Tag: Decentralized Finance

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Finance Internet Culture

Day 220 and Crypto’s Publicist Part 2

Yesterday I wrote about my proposal to create an activist DAO to engage in public relations for crypto. The goal of the organization would be to create a groundswell of support for the space, it’s values, and opportunities as well as engaging in support for a more positive regulatory environment.

If you would like to hear more about why I think it is time for the wider decentralized crypto community to engage in a public relations and media campaign please see my post yesterday. Today I am putting down further notes on what I think our values and priorities might be. As always, this blog is a work in progress so consider this my thoughts as of now that are open to being edited and changed.

What kind of values are crucial in a PR or communication DAO or interest group?

  • Open
  • Participatory
  • Trustless

It’s important that whatever we do on behalf of crypt it must be done in the spirit of the space and why so many disparate types of people believe in its values. While there may be structures like executive teams, core teams, board members and studios and contractors to execute on our mission we want to use the tools and transparency of crypto.

But to what purpose are we organizing? We will create content and engage in conversations to shape media narratives and public sentiment aimed at promoting the positive elements, potential, and impact of crypto.

How will we do this? We will hire publicists to promote our stories in mainstream media along with commissioning content meme-ers and creators to share opinions. We will engage with spokespersons to share talking points created from the priorities of the community. We will place our content, from memes to editorials, on our own properties as well as in supporting communities and member publications.

I expect I’ll be doing quite a bit more note taking and research. If you want to be a part of this effort I’ve started a shared Google doc for collaboration. Email me Julie @ chaotic dot capital or DM me @ AlmostMedia. This won’t be built in a day but together we can push it forward.

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Finance Internet Culture Media Politics

Day 219 and Crypto’s Publicist

Most industries have interest groups. Publicists, lobbyists, and spokespeople weave together stories, talking points and preferred legislative agendas. Anyone or any group is free to discuss why their preferred business or issue is worthwhile and convince others of their view. We have a marketplace of ideas. Sure, not all interests are good but anyone is free to promote what they believe in. So why aren’t we doing anything for our cause in the crypto community? I say it’s time crypto had a publicist.

Not every country allows for this. The crypto community has an obligation to recognize that when we fight for our own interests it isn’t just we who benefit. The entire world benefits from open, decentralized and permission-less systems. What we do benefits everyone who wants to live in a freer world. It’s time crypto had our own activist DAO to protect and promote our values.

I am proposing the formation of an activist DAO promoting the use of crypto. Our goal is to advocate for positive popular culture narratives about crypto. We vote on our issues, stories and key initiatives through the DAO’s native governance tokens. The DAO will hire publicists and communication professionals to promote our stories in mainstream media along with commissioning content meme-ers and creators to share opinions. Policy is crucial but public perception is faster and pushes the right policy down the right.

As place holder I’ve purchased CryptoCommsCoalition.org. The Crypto Communication Coalition. I am working on a shared collaboration doc in Google Sheets to collect input, feedback, and priorities. Anyone who is interested can participate in our effort. Email me Julie @ crypto comms coalition dot org or DM me on Twitter.

We need DAO creation specialists, legal experts, memers, streamers, Reddidters, governance folks, publicists, lobbyists, fundraisers and a thousand other specialists I haven’t thought of yet. This won’t be easy but it’s an eating our own dog food moment for crypto. We can use our own tools to advocate in a participatory, transparent and open way for our own interests. If banking and big oil can can afford publicists then so can we. gmi.

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Finance Startups

Day 181 and Thesis Trends

As I was putting down scratch notes for Chaotic.Capital’s thesis yesterday on the types of businesses we like I thought I’d do a bit more stream of consciousness writing to discuss some of the mega-trends that I see driving returns over the next decade.

Embedded Functionality

We think more and more businesses will be born of the embedded functionality inside protocol layers or data sets. Many protocols have functionality embedded across different layers of utility and functionality. For instance, the new consumer bank is an API at heart. The protocol layer is the API and the embedded functionality is the financial services layers enabled through the protocol or application layer. Need another example. Retail sales data and demand trends give rise to fashion retailers. Think of StitchFix, the clothing brand is the embedded functionality of its aggregate trend, recommendation and demand data set.


Unbundling Trust

Trust based networks rule businesses like insurance, retail banking, law and financing. But what if trust was unbundled from institutional nexuses of power. What if we built trust from value creation instead of value extraction. DeFi wants to build permission-less trust based on a protocol. Its entirely possible we bundle trust back into the wisdom of crowds and markets. Wall Street Bets is an aggregate source of unbundled trust. Figuring out what layers can be stripped away for more efficiency and what layers we need for safety and peace of mind are unsolved problems.


Data Ingestion Is Value Creation. The more capacity we have for data collection the more demand we will have for data ingestion and processing. While we can say sure businesses rely on the protocol and data and that unbundles trust, that’s not the full picture. We will need people who make sense of the chaos for the muggles. Ordered systems give the impression of serendipity for their users (an introduction on a social network, a recommendation for a loan, an outfit customized for you) but the work required to intake and order the data to create value for users is a big hairy problem. And there is a lot money to be made in those. Centralization may come at this layer especially in user experience.

Flexible Asset Weighting.

We are also interested in businesses that know where they stand with capital needs for their business. If you are executional business you need a thin layer of assets to succeed. To quote Roy Bahat “hot swap” startups are executional businesses. A slim horizontal physical layer to take advantage of low financing costs means return on equity is greater for these asset light businesses. If it’s deep innovation then you can be asset heavy. We like those just fine too. But knowing where you stand and anchoring your business case on your asset weighting can give you an edge. That lets you be capabilities based and find opportunities, particularly as debt as is in a commoditization cycle.


All of this is to say we are thinking across a number of system level problems to unearth startups that will give flexibility to individuals, organizations, industries and hopefully the entire economy. Incumbents won’t see who is coming to beat them because they won’t recognize the new predators. They prioritize value systems that at won’t remain true as systemic chaos erodes inefficient businesses and institutions.

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Finance

Day 160 and Starting with Money

The best articulation of why anyone gives a shit about currencies in crypto (as opposed to just focusing on bigger structural problems of macroeconomics) is that you need foundational layers to build a new economy. You need a currency before you can have an economy. Ryan Sean Adams at Bankless gave me an aha moment with this quote. You need money.

The bankless model is simple: you hold the majority of your crypto wealth in crypto money. Specifically crypto commodity money. Today that means ETH and BTC.

Wealth is different than money. And crypto wealth should be in crypto money. Like yes, we get it, assets get tokenized. Crypto folks are wild for tokens. But that’s more of a DeFi problem. Financialization has allowed us to buy so many cool kinds of financial products that we forget that shit like derivatives were invented by normal dudes who traded soybeans for a living in the 70s.

But we needed soybeans to be traded first. There is an order of operations to setting up an economy. That means a system where folks grow soybeans and sell them, or turn them into another product like oil, or sell their labor as an accountant to the oil company that buys the soybeans. Because we don’t trade soybeans for steak. We trade it for dollars and then we buy a steak to enjoy at home with our spouse and kids. Circle of life! Circle of trade.

So first things first (I’m the realist) we to understand that understand that currency is crucial to the functioning of but also the first step in an economy expanding. We need to read up a bit on the history of money. PBS has a NOVA series that is pretty comprehensive. If you like stories Thomas Levenson’s Money for Nothing is a not-actually-tall tale about how the scientific revolution lead to a financial revolution (plus it has boats). Or learn how Kublai Khan invented paper money which seemed even crazier than a digital currency at the time.

If we start with a digital currency who knows what we can build from there. Balaji believes (and I agree) that it’s the first step in forming a digital country. But money comes first.

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Finance Startups

Day 152 and Running The Play

I’m going to put $5,000 into liquidity mining and yield farming to fuck around and, hopefully, find out.

If the last year has been about laying out the primitives of decentralized finance, this summer is going to be the Layer 2 land grab and I need to learn how to stake some claims. I don’t have a clue if it is going to work but I need to start learning how to play the game by tossing the ball around. I doubt I’m going to be whatever the equivalent of a professional player but I want to learn some muscle memory. You can’t very well buy an NFL team without having ever handled a football can you? Yes I am torturing a metaphor.

On a personal psychological note, I wanted to start with a $1,000 but then I realized the difference between losing $1,000 and $5,000 isn’t material to me (which blows my mind but such is the compounded benefit of my various privileges). However, the difference between 10xing $1,000 to $10,000 and 10xing $5,000 to $50,000 is extremely material to me. $50,000 is a a material seed stage check for a company that I may want to place a long bet on.

That is roughly the cost of my medical care for an entire year (not including drugs which roughly doubles it). That is a down payment on a parcel of land to develop over the coming decades. This is a moment to learn and leverage for the benefit of my future self and family if shit goes well. And if it doesn’t no big deal. The real money is better managed than me deciding I want to toss around a ball

My Chaos thesis says it’s time to run the play on the future more generally. It’s hard to argue that I can make good puts on a chaotic future without fully experiencing some of it myself in visceral fashion. I fully expect to lose all of it trying to liquidity mine and yield farm on my own but if I don’t well then I’ve proved something to myself about the future of capital.

I need to remind myself that this isn’t representative of how I allocate capital in a diversified portfolio to preserve my future security nor is it how I’d allocate capital even in a seed stage private venture stage portfolio. But it is a worthwhile amount to put on a 100% risk basis to learn how the fuck the future of capital allocation might work.

Honestly $5,000 is a pretty cheap tuition for a fancy credentialed college class so this seems like a good deal. I will write my way through the learnings and call it an independent study.

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Finance Internet Culture Startups

Day 151 and The New Capital Networks

A lack of network has generally meant capital constraints if you were an entrepreneur. Being hooked up with capital allocators was crucial to being a good operator. Access tended to compound over time like interest. Which is why we make “funny because it’s true” jokes about how successful founders usually had a head start in a few areas. I’m not saying that is going away, but decentralized finance is fucking with some of the consensus knowledge around how capital gets raised and deployed.

And what convinced me we are moving towards an inflection point, over the next decade, where capital allocators and operators decouple, wasn’t my tony Silicon Valley network. No, I’ve had access to the minds of those players for years. What clicked my mind into a position to take action? I spent an hour and a half getting a tutorial from one of my anon reply crypto friends on yield farming and liquidity mining. I don’t want to blow up their spot but Alpha Ketchum dropped a lot of knowledge on me today. And it shifted my energy from belief into understanding. From there action will be seen in my investments.

I’m still chewing through a lot of the details but I’m going to make a bet that scaling DeFi is going to require significant institutional capital and the support of experienced operators to realize its full potential. Thats why I’m invested in folks like Cambrian and Martin Green and would love to get my dollars into Arca and David Nage. That’s why, of my four thesis areas I’m pursuing in my own fund Chaotic Capital, two are explicitly dedicated to both organizational and systemic flexibility and how it plays out across new business opportunities.

We’ve seen capital decoupling from traditional centralized authority systems and trust based networks. The perpetual fundraising machine of tokens, coins and market making techniques like yield farming, are funding everything from esoteric art projects and to the next generation of insurance. Thing about that, the innovative companies that drive growth won’t have their capital needs met just on Wall Street or Sand Hill Road. If you don’t believe me look at what has already been built

Exchanges → SushiSwap, Uniswap, Bancor, 

Insurance → NexusMutual, Cover

Derivatives → Perp Protocol, Opyn,

Credit Markets → Aave, Compound, Maker

Middleware → Chainlink, Grt, 

Asset Management → Enzyme, Yearn Finance

Aggregators → 1inch and Matcha 

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Finance

Day 145 and HODL

If I like something I want to commit. I don’t get folks who get panicked at bumps in the road. Hype cycles for cryptocurrency trading have been unappealing to me. I’ve never been one to watch things like FOREX trades so why would I want to do it but with Bitcoin? Like I have fantasies about being a trader but I am absolutely not. If I believe in an opportunity I am not a short term thinker or investor. I want to see where it goes.

The real excitement to me in crypto is the potential to impact larger more broad based systems. Changes that occur over time and with significant collaboration are more interesting than any narrative blip. A libertarian monetary policy implications was obviously particularly exciting. As business person the potential to change the middle man fee structure that makes financialization and banking a scourge was equally appealing. As a technologist the possibility of building applications on an entire new protocol is enticing.

The bigger picture is the only thing that matters. Go in the right direction over time and ignore the noise. That’s why we’ve slowly moved up our allocation into Bitcoin over the years. And that’s why I’m excited for my husband Alex to be working as the new COO for Hiro.

Any angle you take on the big picture implications for building new systems is an opportunity for innovation and wealth creation. That’s why I’m HODL. HODL is a mindset. Sure it came out of a misspelling of “hold” when someone was drunk but who can’t relate to the desire to really commit to a bigger vision? Participation in the creation of something bigger is the ultimate HODL value. Hold on for dear life or just hold on. Either way you are in for the long haul.

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Finance Internet Culture

Day 136 and The Ease of Centralization

We are a few days into a news cycle where Elon Musk’s corporate socialism interests and/or environmentalism has pushed the Bitcoin discourse to a fever pitch. I don’t begrudge Elon because it’s hard out there for someone who takes government subsidies and we’ve all got to lean into our economic interests. The renewable energy credit system is a policy choice and my neoliberal friends would argue it’s a good one. It’s also one that currently pay’s Tesla’s bills.

Tesla makes most of its $ from RECs, not cars. Last year, it made $1.58bn from sales of RECs to gas-powered auto companies (which must buy to offset their CO2 emissions). Tesla has never been profitable without REC sales to bolster its auto margins.

That’s about to change. Last week, @Stellantis (i.e. PSA Group + Fiat Chrysler) told @LePoint it’ll meet carbon emission rules this year. That means it won’t need to buy RECs from $TSLA anymore.
Fiat Chrysler accounts for $2.4bn of Tesla REC sales from 2019 to date and 55% of Tesla sales since 2008.

What I think is really interesting is that Elon DOES know a lot about money, in particular the benefits of a centralized trusted player. Which he himself points out since you know PayPal. Centralization has been pretty crucial to fast efficient financialization especially in modernity. Of course that has some downsides as institutional power tends to accrete. Good and bad amirite?

The exciting thing about cryptocurrencies is that they may offer us they same scale as global institutions but without the whole plutocrats and fossilized bureaucracy part. Not that I’m advocating for Ethereum or Consyns.us but they put it well in the below quote.

Whereas our traditional financial system runs on centralized infrastructure that is managed by central authorities, institutions, and intermediaries, decentralized finance is powered by code that is running on a decentralized infrastructure

We’ve got a couple decades of experience in computing on the challenges of decentralized infrastructure. It’s not easy and it has costs. The costs are both significant in time and money but the benefits are significant as well. I personally find the argument that systems which are not centralized are less fragile and it is worth diversification into systems that are less fragile. I often chose convenience and speed but I also put significant effort into having systems that can withstand crisis and disasters as well. Security has always been about trade offs. And cryptocurrencies, especially Bitcoin, is about making some trade offs in efficiency for the sake of hardening of financial system. I’m philosophically inclined towards this. If I’m trying to solve global warming and getting to Mars I might find this less compelling as I’d rather focus on efficiency. This is also why environmentalists make great villains as they decide on that choice for you. I’m not saying Elon explicitly going for Bond villain but it’s an aesthetic.

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Finance Politics

Day 135 and 4 Quadrants of Crypto

I’m on my own this weekend so I had some time to listen to podcasts on my daily walk. I stupidly decided to listen to a podcast entitled “best crypto debate ever” which was vastly overselling both participants capacity to engage in productive debate. Not because either wasn’t smart but simply because they were both approaching the topic from entirely different vantage points. One had reasonably well founded concerns about about the how existing powers will fight to preserve their interests and the other was too fixated on proving that the market was the only player that matters. I am beginning to think that crypto, and in particular Bitcoin, is having a “blind men and the elephant problem” that makes discourse challenging.

I’m not pretending to have a full understanding of the future of cryptocurrencies or Bitcoin, merely articulating to myself as an exercise (it’s my blog after all but maybe my thinking helps you too) the four expertises required to wrap one’s mind around how cryptocurrency will evolve and what consequences we need to consider. Because there are no “right” answers at the moment merely different vantage points to consider as we stumble into the future.

1. Macroeconomic: understanding central banking, treasuries, monetary policy and macroeconomic actors is a specialized skill set. I studied it at arguably the best university on the planet for the subject and I still find the ins and outs to be heady stuff. Who decides what money is worth? When do we change those valuations? How does one country’s currency impact another’s? You hear a lot of buzzwords tossed around like “rules not rulers” but the practicalities of it are in fact hard problems. Just tossing off that you think “fiat currency” is bad isn’t enough.

2. Geopolitical: governments need money to provide services and security which makes them economic actors in addition to being political ones. America’s political ambitions are distinct from China’s. How we make make our money and how we spend it both at home and abroad will affect how we perceive other currencies. You need to understand things like how the dollar’s reserve currency status operates (ideally it’s history) to even begin to understand the geopolitical implications of cryptocurrency. Much hay was made of Peter Thiel suggesting Bitcoin could be weaponized by China against the US. Clearly any currency, especially one not run by Americans, will have geopolitical consequences. That anyone got hysterical about it suggested to me that our understanding of monetary policy and its political implications is limited in the general population. One needs to understand how the many actors on the political stage intersect their interests, political and economic, to even begin to comprehend how a cryptocurrency, particularly a decentralized one like Bitcoin, might evolve. In other words you have to understand how it works before you can do any predictive work.

3. Technical: concepts like distributed ledgers, hash rates, decentralized computing, and cryptographic keys are all crucial subjects for understanding the mechanics of a cryptocurrency, who owns it, and how it’s transacted. The chances that you understand the above geopolitical and macroeconomic problems and also understand how to code say your own token or have the wherewithal to acquire and set up hardware for a mining rig are slim. Maybe you grok it but being an expert in all is vanishingly slim. Computer science, political science and economics are all separate disciplines. Sure Bitcoin mining basically operates like loot crates in a game and who am I to say whether it’s a better system to have dorks with a lot of hardware run our money instead of Steven Mnuchin.

4. Microeconomics: the final area expertise is how markets and all the different players in them will value a currency and use it both as an asset and as a payment system. The elaborate financial systems that exist to determine what you think something is worth versus what someone else does is elaborate. We’ve got Byzantine financial products that decide everything from your mortgage to your salary to the cost of a sandwich. And while it’s not intuitive the folks that work on currencies, monetary policies and macroeconomic issues are not equipped with the same skill sets at all as the folks who trade on financial markets, cut deals between market participants or work out balance sheets. I’m much more studied in the macroeconomic issues than the financial ones and I wish that weren’t true. It’s a lot more lucrative to work in futures, arbitrage and market making.

When it comes down to it these four quadrants all require distinct skills and very different areas of study. Much of the debate and disagreement may simply come about because we are seeing different possibilities. Wrapping your head around the whole is difficult and no matter how brilliant you are having exposure to all areas is a lifetime of work.

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Aesthetics Finance Internet Culture

Day 128 and Financial Aesthetics

Humans have imbued money with so much significance over the centuries that financial spaces (merchants, traders, banks, trading floors, brokers, hedge funds) show us the style of their times better than almost anywhere else. Even when power centers have shunned money directly (democracies), and sometimes even because of it, money has dictated the soft powers of perception and relevance.

This makes investigating the styles of finance particularly fun as their signifiers tend to hum with unsaid anger, greed and resentment. Sexy stuff generally as we fixate on ever finer granular details to indicate that our taste shows us to be worthy of holding power (and hopefully money).

There is a reason popular culture loves the Hollywood treatment of Wall Street. Even if some of the most iconic touchstones like American Psycho were meant as dark comedies we didn’t perceive them at way. We were supposed to laugh at the business card scene not get turned on. When Gordon Gecko bellowed “Greed is Good” we were supposed to know he was the villain. We didn’t. We don’t particularly like watching these heros get their comeuppance. Giovanni Ribisi in Boiler Room ratting out the pump and dump scheme doesn’t leave a very satisfied audience but oh how we loved the second act when the gambling prodigy finds a way to go “legitimate” and become a millionaire. Just ignore the crash at the end.

Americans in particular love to fetishize our villains. Our media is littered with anti-heroes that over time become our actual heroes. We throw jealous narratives at the preppy alpha males but love it when their power is subsumed by someone who plays their games better than them. We are riveted when a protagonist emerges that knows how to best the alphas at their own game and emerges victorious. Just be careful you don’t overplay your hand and remain a villain (sorry Martin Shkreli you deserved better) as we need you to be seen as the good guy. It’s a delicate tension.

Think poor savant Bobby Axelrod in Billions becoming the titan of industry. Sure you know he didn’t start out as a classic alpha male (that hard knock upbringing) but I doubt you could tell at the end as he styles himself in the cashmere of his former enemies. Sure now it’s a hoodie but that’s a small inversion of the original sweater. The WSJ has an extensive shoppable feature on the style of the show. Now that’s cultural relevance. Turns out we do want cosplay Carl Icahn or Bill Ackman.

I’m particularly excited about the aesthetics of the next phase of financial heroes emerging from the financialization of cryptocurrency. Scrappy upstarts that want to make a more just and free financial system free of cronyism and accessible to the entire world is a beautiful narrative arc. The chaos of outsiders making the system their own has an ending we all know. You might start out in a tee-shirt and hoodie like Axe but beware the creeping encroachment of luxury goods looking to ride on your newfound wealth.

Turning doge gains into jokey NFT art is just a hop skip and a jump away from getting subsumed into the Art Basel scene. Lest you one day turn up and wake up in a new Bugatti. And while right now it may seem funny to buy a Lamborghini remember the narrative the world wants. You may just claim the mantle of a new kind of power. Or the Feds will come for you. Have fun out there!