digital currency is the future of business. It’s no surprise that more and more mainstream companies are jumping on the bandwagon to find out how they can incorporate blockchain technology into their business model. This week, we’re going to take a look at five very different cases, all demonstrating how they’re using the technology to their advantage.
Cryptocurrencies are going to disrupt more than just finance. – Michael Anderson, Partner at Framework Ventures
What has been true for decades is true about the future of large-scale, profit-driven corporations: Over time, the business models of these entities become so broken that they cannot sustain themselves, and must turn into something else.
The pandemic changed society forever – and in many cases not for the better. But when historians look back in a few decades, will they see this period as a turning point in the transition from a corporate-dominated economy to a new crowdsourcing model in which token participants are incentivized to develop the project and share in the benefits? This idea may seem far-fetched, given that today’s reality is dominated by mega-corporations, but imagine a world where Uber drivers and their passengers own and manage a decentralized network of rides. Or a system where Airbnb owners, landlords, and even cleaners share in the success of the cooperative. What has happened in the past 10 to 12 months would probably have taken 10 to 12 years without the pandemic, says Michael Anderson, co-founder of Framework Ventures. Framework Ventures has raised $115 million for two investment funds and is a major player in DeFi, having entered Chainlink, Synthetix and Yearn.finance early. According to Anderson, the concept of decentralized teamwork has become the norm thanks to working from home. The concept of working in a company where you come into the office every day is broken, he says. We wonder if we will need it in the future. The concept of Uber as a decentralized autonomous organization (DAO) has been around since at least 2016, when the blockchain project Arcade City started talking about it after successfully raising funds for the ill-fated The DAO. But today it’s finally in fashion. This month, David Hoffman, co-founder of Bankless, wrote an in-depth article on the subject titled The Future of Work, and Joe Wiesenthal of Bloomberg covered the topic in There’s a New Vision for Cryptocurrencies. For his part, tech billionaire Mark Cuban tweeted in late May that anti-corporate DAOs are the ultimate combination of capitalism and progressivism. The future of the companies may look very different if the DAOs take over the old companies. It is the ultimate combination of capitalism and progressivism. Entrepreneurs who launch DAOs can earn $. When the community is successfully managed, everyone benefits. The gullible can pay – Mark Cuban (@mcuban) May 31, 2021 TheFi sector is seeing the rise of DAOs and digital organizations (DOs), which are similar but less code-driven and not autonomous. They have enabled a collaborative model and collective ownership of protocols and have become popular in the DeFi field as a form of governance and a means of outsourcing development. Revenue culture may have had a bad reputation in its early days as Ponzinomics-inspired guerrilla marketing, but it quickly became clear that it was a great way to reward the most active members of the community with tokens and often a share of the proceeds. This in turn encourages the best participants to contribute to the development of the protocol by recruiting more and more participants to the project. It’s that element of ownership that has power, Anderson says. And the best communities are the ones where you have the early adopters who are on board from the beginning, and they become your biggest supporters, they become the customer support, they become the business development.
Think of the future
If it works in DeFi, there’s no reason why it shouldn’t work in other industries and economies. Every market could benefit, and we’re not just talking about tokenized versions of eBay or Uber. Anderson uses the example of a clothing production line where material sourcing, clothing production, distribution and sales can be encouraged and organized through this new model. I think what we’ve seen in recent years is the culmination of societies. And I think what we have now with the creation of the DAO is almost a substitute for a limited liability company or a corporation in general, he says. Incentive levels such as shares and share options are replaced by tokens. It’s mostly DeFi, but beyond that, I think you can apply this model to any market. I think it’s a unique way to encourage participation. This model has many advantages: Decentralization means that anyone, anywhere in the world, who has an idea on how to develop the protocol – or who has found a better way to do something – can participate and reap the benefits. The iteration and evolution process is also accelerated. We don’t have to wait for the corporate machinery to accept the new way of doing business. This is done simply by effective competition that produces the best result for the team. Ultimately, it makes everything more efficient, scalable, fair and open, Anderson said, adding that it allows anyone, anywhere to compete with tech entrepreneurs in San Francisco or Silicon Valley, who previously had an advantage because of proximity to capital. Breaking down these walls is really interesting, for the future of the world, but also for the future of work. Government ownership, I think, is a fundamental difference and a fundamental innovation, he says. That’s why I like the chips. This is a whole new area for design; we’re only probing the surface to see how we can use it in new and different ways.
Fairer than Fair
In some ways, CADs and ODs are a modern interpretation of the old concepts of partnership, collaboration, and cooperation, which technology has made a thousand times more effective. And while our mental models for this type of ownership are currently very similar to gifting shares, Anderson expects this to change as the use of tokens increases and evolves. According to Andersen, a clear vision of the future – or a solid thesis about how things might change in the future – is one of the things that sets Framework Ventures apart from many other investors in this sector. Unlike the short-term, price-driven thinking that prevails in crypto-currencies, Anderson and his co-founder Vance Spencer believe in looking at the direction of digital finance five to 10 years from now and betting on it. They are welcome guests on the DeFi podcasts for their inspired and reasoned thoughts on the future. Framework’s first major success came even before the foundation was formalized: Anderson and Spencer developed a thesis on the need for smart contracts to access secure and reliable real-world information, based on which they invested in the decentralized oracle network Chainlink : Mass adoption of attractive smart contracts requires secure data that resides outside of the blockchain (e.g., a bank’s interest rate data) and maintains privacy when included in a smart contract. Data meeting these conditions are not currently available. Your investment thesis – which my brief summary can’t quite capture – worked well. Anderson cites the example of Don Valentine, the late venture capitalist who founded Sequoia Capital and invested in Apple after he had the same epiphany: someday PCs would be in every home and on every desk. That’s the secret to successful venture capital, Anderson says. Finding the pieces that fit into this vision and this new world is actually pretty easy, he says. The hardest part is determining what that future state looks like.
Once upon a time in the world of startups
Anderson grew up in Palo Alto, California, the epicenter of the startup world, and attended Yale University in Connecticut. He planned to study electrical engineering or computer science and play college football. But in September of his first year, the fourth-largest U.S. investment bank, Lehman Brothers, collapsed and filed for bankruptcy. This event led him to develop a passion for finance and pursue a degree in economics and computer science. Then he heard firsthand stories from relatives of his friends about the turmoil on Wall Street and read articles in the New York Times and the WSJ. He has become familiar with the complex and opaque nature of mortgage-backed securities and collateralized debt obligations. Once you start delving into the depth and complexity, I don’t think there’s anyone who really understands the whole system, he says. You can spend your whole life trying to figure it out. He turned to fintech as a possible solution. The software is the eighth wonder of the world in my eyes. How can we create software that accelerates or amplifies the power of finance? Initially hesitating between a career in technology and finance, he tried to do both. When he interned at Apple in 2011, he was horrified to discover that a company that made such elegant products was organized like a stagnant, opaque corporate institution, where even many department heads didn’t know what product would come out next. He realized that he probably couldn’t influence the situation. Anderson also spent three months as a summer analyst at Barclays Bank, where he studied companies considering an IPO, such as GoPro and Dropbox. I was tired of covering for them and realized I just wanted to work for them, he says. And that’s what eventually led me to Dropbox. He spent three years at Dropbox and another two at Snapchat, primarily in the role of product manager. There he learned how to take an idea from concept to production, taking into account the needs of the users while evolving the product to millions of people. This knowledge would later prove to be an important expertise in his approach to the growth of crypto-currency networks, none of which are yet operating at the mainstream technology level. Although he minored in bitcoin during college, Anderson didn’t really dive down the cryptocurrency rabbit hole until he read a white paper on Ethereum in 2015 and a light went on in his head. Shortly after, when he moved to Los Angeles to work at Snapchat, a friend sent him on a blind date with his roommate, Vance Spencer, who was then working at Netflix. The two met on Ethereum almost from the first release. Our friendship developed very, very quickly. We started an informal investment partnership to look at different opportunities for angel investors, and it grew from there.
Top Shot in all but name
It is one thing to develop a clear vision of the future, and quite another to put that vision into practice. As with most things, time is of the essence. Unfortunately, Anderson and Spencer were about three years ahead of the curve in 2017 when they released their first project, Hashletes, essentially an NFL version of the outrageously popular NBA Top Shot. The collectible NFT player cards allowed users to participate in fantasy football games and win prizes. One of Anderson and Spencer’s assertions about NFTs, which we won’t start implementing until 2021, is that NFTs should be useful and also provide digital ownership. Hashletes was the first Ethereum-related app in the iOS store, but the project lasted only a year and a half, killed by high licensing costs and a lack of interest or understanding from NFT at the time. Anderson and Spencer sold the company to a New York-based sports holding company. It’s hard to promote something, especially when you know the idea should work, but the infrastructure and technology are lacking, he says. American entrepreneur Mark Andreesen said there are no bad ideas, just bad timing. So there’s a little bit of that. You know that being early is the same as being wrong. I would say we are really ready for entrepreneurs in this area. And it helped us understand how we want to build the framework and why we want to build it. Due to the increased interest in NFT this year, Framework Ventures has revisited this area. The couple’s success model originated with their initial investment in Chainlink when it was worth 11 cents at its ICO in 2017. Anderson’s investment thesis is still online and explains why they had a $10-$20 price target for the 11 cent token. That’s in the past: At a price of about $25, the token offers a return of over 22,000% in about three years. We probably made 20-25 different investments as angels before we launched the framework, but Chainlink was by far the most influential of all. But I think it is the sector with which we have the closest links, simply because of the wide opportunities for expansion in different sectors. They then formalized their partnership and Link’s investment led to many other companies including Aave, dHedge, Synthetix, Yearn.finance, Dodo, Edgeware, Fractal, Futureswap, Kava, Pods, Primitive, Teller, The Graph and Zapper. That’s how we got to know all the other teams. Chain oracles are usually the usual choice, he says.
Another premise is that in a decentralized and open world – where any protocol can be cloned and its liquidity pumped – the quality of the community around the project is more important than almost anything else. The community is really protected, he says. The development of the Community is therefore of the utmost importance to us. We like to talk: You can evaluate the team, you can evaluate the product, you can evaluate the market, but the most reliable elements of an investment are the core team and then how it evolves into a community and community ownership. They are not just investors, but active members of the community, and very influential and wealthy people. In a subsidiary called Frameworks Labs, 17 software engineers develop tools and systems to increase the growth and engagement of the projects they have invested in. We are one of the most important nodes in the Chainlink network. We are one of the most important hubs in Graph. We are active traders when we invest in the stock market and provide liquidity, he says. It simply means that we have rolled up our sleeves because we are one of the largest users and one of the largest suppliers of most of the investments that we make; that is how we define our advantage. Anderson and Spencer see a perfect convergence of interests. Therefore, the new model of decentralized organization could take some of the power away from the technological monopolies and corporations that dominate daily life. As the Internet began to spread, the utopian idea prevailed that it could democratize the world and return power to the individual. In fact, thanks to tech monopolies like Google and Facebook, addictive algorithms, filter bubbles and a culture of oppression have developed. This may be another utopian vision, but perhaps the DeFi/Web 3.0 model can succeed where the Internet failed. Anderson notes that he used to live right next door to Google. Says he: Google had a famous phrase: Don’t be mean. Well, with blockchain, you can do something even better, namely: He can’t be angry. When you build cryptocurrencies on transparency and decentralization, you know that a company doesn’t have the ability to extract value in the same way. Radical transparency means that the best projects with the most thoughtful incentives will attract the brightest minds, and those who hold 50% of the chips to throw away in the future will be rejected. I don’t think you’ll get very far with these models because everything is transparent and the incentives are aimed at the users of the product, the users with networks, to a greater extent than anything I’ve seen in previous generations of technology.To put things in perspective, it would be reasonable to assume that, in the future, business and government will be run by organizations that are not-for-profit, and not-for-profit organizations that are designed to exist forever. The question is how to achieve this goal. The answer is to create a new type of organization that’s designed for long-term survival — a corporation.. Read more about michael anderson san francisco and let us know what you think.
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