Venture capital funds purely for the purpose of making money will have less influence in the crypto field in the future, from venture capital to “altruistic capital.”
Written by: Ian Lee, Managing Director of IDEOVC Compiler: Perry Wang
In the past 10 years, the VC team of venture capital funds has continued to grow, and the number of investable entrepreneurs has become scarce compared to the number of funds. This is why experienced entrepreneurs did not come up with what products will be able to get hundreds of millions of dollars in financing –VC theoretically will give as much as possible investment, even if sometimes it does not meet the founders of start-ups or most Good interests.
Therefore, an increasing number of founder (and VC) to admit more and more like capital goods. This dynamic is even more extreme in the field of encryption.
Fair start: crypto projects that will never be financed from VC
Yearn Finance founder Andre Cronje launched the governance token YFI without pre-mining or attracting venture capital , shocking the entire crypto field. For encryption may not be familiar with the field of the reader, it can be so simple to understand: a founder creates an encrypted project, founder did not take stock, there is no project financing from VC.
Within four weeks, the YFI token skyrocketed from nothing to more than $30,000, and its total valuation exceeded $1 billion. YFI owned by its community of users, when YFI initial token distribution, everyone has a “fair” (explained in detail later) access to the token (you can now buy in to the center of the exchange Uniswap, etc.).
Since then , new projects such as YAM, BASED, and SUSHI have followed in the footsteps of YFI, and they all have similar characteristics: no pre-mining, no venture capital, and no control over the network before the network is publicly launched (and venture-backed projects) , Investors pre-purchase certain equity before the public sale).
If fair startup becomes more popular and successful, encrypted VCs will be frightened. In recent weeks, some of the world’s best encryption currency founder and builder inspired Andre, so that they are now beginning to question whether from VC financing. In fact, many encryption projects may not require that much venture capital, especially if they have forked most of the code and do not require much engineering, business development, or follow-up support. Many protocols (eg BASED and Uniswap bifurcated SUSHI) a fair start, and the like, such as YAM project, whether it likes it or not, are basically true.
The effect that Andre has achieved with YFI is indeed extraordinary, but there is still a long way to go before Fair Start can truly subvert encrypted VC. I want to talk about what might happen in the coming months and a year in this article.
Here are some assumptions about how Fair Start has evolved over time and eventually became dominant. Encrypted VC, pay attention-the game is about to change.
Evolution #1: Fair start becomes more “fair”
Monetary items using encryption mechanism mainstream fair start is “liquidity mining”, which is conducive to the greatest extent possible encryption whales have huge liquidity. The reason is simple: giant whales with more assets have dug away a larger proportion of “fair start” , so “fair start” tends to make the rich get richer .
In other words, even taking into account the whales get an unfair advantage from the liquidity in mining (for example, address the top 10 ranking with 20% of assets YAM v2), the fair usually start than most VC supported encryption program token allocation is more generalized.
Since Fair Start is still in the early experimental stage, this means there are many opportunities to learn how to further iterate and improve the release.
The figure below is a simple calculation and estimation based on Etherscan data. These data do not include exchanges and smart contract fund pools (such as Uniswap, Aave). It is directional and may not be 100% accurate.
Looking ahead, if the purpose of the fair is not only a fair start, but more evenly distributed network ownership, then there is still a lot of space can open up new fair distribution pattern. Here are a few thoughts:
- Short-term and long-term incentive: reward not only short-term liquidity providers and help guide the network’s earnings farming “farmer”, but also to reward long-term participants and proposals, voting or other networks contribute to the development and maintenance of the forms of participation.
- Non-linear rewards : create the weight, level and/or logarithmic curve of the rewards so that the rewards will not increase linearly with the liquidity of the users, thereby reducing the proportion of the behemoth’s income.
- Staged rewards : According to the development stage of the project (such as before Alpha, Alpha, Beta, public mainnet, etc.), rewards are distributed to different users. PowerPool did this by launching the CVP token and its network. They divided the liquid mining plan into four phases: Alpha, Beta, Gamma and Mainnet .
- Give different rewards based on user prototypes: Reward based on user prototypes and historical activities on the chain to attract users who want to enter your network. For example, a “income old farmer” who quickly invests money in income cultivation? Or is it usually a long-term investment to accompany the growth of the network and vote in the network? (These calculations will be done off-chain using on-chain data.)
These are just a few of the many possibilities yet to be designed and tested. I think I will see a path to success next year, or as my colleague Gavin McDermott is used to calling it the “secret recipe.” These secret recipes will enable Fair Start to achieve a more ideal and fair token distribution in the future.
Evolution #2: Fair start will get funding outside of VC
As we have seen in the YAM experiment, a fair start can attract a lot of interest and capital, but it may also be lost quickly, especially if the smart contract has not been audited.
To make a fair start long-term success, we need to find a new way to finance expensive projects receiving top agency security audit before posting on the main network.
At present, ordinary developers release products fairly without first seeking VC funding for security audits. Therefore, we usually see two modes:
- Raise VC capital -> accept audit to ensure smart contract security
- Fair start without audit (possibly unsafe to start smart contract)
But what if there are other options? What if something new appears between the two? Well, in the past five days, two new and exciting new experiments have explored this:
Experiment #1: Fair start fund
I IDEO partner Gavin McDermott and Joe Gerbe, our friend Reuben Bramanathan as well as some good advisers launched a “fair start fund ‘- provided free for the fair to start project founder (! Note, is free) funds, pay No return is required for security audits and other start-up expenses. You’re right, don’t ask for anything in return.
“Fair Start Fund” there is a community feedback mechanism, with the help of a fair start, and then the next fair which in turn help to start a project, so the relay. The “Fair Startup Fund” was officially launched on Wednesday and has received a large number of requests for funding, as well as the strong support of the crypto community, and is currently accepting the proposal.
Experiment #2: yearn.finance unsecured loan DAO
Then, only three days after the “Fair Startup Fund” was launched, Andre once again pioneered a way to break people’s imagination, allowing founders to borrow from yearn (unsecured) to start their own projects fairly.
Encryption community’s response was very enthusiastic and positive, many people (including myself) by Andre vision, selflessness and generosity of each of cryptography and encryption field of human love and brings great inspiration.
I personally believe that the “Fair Startup Fund” and yearn funding will give birth to an incredible, community-owned network (no pre-mining, no VC investment) in the coming months. It is best to pay close attention to encrypted VC. Remember: the “Fair Startup Fund” hasn’t been out for 7 days, which means that the craziest and best things are still to come.
Evolution #3: Fair start will support more advanced protocols
Skeptics and encryption VC is currently one of the direct criticism is fair start: fair start only for bifurcation or project funding simpler dish, but can not launch and grow higher-level protocols.
This argument is fair, because to maintain healthy growth and protocols, requires more than just security audit, also we need to spend more time to build, launch and development. The agreement may require strong computational engineering, marketing, and business development teams to achieve long-term success.
But I think that next year we will see some of the most exciting, innovative and counterintuitive things in the fair launch of the project. Here are some examples:
- Free help : The fair start team will receive free support from individuals and organizations (such as other crypto project teams, construction-centric investors/incubators, etc.) to support the design, construction, release and expansion of the fair start project.
- Reverse funding : After a fair start, a reputable design, development and operation team will apply for a large amount of funding from the community to continue to build and develop the network in the long term. This may also happen for other important functions required by the network (such as marketing, business development, and legal affairs).
- Active liquidity mining : After the fair start, large liquidity miners with more funds will begin to allocate and invest resources to support the long-term development and expansion of the agreement.
The above are just a few ideas that I am thinking of now, but we know that new things will appear in 3-6 months .
From venture capital-backed projects to altruistic capital-backed projects
The fair start is really exciting. Personally, I can’t wait to know how the next development and fair start will start to disrupt VC. Not only fair to start the venture to become a commodity, also make venture capital is no longer necessary. 🤯
What will be the situation in the post-VC era ?
We can only wait and see, but in my opinion, the founder of the most valued and sought not money, but generous contribution, network of contacts, ability, community and values. I believe this will benefit people and organizations that are highly capable, networked and aligned in values (eg generosity, selflessness, etc.).
This will require a lot of experimentation, trial, and trial and error-but a fair start is likely to subvert the cryptocurrency and encrypted VC landscape-this is a breathtaking thing. If you can get a fair start large-scale success, encryption Fund will not completely disappear, because it may turn to the open market from a private equity investment, but at least fair will start to effectively balance the competitive environment, and to provide more equal opportunities for people to participate in the next few The most exciting and important part of the world’s growth and development of networks and technologies
This is not exactly the center of encryption and full significance of where you go?
