovereignty is a spectrum, but Web3 provides an opportunity for users to be highly self sovereign on the financial system axis with minimal relative effort

• I think one of Web3’s biggest bets is if we can reconfigure how organizations operate and challenge the composition of an ideal workforce. There are always exceptions, but historically companies have charismatic and / or authoritarian leaders on top and checklist workers on the bottom, often leaving the intellectually curious go-getters feeling trapped in the middle

• Retail banks are not delivering for their customers. TradFi is understandably focused on high net worth individuals, corporations, and investment funds. I think it’s time to set retail users free

These are my opinions. If you have a different perspective on any of these topics or there are different topics which you find to be more compelling arguments for or against Web3, feel free to reply to the companion TWEET to this Mirror post. I’d love to hear about them, #Learning.

My high conviction reasons to join the Web3 community

As I descended into the Web3 rabbit hole, I was asking myself is Web3 and Crypto inevitable? What basic concepts do I need to embrace on a leap of faith in order to buy into the hype? I was searching for a few foundational reasons that would make it prudent for me to invest time and money into the ecosystem. Here are a few useful philosophies and general thoughts which got me to the settler level of conviction about the ecosystem.

All human rights are derived from financial rights

I live a pretty regular life overall. I am not too politically active, abide by laws, and generally just try to be a good citizen / neighbor / husband / father / friend. I think the risk that any centralized authority tries to infringe on my rights that I’m passionate about is very small.

However, I do realize that my individual experience is a privileged one and I know that there are many people who’s rights are violated every day in the US and globally. I think we all deserve and should defend the ability to protest perceived injustices and the opportunity for due process. Even if our non financial rights are not under attack, if our ability to participate in the global financial system is blocked it becomes virtually impossible (in a modern economy) to experience any of our rights as global citizens. I won’t try to define the universe rights, but I don’t think that’s necessary to support the point that financial rights are paramount.

How can you eat if you can’t purchase food (or land to farm, seeds to plant, etc.)? How can you live without paying for shelter? How can you organize a peaceful protest without purchasing paper for fliers, filing permits to protest, paying for transportation to the protest location, etc. How can you reasonably participate in due process without clothes, transportation, etc.

I won’t try to source the originator of this position as I’m sure it goes way back, but @punk2529 has highlighted this concept / risk on a number of occasions and it resonated with me. See THIS POST as an example.

6529's view is that once you lose the ability to transact, all other rights are cosmetic only as you can't implement any of your other rights without money.

Now, I’m not personally doomsday prepping, going off grid, or looking over my shoulder in a state of paranoia. That said, a decentralized financial system seems like a necessary step in the right direction to check centralized authority. I don’t expect that the decentralized system we get will be perfect on day one, but I think it’s an important hedge to have.

I also don’t think that all people must ONLY utilize a decentralized system in order for a check on power to be effective, partial use will still be an effective hedge. I personally hope to move nearly 100% of financial activity onto a decentralized blockchain system (to remove nearly all friction from commerce) once the system has withstood the test of time and the network governance apparatus has been battle tested. I can’t think of a compelling reason to give custody back to a traditional financial institution (assuming continued Web3 user experience improvements and no degradation in security) given the technological improvements I’ve observed thus far in my Web3 journey.

Two recent events which illustrate my concerns on this topic are the Freedom Convoy in Canada and the US freeze of Russian foreign currency reserves. I’m not taking a political or legal position on these events whatsoever, but my point is if two of the most developed democratic central authorities in existence are ok with freezing and seizing financial assets without due process, what next? This authority was imposed on essentially the widest range of financial system participants possible, from individual everyday people who made small donations to a protest in Canada all the way up to a nuclear nation state.

If there are balanced and objective accounts of these two events or other similar events, please do share so I am better informed.

Programmed incentives = programmed intelligence

I subscribe to the quote most frequently attributed to Charlie Munger

Show me the incentives and I will show you the outcome

This topic was expanded upon and mapped into the Web3 context (from my perspective) by Karl Floersch on the Bankless podcast (around 20:10 mark)

http://podcast.banklesshq.com/the-eternal-optimist-with-karl-floersch-layer-zero

Crypto allowed us to program money, programming money means we can program incentives, programming incentives means we can program people

I personally believe that human intelligence is the most powerful known force in history. Artificial General Intelligence (AGI) may challenge my belief, but not yet. Human intelligence can harness forces which are extremely powerful (e.g., filling sails with wind to find new worlds, the converting the sun’s fusion reaction to energy via solar, organizing open and closed circuits to create computers, etc.). I think the ability to better program human intelligence for desired outcomes is progress.

A top priority when performing diligence on companies over the course of my career (both in a support consulting capacity and more directly as a private equity investor) is to understand what the incentive structures are at a company and consider how incentives influenced human behavior, impacted historically observed performance, and may impact future performance outcomes.

A simple example to illustrate. A board of directors may want to incentivize new customer growth and gross margin expansion.

Once these goals are communicated to the executive team, executives may begin to change the definition of what is a “new” customer and now consider a new division of an existing customer as “new” in the incentive calculation context. Or, they may just focus the sales team efforts on finding new customers to the detriment of existing customers. Both may artificially increase new customer growth and improve incentive payouts, while not necessarily improving performance.

Similarly, as new products are rolled out and / or new vendors onboarded, the executive team may make the case that new cost categories are actually more of an overhead cost not directly tied to product creation or service delivery. This may increase gross margin expansion artificially and improve incentive payouts, while not positively impacting business performance and enterprise longevity.

I have observed this directly throughout my career. There is definitely a spectrum of behavior that ranges from exactly what the board intended to outright nefarious activity, but my personal view is looking for that edge is pervasive and often detrimental to long-term performance and societal progress.

Additionally, the impact to me personally has been at best imperfect. Below the C level at many companies incentives are typically designed as discretionary. It’s common to have some OKRs or KPIs that are loosely aligned to incentive payouts, but there is often a broad catch all of “subject to business performance”. As an employee, it’s hard to get excited about focusing on the “right things” with loosely defined incentives, multiple opaque caveats, and no history of clear correlation between performance and incentive outcomes.

Does this risk go away entirely in Web3? I doubt it. Humans will always try to get an edge and incentives are hard to program. Will it be tougher to game and more transparent? I hope so.

The fact that tokenomics are programmed on chain and that everyone involved in a project (not just C suite and capital providers) can buy, hodl, and sell is a huge improvement in my opinion. If tokenomics are well architected and understood, the project team should be optimizing project development and growth towards the max outcome. Token holders and / or citizen governance voters can force changes to tokenomics or fork a protocol if a different direction is expected to be more optimal. Iterate, iterate. And with more activities occurring on chain, individual contributors should be better positioned to tie compensation to measurable metrics which they themselves can influence and observe on a daily basis.

Self-sovereignty is a spectrum

Balaj Srinivansan references a mental model to illustrate an individual and / or cultural trilemma as it relates to power and authority. Simplified, I’ve interpreted the trilemma as:

• Sovereign - The individual does not require permission or help

• Sympathize - The individual (privileged) must compel themselves and each other to surrender to the mob (less privileged)

• Submission - The individual must surrender all rights and liberties to a central authority

Both Sympathize and Submission result in surrendering control to others whereas Sovereign maintains control at the individual level.

In practice, this trilemma is evaluated by anons countless times every day.

I’ll attempt to illustrate with home energy, for example.

• I currently receive energy from a regulated utility and have limited to no backup power. So, in the trilemma model my dot would be very near the bottom left hand corner as I’ve essentially given all power and trust to an authoritative entity.

• I could install a solar array on my roof, install back up batteries, etc., and move further toward the bottom middle.

• I could also lobby and protest to pressure regulated utilities to move to 100% renewable energy, which would begin to move towards the center of the triangle or ultimately towards the top.

• But in this example, to be fully energy self sovereign, I would need install solar panels, industrial batteries, back up generators, a large natural gas or propane tank, etc. And, hope that nothing breaks (I don’t know how to fix any of these things). This seems like a lot of work and still requires some points of reliance on other parties.

• I think it’s prudent to explore some of the options to hedge towards sovereignty, but I don’t think most people have the financial resources or general interest to move the self sovereign direction much at all as it relates to energy consumption.

• Also, it would be quite silly and inefficient for everyone to go fully self sovereign and not participate in an operational energy grid / network which enjoys the benefits of scale. So we all make these tradeoffs.

The reason I think this mental model is relevant for Web3, and most specifically for a crypto based financial system, is that with the various networks (Bitcoin, Ethereum / EVM equivalent, IBC, etc.) the required sacrifice or perceived hurdles to achieve individual sovereignty for all participants on the network is relatively low, in my opinion.

If global citizens agree that we’re going to use these networks as mediums of exchange, everyone has the right to self sovereignty with minimal effort. Additionally, those that don’t care to be self sovereign can choose to work with a centralized entity to custody their assets and the anons assume the risks of freeze or seize (no different than the current risks of freeze and seize with traditional financial institutions).

Generally, I think we should all be looking for optimal tradeoffs where we can be self sovereign so we don’t continue to surrender control to others. I’m optimistic that Web3 will provide a low sacrifice sovereignty vector for anons relative to other possible vectors (seeking energy sovereignty, food supply sovereignty, education sovereignty, etc.).

https://tim.blog/2021/11/15/balaji-srinivasan-2/

Balaji discusses the Trilema at 0:51. Tim tries to ask the question I am still trying to figure out (what is the right amount of sovereignty?) at 1:29. I don’t think Balaji ends up delivering a direct answer, but he does touch on it around 1:35 and 1:45.

Be the change you want to see

My Dad was recently reflecting on his career and helping me think through how I want to spend the rest of my time. He said something that has stuck in the back of my mind ever since:

There are people who NEED to lead, people who NEED to follow, and people who want to be the change.

To me, this statement attempts to categorize all people into three narrow definitions, which is suboptimal, but I think of it as a spectrum. However, I think the people who want to be the change end up being more of a silent minority because they simply want to make progress and not be distracted by all the noise.

As I’ve progressed to increasingly senior roles though out my career, the conventional wisdom I’ve received at multiple points in time is that you MUST become a “leader” and “get out of the details” to be successful. I’ve perceived that being a political animal becomes very important in the conventional “leader” role, much more than getting your hands dirty and executing or simply leading by example. I’m not personally against taking on leadership roles, mentoring young anons, and navigating some political challenges…but it’s not my native skin. This has been my experience and I try to be honest with myself about who I am am who I’m not. Blindly trying to to become a conventional wisdom manifested shell of myself has never appealed to me.

To me, Web3 seems like the best scalable platform to amplify those who want to be the change. If you NEED to lead, to have power, and to have control…you probably won’t thrive in Web3 (or the version of Web3 I’m hopeful for). If you NEED to follow, to be told how you use your time, to be force aligned with superiors and don’t seek out symbiotic relationships with mentors, or be told what causes and purposes are important…you probably won’t thrive in Web3.

I’m hopeful that Web3 will amplify the global value of the builders, the creators, those that don’t expect people MUST respect them, and those that don’t simply submit respect but seek out mentors who want to earn it. This is my hope.

TradFi is not delivering for retail customers

At least not for me. I’ll explore this topic in much more detail in a future post, but simply put I can’t stand the retail banking user experience. I think retail banks were a great improvement relative to cash under a mattress or gold bars in a hole in the back yard, but Web3 has improved on a lot of fundamental features for retail users and I’m optimistic many more compelling use cases are on the horizon.

I plan to be a settler, help me find the right trail

In summary, I’m optimistic that Web3 / crypto can have a real impact on society and I want to contribute in the best way possible. It appears that we’re heading into a bear market and I plan to be a settler here, not a tourist.

What are the high conviction reasons you’re a Web3 settler? I want to hear about them in the replies to this TWEET or in my twitter DMs (@rasmuky).

About the This Web3 Life collection:

https://mirror.xyz/0xdb92c5C91a5D81Bd9865a07A42c7dD3F35bDA225/PMr7U1cp5LhxphP7bsSDg0kQYpEoPlirE0EN8kdg90c

About rasmuky:

https://mirror.xyz/0xdb92c5C91a5D81Bd9865a07A42c7dD3F35bDA225/lnFQ5wj4FfNKK0wcyOYt974y-9lnaD3M-iUAqS1bRe4

https://twitter.com/rasmuky

https://linktr.ee/rasmuky

• I find writing is great way to reflect on the world around me and to think critically about my experiences. This Web3 Life is my space to do that for ME

• Web3 is for creators and builders. I’m not an artist, and not currently a developer, so I’ll give writing a shot

• I think common / average Web3 community members need to share their experiences to help spotlight all user stories

  • This is important to make sure everyone is represented as the space evolves

  • Representation of the affluent, wealthy, and / or technologically advanced users only is not enough

• Aspirationally, the “This xxx Life” series would evolve into a safe place for anons to tell their Web3 stories across various sub categories in Web3 (DeFi, NFTs, Metaverse, etc.)

• NFA; DYOR

Why This Web3 Life?

I think there are great benefits in taking time to synthesize ones own thoughts, distill key takeaways, and use the written word to memorialize your positions in a way simple enough for any reader to understand. If this is done well, both the author and the reader benefit.

So, my posts are for me and are my opinions based on my unique experiences. Opinions are not facts. If any facts of consequence are proclaimed or others opinions referenced, they will be adequately sourced. If readers find my posts useful, that would be an exciting bonus to me personally.

I plan to post periodically to mirror.xyz to reflect on my personal Web3 journey, refine my research based takeaways and high level outlook on the space, and challenge where I plan to spend my time going forward.

Web3 is for creators

I’m generally a private person and have never aspired to build a large social media following or garner public attention. I’m not passionate about being a strict anon, but not looking for attention.

However, creator empowerment is a core tenant of Web3, so If I’m going on a Web3 journey it feels right to find an avenue to create and try to contribute to the community however possible. Simply by sharing my experiences with other community members, or by providing feedback to platforms like the mirror.xyz on what would make life easier for future creators. Positive contribution can start small, it’s the starting part that’s most important.

Community voice, not corporate PR

One thing I have noticed is that there are few authoritative voices in Web3. I assume this is partially due to the overall maturity stage of the space, but it also seems to align with the general Web3 ethos of very flat orgs, everyone contributes, create what YOU want to create, etc. Outside of some of the largest and most established foundations or protocols, there aren’t central figures or organizations which are dictating the direction everyone should be heading.

It will be interesting to see how this evolves, but I generally like the change to a dialogue among all users vs my interpretation of the pre-Web3 approach of: corporation privately gathers feedback via market research and then publicly responds to the topics it so chooses at the level of detail it so chooses, likely with a filtered view and self serving agenda. An open dialogue COULD be much more productive, if properly curated.

However, I do think that this amplifies the importance that Web3 community members are actively:

• Sharing their own experiences in a thoughtful way

• Dedicating time to amplify reach and voice of key contributors

• Surfacing topics and / or key issues that are important to them

• Considering if a Web3 wide aggregator platform / DAO is needed (much like how large corporations or trade groups will set macro agendas or top priorities for an industry)

• Building to solve the most important problems in whichever corner of the Web3 space they are most passionate about

This Life series

The initial purpose for the series, again, is simply a way for me to structure my thoughts and reflect on my observations as I traverse Web3. If I find myself overexposed to areas I feel are not long-term productive or what I believe will maximize my impact to the Web3 ecosystem, I will reflect on those experiences and close the chapter to move on.

Thus far, my journey has focused on (i) broad research into Web3, (ii) basic research into DeFi and general mechanics of tokens / wallets, etc., (iii) basic introduction to some Metaverse primitives, and (iv) NFT degenning, pretty hard. So initial installments will typically fall into the following collections:

• This Web3 Life

• This DeFi Life

• This Metaversal Life

• This NFT Life

As I continue to explore, I’m sure more collections will be added.

Additionally, If other anons have something important to say and would like help to tell their story, let’s figure out how to collaborate to make This Web3 Life a megaphone to amplify reach. DM me on Twitter @rasmuky.

See previous post for more about the author:

https://mirror.xyz/0xdb92c5C91a5D81Bd9865a07A42c7dD3F35bDA225/lnFQ5wj4FfNKK0wcyOYt974y-9lnaD3M-iUAqS1bRe4

https://twitter.com/rasmuky

https://linktr.ee/rasmuky

Just for some context:

• Young gen x or old millennial, depending on the source

• Husband to an amazing wife and father to two wonderful sons

• Lived in the United States my entire life. I’ve traveled an above average amount, but it’s safe to assume I’m a relatively stereotypical American…

• I generally feel more at home as a system 2 thinker, so don’t be alarmed if posts are longer than average

• Relatively early adopter, but try to catch technology transitions once the UX is only mildly abrasive and not brutal. Web3 is getting close to this stage, I think

• I’ve essentially been bankless since 2017 in the consumer retail TradFi bank context. I just don’t understand the value proposition of TradFi for retail banking clients, especially relative to the Web3 alternative

• Majority of my career so far has been spent in M&A consulting (financial and data & analytics diligence, primarily within TMT / SaaS / AdTech)

• Also experienced in private equity investing, PE portfolio company operations / support, and corporate side finance and operations

• I started to purchase some cryptocurrencies in December of 2020, but did not meaningfully lean into the ecosystem until November 2021 (currently wearing my top signal badge…)

• Positive vibes only. There is plenty of stress, anxiety, and confrontation IRL. I’m going to stay positive and productive out here. Thank you to all abrasive folks keeping everyone in check. I appreciate you, but that’s not me

• Although I’m loosely an anon, I plan to approach my mirror posts in a very authentic way. I won’t pretend to be someone I’m not or know more than I do. This makes me feel pretty vulnerable and exposed, but hopefully relatable

• I loath protection of legacy business models in all forms (regulatory driven, anti-competitive behavior, weaponization of the benefits of scale, etc.). Innovation suffers when too much emphasis is put on improving from 1 to n instead of finding the next 0 to 1 technologies that will shape the future.

• I support innovation by voting in the most powerful way I can, how I use money. For example:

  • I bought a Tesla Model X in 2018…and it’s still probably above what my household should spend for a vehicle on a prudent budget

  • But I chose to reward the innovators trying to build a better future instead of rewarding the boring Internal Combustion Engine (ICE) producers who call adding a 10th gear to the transmission in order to begrudgingly hit fuel efficiency standards (while simultaneously diluting user experience)…“innovation”

  • I personally think anons place too much emphasis on cost differential at the moment of purchase. I do my best to reward innovation even if it costs me meaningfully more as an early adopter as costs should come down over time with adoption and scale and I prefer to fund progress, not status quo

• This is not financial advice! I do wish the Web3 community would stop normalizing the disclaimer of all responsibility “DYOR”, stop telling people to expect everything to go to zero, and emphasize sharing of research for the good of the community…but Do Your Own Research!

• Lastly, I’m an #Mfer. We’re all Mfers.

The next major platform transition

After college, I developed a healthy obsession with understanding how companies were valued and how equity markets worked. I even fashioned myself a moonlighting stock picker for a brief period. However, I quickly realized that I was not going to produce alpha analyzing Amazon earnings reports...the 100+ Wall Street analysts already covering the asset as a full time job would only leave beta for me (best case).

So, I focused on what I thought Wall Street simply couldn’t get right due to lack of imagination and / or over discounting of uncertainty: transformational platform level transitions. This is a nebulous term, but a few examples I invested in with conviction are:

• ICE → EV: The size of the opportunity to transition from the ICE to Electric Vehicle (EV) platforms was / is massive. I Purchased $TSLA in 2016 and diamond handed until the end of 2020, then I took some gains. $TSLA remains a material hold and I’ll probably be in it to some extent forever.

• CPU → GPU: ML, AI, AR, VR, crypto PoW, and autonomous driving all require compute greater than what a CPU is efficiently capable of. I purchased $NVDA in 2016 and held until mid 2020. The one that got away…I had paper hands on this one as the runup continued post my exit. The amount of VC investments allocated to IPU start-ups started to concern me, though mass adoption of IPUs still has not materialized. The thesis has continued to play out and would have been an excellent hold up to date of drafting this post.

• Therapeutics → Genomic Therapeutics: The advent of CRISPR and gene editing is expected to revolutionize genetic therapeutics. The CRISPR technology essentially gives doctors the ability to write software for biological entities to heal themselves, relative to pre CRISPR therapeutics which were essentially mechanical repairs. COVID-19 put a number of CRISPR companies in hyper drive ($EDIT, $NTLA, $CRSP), though IP litigation, finding the next great application, and negative market sentiment towards long duration equities (due to inflation and interest rate expectations) have reversed performance materially. I’m still long-term optimistic about this platform changeover and will continue to monitor progress. I initially invested in the basket of three previously mentioned equities, but later switched to $ARKG to reduce single ticker risk.

Each of these investments have unique and different elements, but all are what I think of as major platform transitions with high risk and high reward profiles.

• I believe the key is to have high conviction that the transition will eventually happen and that there logically must be alpha to capture as Wall Street will heavily discount the probability of platform change success (it’s easy to bet on incumbents)

• Also, as I am not a full time investor, this investment profile is attractive to me as it is very low touch. I try to pay attention to the news cycle close enough to catch any bombshell updates, but primarily just challenge my “leap of faith” assumptions once every 4-6 months at most

I did also test a few lower conviction ideas like 3D printing ($DM), citizen data science transition to cloud ($AYX), and Space Exploration ($ARKX). All were exited in less than 12 months due to lack of conviction or timing (too early / too late). Consider this disclosure of my anti-portfolio.

Relevance to Web3

After identifying the previously mentioned opportunities (most recently in mid 2017), I focused on a career change, had two kids, and more recently started to immerse in Web3.

I think this type of platform transition is what will play out over the next 10+ years around Web3 in the centralized permissioned database → decentralized permissionless blockchain transition, and on a much more grand scale than the examples previously referenced given how pervasive the blockchain / smart contract use cases appear to be.

The industries, companies, and applications which I think will be disintermediated by trustless, permissionless, self sovereign payment and smart contract technologies will be wide ranging. I don’t know where the alpha is right now, but that’s what I’m here to find out.

Lastly, when I identified these first three platform transformations it was more of a hobby and not something that I leaned into meaningfully. Now that I have a couple of case studies that my thought process is not totally off base, I plan to lean in more to Web3 and hope to make it my full time job and obsession.

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