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July 1st, 2022
CoinFund was once a side project.
CoinFund was once a side project.

The blockchain technology space proceeds in cycles. Today, in July of 2022, we are in a downturn but with more reasons than ever to be excited about the future. July 1st marks seven years since CoinFund was founded at my kitchen table in Williamsburg, Brooklyn, in the 2015 Bitcoin bear market. Indeed, as a firm we spent four and a half of the last seven years navigating bear market conditions. Now, as we begin our eighth year as a firm, it’s worth reflecting on just how far the industry — and CoinFund — have come in that time.

The Wild West of 2015–2016

Thinking back to July of 2015, it’s hard to exaggerate how different things looked. Bitcoin was trading around $250, down from its last high of $1,200. This was thanks to the collapse of the Mt. Gox exchange the previous year, an event that shook our nascent industry to its core. Ethereum was still a month away from mainnet launch and “dapps” (decentralized applications) were not much more than theoretical blog posts and a few toy-like demos on testnet. CoinFund’s very first research articles, which started to be published in June, made barely any reference to smart contracts at all. At that time, we saw the world mainly through the lens of “cryptocurrencies” and smart contracts were an abstract idea for most participants in the space.

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June 18th, 2022

Note: The original content of this post was first published on Medium on October 26th, 2017. It was one of my most cited articles, and remains an operative view on value capture in the web3 stack at CoinFund today.

Searching for investment criteria in the functionality stack

In Fat Protocols, my fellow Brooklynite Joel Monegro insightfully draws parallels between the Internet protocols of the 1990s and the blockchain-based protocols of the 2010s. Early Internet protocols have provided massive value, he explains, but have been “thin” — meaning that monetization has historically occurred in an industrious, “fat” application layer built on the protocol. As scarce digital assets enable decentralized value and information networks, the protocols which they implement are now “fat” — monetizable at the network level using a cryptoeconomics or token — while the application layer is “thin”. Decentralized applications can still be monetized, but are much more focused on interoperability with the underlying data layer.

This view of blockchain networks is an important observation which has had profound implications for the way blockchain investments are structured*, also *discussed in CoinFund’s piece on blockchain investing. Specifically, it has taken traditional investors a market cycle with Bitcoin startups to realize that private equity of centralized companies is usually the sub-optimal method of investing in decentralized networks. But that was last summer. This summer we have cryptofunds, VC funds that can allocate capital toward token and hedge fund investments (!), SAFTs, smart contract vesting, options for cryptoassets, token-based engagement agreements, and other technology which collectively provides a set of investment tools for exposure to the growth of value networks. When investors take the time to understand and experiment with the complexity of blockchain’s new asset class, its issuance, and its lifecycle, they can make informed decisions about how to best structure investments into it.

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June 8th, 2022

In the course of observing an innovation process with its whirring and whistling, periodically we come to a one-way door. Once we walk through that door, we can never go back.

The invention of Bitcoin was such a door. Overnight, the power of nation states to monopolize the issuance and distribution of currency dissipated. The democratization of issuance of digital assets logically followed, and as a species we are now in a fundamentally more advanced leg of our technological innovation journey.

Between the invention of Bitcoin and Ethereum, there were many projects that allowed for token issuance beyond Bitcoin. Projects like BitShares allowed custom token supplies with a small number of predefined functionalities to be minted on their platforms, as long as you married that blockchain network. Namecoin was an early Bitcoin fork and precursor to systems like ENS, which allowed naming records to go on-chain. Colored Coins and efforts like Counterparty showcased the early expansion of token issuance and were the precursors to NFTs.

But the moment the industry walked through the door of Ethereum’s Turing-complete smart contracts in the summer of 2015, these important and directionally correct innovations were left behind. The generality of Turing-completeness subsumed them all, and it was obvious that we would never return to that predefined model. The design space of digital asset functionality went from being discrete to being, for all intents and purposes, infinite; and today the overwhelming majority of new blockchains, regardless of consensus or architecture, are programmable smart contract systems.

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April 4th, 2021

Imagination Figment #6 is a manipulated image, composed of several photographs that I shot on my iPhone 11 Pro, smashed together. The photographs have nothing in common. One is the remnants of some balsamic vinegar on a plate from long ago. And the other is a snapshot of the frontier of where the wall meets the ceiling -- in other words, the ennui -- of an apartment I tend to occupy.

But it is in the act of smashing them that we create fusion and start to get at cosmic truths.

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January 26th, 2021

Capital efficient price discovery mechanisms will transform markets for nonfungibles and other illiquid assets

Read this on Medium.

Today, most people following nonfungibles observe that it is a very illiquid asset class and feel it is likely to stay that way. What may not be obvious is that, in the context of blockchain’s cryptoeconomic mechanisms, “liquidity” is merely a mechanism design problem being rapidly solved. In this post, I would like to dive into how cryptoeconomics will financialize the NFT space, improve its liquidity profile, and extend this technology to other illiquid assets over time.