ETHDenver Takeaways
0xd306
February 23rd, 2022

Over the past week, I headed west, to the largest Ethereum Development conference in the world, ETHDenver. My goal was to observe, learn and get the temperature of the market.  The fundamental ideas of blockchain technology appeal to my social, economic and political values, so I wanted to see what’s up!

Special thanks to Andrew Keys, one of my close friends, Co-Founder of Ethereum and my Puerto Rican neighbor. AK helped me see the light of Ethereum 6 years ago and I am forever grateful.  So grateful, I dedicated this PartyBear to him 😂.

TLDR; All protocols are seeking to solve the blockchain trilemma - Decentralization, Scalability and Security.  Many protocols have two out of three and are working hard on the 3rd piece. I am SUPER BULLISH on ETH.  Incredible human and financial capital is coming into the ecosystem.  We are in the year 1993 as it relates to the old internet.  Crypto isn’t all about coin prices and marketcap.  A lot of these will fail and there are diamonds in the rough.  Technology is moving at the fastest pace in human history and I don’t want to be left behind.

Disclaimer: Not financial advice, do your own research.  I am not your financial advisor and may or may not own assets mentioned below.

What’s up with ETH?

As the second-largest crypto behind BTC, everyone knows ETH.  It differentiates itself via smart-contracts “IF THEN THIS, IF THAT ELSE”.  Seems pretty simple but the possibilities are truly endless. In years prior, I heard a lot of big ideas and how nice a crypto-utopia world would be, but nothing really worked.  The development, user interface and user experience weren’t there, yet.

Now, things are starting to work and the space is maturing.  You can become your own bank, on your own terms, prove ownership and invest in many asset classes (stocks, real estate, gold, options, derivatives and others) with little friction.

ETH is bringing power to the people.

Why are things starting to work?

Simply put, an influx of human capital and financial capital.  I met folks who previously worked at Facebook and are now contributing to the up-and-coming social media projects on Web3.  I met folks who ran billions at Goldman Sachs who are building the latest DeFi protocols.  I met lifelong institutional money guys who are moving to Web3.  The quality of talent was kind of shocking to me. The room of devs is now scattered in with Stanford and HBS MBA’s, executives from the Fortune 100 and more.  While the ETH OG’s are a different kind of breed and don’t like the suits in the room - and I get why - this validates my assumptions of what ETH is and what it will be.

I have heard the stories of 8 people sitting around a conference room trying to start ETH only 7 years ago. Now there are 8,000 people running around Denver, dedicating their lives to this new way of thinking.  CRAZY!!  There are hundreds of thousands more across the globe and the money is flowing in.

These people are much smarter than I and I’m confident they’ll find a way.

What’s next for ETH?

ETH has become very popular and there is a lot of traffic on its highway, which is driving the prices of transactions higher - think of dynamic tollway pricing.  This is a problem for ETH now, but I believe this will be fixed with “The Merge”.  ETH is moving to a new way of verifying transactions and the network will provide security through Proof of Stake (PoS) - Summer ‘22.

ETH is currently doing these functions through Proof of Work (PoW), the same way BTC does.  The problem with PoW is that it demands a lot of real estate, electricity and hardware. This is all about to change.  ETH will become a deflationary asset, with a supply reduction of 2-3% per year.  If BTC is sound money, ETH is ultra-sound money🦇🔊.

ETH is designed for decentralized apps (dApps) and Layer 2’s to be built on top of the protocol layer (layer 1) and you need to use ETH to interact.  Layer 2’s basically batch a lot of transactions, bundle them up and send them to the ETH blockchain in one transaction, making everything faster and cheaper.  There are a handful of ways to do this (zkSNARKS, Optimistic Roll-Ups and others) but the most innovative method under development is by Nahmii.  They utilize “state pools”, which combine the best of both worlds as it relates to security and speed.

Think of ETH as the oil for the new economy.  Everyone is going to need it, there is a limited supply and demand is going to be skyrocketing. If you are only into crypto to make money, ETH is a great long-term investment. BTC only does one thing - send money from Alice to Bob, but with ETH, you can do anything!

There are already thousands of projects on ETH and there will undoubtedly be winners and losers.  Buying ETH is the index bet.

Projects that have big upside

I did my best to cut out the noise, talk to those who are “in the know” and answer the “why”. Here they are in no specific order:

  • Polygon ($MATIC) - A layer 1 solution (its own blockchain) that is tackling the trilemma in many different ways. They have 8 unique scaling solutions and are integrating with some major brands (Walmart, Starbucks).
  • NEAR Protocol ($NEAR) - Another layer 1 that a lot of developers are moving to.  NEAR want devs to build dApps on their network and make it easy to onboard and maintain these dApps - with quick finality and low fees.  Some big funds are betting on NEAR too - A16Z and Pantera are two heavy hitters.  My Web3 #advisor, Billy Luedtke, loves NEAR.  He hasn’t missed yet, so I will continue to ride his coattails.
  • Chainlink ($LINK) - LINK has been around for a while and I believe it is a good idea but coin performance has been weak over the past few years.  LINK takes data from the real world and through an “Oracle”, puts it on the blockchain. As Web3 matures, LINK is going to be a key part of the equation.
  • Filecoin ($FIL) - FIL has also been around for a while.  It was born out of ConsenSys and is run by Protocol Labs - two rockstar teams and it seeks to be the DropBox or AWS of Web3.  With the insane amount of storage society will need as we move to a more digital world, FIL is going to play a key role.  DARMA Capital recently launched a $100m Filecoin Swap Facility.  If DARMA is betting on it, so am I.
  • Ceramic Network (Coin TBD) - Founded ConsenSys OG and friend, Mike Sena.  His first project was FIL, now he is working on implementing identity on the blockchain.  This will be a critical protocol layer technology as we scale Web3.  They also just closed a $30m round.  The investor stack is….stacked.
  • Olympus DAO ($OHM) - OlympusDAO is an experiment that seeks to create a stablecoin that is not backed by the dollar (since Mr. Powell just keeps printing money) or BTC or ETH (due to volatility).  They implement game theory via bonding and staking to create a win/win scenario to attract liquidity (bonding) and to reward token holders (staking) with crazy APY. They have gotten absolutely rekt in the last few months and I thought they were dead.  After listening to their upcoming plans and where they stand financially, the $243m risk-free value of the treasury is making a fortune.

Funds

A lot of us like the idea of blockchain tech, want exposure to it but are not experts.  We don’t have the time to learn and would prefer to hand it over to a professional.  Everyone looked like a genius last year with the mega-bull run, but who is going to survive?

I met with a lot of funds over the past week and the key question that needs to be answered is:

Will your fund out-perform ETH?

That is a super tall task and some funds flat out told me, “It will be tough”, “We hope so”.  Not great answers, especially when they want 20% of any profit with no hurdle rates.  That being said, there are two funds that I found that I really like:

  • Aligned Capital - Founded by Sam Cassatt, former Chief Strategy Officer at ConsenSys.  I was lucky enough to be at the inaugural dinner, officially coming out of stealth and the announcement of the fund.  He is an ETH OG and has built a “Hall of Fame” C-Suite with a badass team supporting them.  They have their hands in a few different verticals and I believe they are going to crush it.
  • 4RC (4th Revolution Capital) - Founded by Keegan Selby and EJ Rogers, this group is investing in the bleeding edge of the digital asset ecosystem.  They are a stage agnostic fund focused on protocols, DAO’s, DeFi and NFT’s.  As a VC they are watering a handful of seeds and some of them will undoubtedly grow into big, big trees.  Will blockchain technology become the 4th industrial revolution?  I think so.

DAO’s

Decentralized Autonomous Organizations (DAO’s) are truly innovative and will change the way people organize, track accountability and make decisions.  DAO’s provide a legal structure that is more democratic and transparent in nature - two things I am all for.  In theory, there is less friction to organize, build and manage capital.  DAO’s are currently trying to determine how to interoperate with the legacy legal system and it is bringing some challenges.

There is some over-hype in the DAO ecosystem right now and my big question for these projects is:

Why do we need a DAO for this?”

Here are a few cool DAO projects to keep your eye on:

  • Bankless DAO - David Hoffman and Ryan Sean Adams run one of the best podcasts in crypto.  Their mission is to make the world go bankless and to do good in the world.  Joe Lubin gave them a shoutout at his fireside talk.  You can get involved on their website or getting their native token $BANK.
  • LAO - OpenLaw, a company that is focused on bringing real-world contracts to the blockchain, launched the Legal Autonomous Organization.  Both organizations were co-founded by Aaron Wright, one of the brightest minds in the blockchain industry.  His group is trailblazing the way for the future of society.
  • ReadyPlayerDAO - A community for the gamers.  The DAO is big into the metaverse, NFT’s and play-to-earn (p2e) games.  Interestingly, they are doing KYC for US investors and while I am not a big gamer anymore, the size of this space is undeniable.  Here’s a nice write up on them.
  • UniverseXYZ DAO - Co-founded by Tyler Ward and Troy Murray.  These legends already have a project that is listed on Coinbase (Barn Bridge) and are seeking to develop a community-driven NFT universe. Their upcoming project is a fully decentralized NFT Marketplace.  Currently, OpenSea, a centralized company, has the majority of the NFT volume and IMO, they suck.  The ecosystem needs what Universe XYZ is building.  You can read more about them here and invest in their native token $XYZ.
  • KLIMA DAO - A fork of OlympusDAO, built on the Polygon network.  KLIMA utilizes the same tokenomics as $OHM but instead of building a stable-coin, they are actively purchasing carbon credits on the open market.  They have purchased enough carbon credits equal to 3.5m of annual car emissions since August. Mark Cuban has invested in this innovative idea, it has gotten absolutely rekt, down 95%+ over the past 3 months.

Wrapping up

As a blockchain enthusiast and investor, I feel like I have a good handle on the ecosystem until I head to something like ETHDenver.  The future is coming FAST.  Blockchain technology will provide financial tools to the billions of unbanked and underbanked, give value to creators, not record labels or tech giants and ultimately to grow the pie for everyone.  Blockchain gets us to 1+1=3 faster than any other mechanism humanity has seen before.

I am super thankful for everyone who is searching for solutions to the new questions society is bringing and I believe the world will become a better place because of it.

WAGMI ✌️

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