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.
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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:
- 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
- Asset types with a long-tail distribution → Software platforms with limited restrictions allow for any market to be created
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Let’s pick a few areas that are “trending” and figure out value chains:
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- 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
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- 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?
- 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)
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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.Â
- 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?
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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).
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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”
- What data do apps not want to share? eg. banks didn't want to share a user's checking account balance
- What data is helpful when aggregated, or presented differently? eg. i want a portfolio tracker, or deep analytics into budgeting, etc
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More to be added.
Topics I want to dig more into:
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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.
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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
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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
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More soon. Some notes from Crypto checkout problems
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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: