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Crypto exploration

I’m excited to build a mainstream business that uses crypto behind the scenes. Currently fascinated with new business models, incentive design, and new technology.

Public crypto infrastructure: Building a fee-less marketplace and/or open-source software; and doing so in a financially valuable manner, such as a positive expected value lottery

Megapot: World’s Largest Raffle + why I’m not working on this

♾️Open, fee-less marketplaces that are financially valuable

General thoughts

  • My belief is we can build an open source product that people want to build on top of, yet be financially valuable. This is a hyperstructure.
    • The world runs on open-source, yet the only business model is to sell optional SaaS alongside it. Marketplaces build closed networks so they can extract fees, so no one wants to build on top of them as a platform. What if there was something else?
  • My theses on where protocols are uniquely well-suited:
    1. Where assets of value are pooled, and these pools are fragmented due to competition → Software platforms that cannot exclude anyone means everyone cooperates instead of competing
    2. Asset types with a long-tail distribution → Software platforms with limited restrictions allow for any market to be created
Unorganized notes

Let’s pick a few areas that are “trending” and figure out value chains:

Long-tail
  • What doesn’t generate enough liquidity to deserve a dedicated marketplace?
  • This is where crypto has good PMF.
    • Could you issue high yield bonds for new projects? High yield bonds financed hostile takeovers
      • See an undervalued business, entrepreneur buys the business with $20 of own money, $80 of debt that the company is liable for
      • Could be a way to finance takeovers of NFT projects that aren’t doing well, securitized by the NFT project itself. Sort of like Twitter takeover.
      • Based on assumption that there are many projects that would benefit from new management and also have debt that is attractive on risk-adjusted basis
    • ICO → IBO?
      • Both susceptible to rugpulls
      • Bondholders have the right to get $PAT at face value in 1 year
      • If you raise $100 of bond from a bank, and can’t be paid back, goes back to bankruptcy proceeding
    • Problem is no long tail oracle
Debt financing
  • Uniswap lets people launch equity, is there an equivalent to let new projects to get debt financing?
  • Loan refinancing
    • Allow someone to get better terms than what they get at a bank
    • Allow any bank to offer better terms
    • Unclear: How do you keep information private?
  • ForEx
    • Price is tied to real monetary markets and generally has low variability.
    • Is there an equivalent to “I’ll sell at X% above the prevailing price, buy at Y% below” that doesn’t have impermanent losses?
    • ForEx value chain
      • Banks
      • Currency exchanges
      • Speculators/traders
      • Exporters and importers
      • Multinational corporations
  • Onchain betting markets
    • Polymarket / Kalshi → move onchain with no fees.
    • NVM - Polymarket is a non-custodial prediction market protocol built on Polygon. Polymarket was founded by Shayne Coplan and launched in 2020.
  • Hedging market risk - this is generally for sophisticated traders only
    • Generally you buy an options contract on the opposite side
    • Is there a way for a user to say “I think X will go up by Y” and we offer different strategies with different stop losses / hedges which have a cost but reduce risk?
  • Bundled asset loans
    • Allow you to put different assets as collateral (WBTC, NFTs, etc)

Why not

  • Securities - there’s enough legal risk here.
    • The SEC asserts that all tokenized securities need to be registered. Tokenized stocks that do not register their issuances will be regarded as illegal.
  • Commodities
    • there’s tokenized gold already, unsure if there’s a “why now” moment

Market evaluation

Hyperstructures - online transactions
Market selection
Insights - Few are aware of hyperstructures as a way of making money. Interested - It’s cool. I like the idea of building public infra. Can work on this for 10 years.
Market evaluation
Advantage - worked at Uniswap. small knowledge, but also resume fits Large/growing market - people are looking to trade more, speculation is inherently human New tech - decentralized protocols to execute transactions, get best prices
Talking to people
Value chain: - Asset types: Securities, commodities, ForEx, Indexes/ETFs - Transaction types/stages: List, sale, escrow, contracts, options, margin; reducing complexity via intents, debt financing - People: Day traders, trading desks, hedge funds, institutional funds

Idea brainstorms

Idea
Market selection
Market evaluation
Loan/debt financing
Low - low interest, no insights
Low - Unlikely that initial loan happens onchain
Refinancing
Low - low interest, no insights
Low - Contracts may come onchain (eg. mortgage). Value prop is known (get a better rate) but this is not a new problem.
ForEx
Low - low interest, no insights
Low - These markets are generally as efficient as possible. Largest volume, relative stability, also trade happens this way.
Betting and prediction markets
Low - not that motivating to work on purely speculative stuff
Low - Polymarket and many other prediction market protocols do this already
Hedging risk - giving people who need to hedge a more efficient way to do so
Med - Have a thesis that any time there’s forced sellers, there is market inefficiency - Could be impactful
Med - Different from below, since this is related to specific types of assets that are generally traded
Individualized insurance - creation of insurance market
Med - Interesting - Follows thesis above
Low-Med - Don’t know any real world insurance products that are crypto - Insurance is basically a betting/prediction market, but localized. Eg. Earthquake insurance - instead of per house, state it as if 5.0+ on Richter scale, and epicenter is <50 miles from your house. Which makes it OK if your house didn’t collapse, you still get paid out.  - How do we handle claims? Quite complex → Can we tie this into specific, verifiable events? - Do you need KYC? You could make a bet on it. - Timing: Prediction markets are mature, and settlement on events is figured out. - Difficult to handle pricing of insurance - High probability of arbitrage if pricing is public, and sale is irreversible
Bundled asset loans
Med - Interesting math problem
Low - Don’t see much of a need for this. Cool to do, not really much benefits.
Carbon credits
High - Isaac is very interested Low - Patrick doesn’t know anything about this
Low - Important to solve, but not the right founder market fit - Much harder than just a market problem, it’s a standards / regulation problem as well - Multiple companies and DAOs in this space
Commodity markets
Med - MEV is similar, there are relevant crypto concepts - Seems interesting
Low - Fragmented, geographic markets - Low liquidity markets because constrained, forced demand: people need downside protection
  • I’m exploring
    • 1) different financial and digital assets and how users interact with them
      • What type of asset or transaction is missing from protocols today?
        • Fungible tokens - Uniswap (sell, earn yield), Dydx chain (options)
        • NFTs - Zora (create, list, sell)
    • 2) evaluating peer-to-peer marketplaces, exchanges, or pooling of money, to see if there is an opportunity to build a protocol as a platform.
      • Best things to tokenize are things that involve some sort of consensus
      • Blockchains allow the transmission of different types of value over the internet that wasn’t possible before
      • Best markets lower interaction friction
      • Thesis that any time there’s forced sellers, there is market inefficiency
  • Separately, if we believed in a fat apps thesis - or building apps and interfaces on top of popular protocols - is there an opportunity to build a payment software platform (eg. Stripe, Visa) on top of a stablecoin like USDC, where the software is 1) open-source 2) is fee-less but has a fee switch?
Global access to capital: Connecting non-crypto borrowers with restricted access to capital, to deep onchain liquidity, such as peer-to-peer cash advances.
Zero knowledge proof applications: SaaS to enable trustless and private whistleblower programs, streamline verifications of airline status matching, etc.

Proposals

  • Enable trustless and private whistleblower programs
    • Prove you’re an employee of a company or a user in an email group list without disclosing your identity. This can be done via zkemail on a welcome email that all users get, or on an email that only a select group of employees received.
  • Streamline verifications of airline status matching
    • Prove you have status in a trustless manner. Currently, users submit screenshots of their account page and customer service does labor-intensive validation. This can be automated using TLS Notary, which could prove that a user had a certain # of points on their points page.

Brainstorming around applications: Zero-knowledge proofs, attested data, and escrowed transactions

Thoughts:

  • Attested data and escrowed transactions. It’s like having a magic wand to be able to privately prove something without sharing who you are, use private data from any service without API access, build trustless escrow systems, and ensure code was executed correctly among a non-trusting group.
  • My takeaways
    • People trust third parties to verify identity or assets for the vast majority of pseudonymity use cases
    • Anonymity is not desired by businesses and especially governments
    • Finance problem space has 10x more product-market-fit than identity. That said, I haven’t identified large opportunities outside of peer-to-peer payments coordination (eg. zkp2p), which have a number of players now.
  • I’m exploring SaaS instead, in areas with zero trust (eg. whistleblowing) or marketing/sales opportunities based on private data (eg. offering VIP benefits if you prove you’re a top customer of a competitor).
Unorganized notes

Idea brainstorm -

Idea
Market selection
Market evaluation
Whistleblower program
Med - Interesting!
Med - Enable any company to build a whistleblower compliance program. Employees don’t have to trust that HR will leak their info or get retaliation. Uniquely ZK-enabled - Proof of concept, hacks, hacks
Giving VIP benefits to top users of competitors
Med - Interesting! - Not uniquely zk enabled
Med - Winning over users from competitors already happens (eg. TMobile), but could be cool to provide VIP onboarding as a service (product + ops) to companies - Can give you free trial if you use competitors, are a top streamer or influencer, VIP benefits (eg. if you are top gamer, get credits in new game), etc.
Bootstrapping social graph
Low - Interesting
Med - Automatically being friends on a new app if they’ve ever emailed you, etc. Export social graph without API access in a way that’s better than connecting your contacts
Private networks of likeminded individuals
Med - Interesting! - Quantification of an aspirational value for an individual
Low - Zk verify some credential, organization, verification, assets for pseudonymous discussion - Most are fine with a third party doing verification - Teamblind for work, Backchannel for founders, Benjamin for net worth, many VC/founder gossip groups - For many use cases, it’s good to know who someone is (YPO, EO Network)
Donation matching
Med - Could be impactful
Low - Zk verify you donated, and onchain funds are dispersed - Tough to take money when the subject is donations - Public wants to know that the matcher did actually donate, but this doesn’t need blockchain to solve
Airline points P2P transfer
Low
Small - Feature of zkp2p / zephyr, also small market given that most airlines/hotels don’t let you transfer, those who do charge you a lot
Concierge for crypto degens
Low - Low cost business - Not zk enabled
Low - Concierge service for crypto degens / money laundering - Crypto degens don’t want to deal with friction of offramping, the wait time, etc. - Wants to have all money in one place, not have to worry about money in different places - If you can buy stuff in crypto, will never have to offramp anything - Chrome extension. Before you pay, click a button and fill in virtual credit card, - Doesn’t use zk - Running afoul of tax laws
Provable AI doctoring detection tool
Low
Low - Not a trustless problem. - Using zkml to prove that an image or video wasn’t doctored - More a community notes product since a lot of context needed. Eg. it could be multiple videos stitched together, incorrect captioning, etc.
Rebates
Low
Low - Zk verify that you bought something, then get money back - They’re designed to be high friction, so likely not a business need
Proof of financial reserves for mortgages
Low
Low - Zk verify your financial assets. Why not just use Plaid? - Someone is already doing this at Pineapple.mortgage
Public proof for flexing
Low
Low - Only useful for specific Twitter influencers, but doubt it’s a high priority for them - Zk prove that their dashboard from Stripe (indie hacking) or trading account (trader influencers) is real - RealReturn built at ETH hackathon

Questions to ask, when I think about “Plaid for the internet”

  1. What data do apps not want to share? eg. banks didn't want to share a user's checking account balance
  2. What data is helpful when aggregated, or presented differently? eg. i want a portfolio tracker, or deep analytics into budgeting, etc
User-owned platforms: Vampire attacking a web2 platform that doesn’t reward its top users, with a capital-efficient go-to-market strategy, such as Stack Overflow for web3 devs
Feed and algorithm control: Controlling the content you view, eg. Only happy content, filter out political content, prioritize launch announcements, deprioritize threads via a Farcaster (Twitter alternative) feed customizer.

More to be added.

Topics I want to dig more into:

Consumer crypto: Making fun activities more lucrative, or turning money-making activities into fun. What apps, with leaderboards and competitive audiences, can we add money into?

I love this article about how we generally choose things that are fun or make money, or some combination of both. Crypto injects money into fun, or makes trading more fun with gamification.

image
Intents: Outsourcing execution of any asset or transaction, to anybody

Outsourcing execution of any asset or transaction, to anybody.

  • Previously, outsourcing execution was limited to tradfi, like stocks, ETFs, or FX, and only to a closed network of fillers.
  • Now, you can outsource execution of any asset or transaction, to anybody.
  • You can use any digitally signed content, whether it’s a webpage, email, or signed PDF.
  • I’m exploring transactions that are conducted digitally, are irreversible, have clearly defined outcomes, and are price-compared often to see if there are opportunities to make it easier to transact.

Criteria for a transaction that is well-suited for intents:

  • Price-compared often
    • Many vendors, all relatively trustworthy
    • Similar product
  • Clearly defined outcome
  • Irreversible
  • At least one party has significant demand side volume
  • (optional) Complex or large transactions
Unorganized notes

Market evaluation

Outsourced execution
Market selection
Unique insight - Few are aware of UniswapX. I think it has massive potential. Personal interest - Can’t explain it. I think it’s the notion of “anything can be sold at a best price” and “no need for manual integrations”. Fascinating, but only if I find a worthwhile wedge.
Market evaluation
My unfair advantage - Just a bit of knowledge. But not much else. Market size - Depending on asset or transaction type Is there new tech or behavior shift - yes!
Talking to people
All participants in a value chain - Voice assistants: Siri, Google Assistant, LLMs - Auction houses: Sotheby’s (eg. allow for anyone to bid by escrowing USDC) - Crypto businesses and DAOs: Need to sell assets for best price

Examples

  • Travel bookings (many airlines, all trustworthy, economy seat)
    • Expedia has significant demand, complex choices
    • Travel apps - do you integrate with Expedia, etc.?
  • AI Agents
    • Anything that needs to be done, if it can be done by outsourcing
    • Eg. Buy me a Macbook Pro M3 with these specs, and is brand new. It can try browsing Amazon, etc. but maybe an automated trading firm could do this better.
      • Retail: Buy from Apple
      • Marketplaces: Check Best Buy, Amazon
      • Furthermore - use discount codes: Honey, RetailMeNot
      • Even more - use discounted gift cards to buy it
  • Is there an auction house equivalent for buyers? Eg. a buyers agent

Not:

  • Fine art
    • Galleries, art agents - generally, they handle
  • Generic requests, aka “floor fan”
    • One seller on Amazon is different from another, in quality and features
  • dApp Developers who want to integrate swap, loan, etc
    • Generally, they profit from a transaction fee. Few companies, except Coinbase/Binance have a subscription model where they’re incentivized to give you absolute best prices. Could be cool approach
  • What activity is difficult to optimize for, that we can do on behalf of users easily? Yearn.fi
  • Outsourcing integrations to HFT
    • Marketplaces that have many markets with better prices (tokens, flights, hotels)

Isaac @November 14, 2023

  • Double-sided auction based intents - kind of like Fiverr
  • Hassle with spending crypto to buy a flight. He’d pay 1% to pay in USDC.
    • zkp2p.xyz / zephyr.exchange
    • Skyscanner, add 1% spread on convenience. Can do that for any product. We’ll be the trusted platform. Can even tokenize even that 1%
  • Bountycaster.xyz
Stablecoins and instant cross-border settlement: Providing banks and remittance providers with instant settlement and no float, without them integrating stablecoins or crypto

More soon. Some notes from Crypto checkout problems

Open-source bank infrastructure: What if the backend of every bank was a protocol?

Proposals

Thoughts

  • I believe stablecoins have the most product market fit in crypto, that Circle will continue integrating USDC with banks and merchant networks, and fees for on/offramping (going from fiat to crypto) will go to zero over a long time horizon.
  • In this future world, transfers and remittances are a clear opportunity, but I don’t have a unique insight here.
  • I’m exploring B2B payments and problems faced by the unbanked and underbanked. If a banking platform was built from the ground up in stablecoins, what would that look like and could the backend of every bank be a protocol?

Questions:

  • What is possible when anyone is able to cash out easily?
  • What does a bank account that you own and can take around with you look like?
    • What is wrong with checking accounts today? What makes people switch checking accounts today? Who doesn’t have access to checking accounts?
  • What does a crypto-backed credit card look like?
    • Eg. Secured credit card, where you earn yield from your security deposit, and rewards from merchants when you save them fees
    • Better APRs due to lending offered by others?

Links: