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Is equity the ultimate vision of decentralization?

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What is the ultimate vision of encryption and decentralization?

Fair Marketing Will Disrupt Crypto VC

Ian Lee is an investor in cryptographic investment firm IDEOVC

Over the past decade, venture capital has become more plentiful, but the number of investable founders has become scarcer relative to the amount of capital. That's why millions of dollars are often invested in inexperienced entrepreneurs, and vc firms will invest as much as they can in them, even if it's not necessarily best for the founder or start-up.

As a result, a growing number of founders (and VCS) admit that investing is becoming a commodity. This dynamic is even more extreme in encryption.

Fair distribution: Cryptographic projects that never use venture capital

The Andre Cronje sent shockwaves through the encryption industry when it launched YFI without pre-selling, pre-digging (in which the founders were pre-allocated tokens) or venture capital. If you don't already know anything about encryption, think of it as an entrepreneur starting an encryption project without founding equity or venture capital.

In just four weeks, the value of each YFI token has risen from zero to more than $30,000, valuing the project at $1bn. YFI is owned by its user community, and when YFI tokens are first distributed, everyone has a "fair" chance of getting them.

Since then, many new projects have followed in YFI's footsteps, including YAM, BASED, SUSHI and others, with similar models: no pre-sale (pre-cut), no venture capital support, and no way to control the entire governance network until the token is issued. By contrast, venture capitalists are more likely to buy projects with token quotas.

If fair distribution becomes more widespread, sophisticated and successful, it will be a headache for the bosses of many crypto-venture firms. In recent weeks, Andre has inspired some of the world's best cryptographic founders and builders to question whether they should accept venture capital. In fact, perhaps many cryptographic projects do not require as much venture capital, especially if they are mostly code forked to create or maintain a project, and do not require much engineering, business development, or followup technology, or funding. This is true, whether you like it or not, of many such fair deals as BASED and SUSHI (the bifurcated version of Uniswap) and money games such as YAM.

What Andre has done with YFI is truly extraordinary, but fair distribution is still a long way from truly breaking the "monopoly" of encrypted venture capital. In other words, it's going to keep happening for months and years to come.

Here are some speculations about how fair distribution has evolved over time and eventually become the dominant way of distribution in the entire encryption market. Cryptographic VCS are paying attention. The gameplay is about to change.

Development 1 / Fair Distribution will become more "fair"

The main mechanism for fair distribution in cryptographic projects is "fluidmining", which benefits the whales with the most fluidity. It is simple: whales with more assets have a bigger share of fair distribution, so fair distribution tends to make the rich richer.

That is, even taking into account the disproportionate benefits to the whales from the mobile mining (for example, 20 per cent of YAM V2 for the top 10 addresses), fair issuance is still more decentralised than vC-backed encryption projects.

Since fair release is still an early experiment, this means that there are many opportunities to learn how to iterate further and improve the decentralized case.

Note: The following analysis is based on Etherscan data after excluding exchanges and pledge contracts (e.g. Uniswap, Aave). Because of the directional data analysis, it may not be 100% accurate.

Looking ahead, if the goal of fair distribution is to distribute network ownership more equitably, there is still plenty of room for new models of fair distribution. Here are some ideas:

Short - and long-term incentives: reward not only short-term liquidity providers and liquidity miners, but also long-term participants, such as proposals, votes, or other forms of work that help develop and sustain the network.

Non-linear rewards: Create a weighted, hierarchical or logarithmic curve for the rewards, so that the rate of return is not linearly related to the amount of liquid money the user has, thus making it difficult for the whales to make a profit and changing the current way of distributing tokens in a liquid proportion.

Rewards in Stages: Rewards will be assigned to different users according to the development stage of the project (e.g., pre-Alpha, Alpha, Beta, public main network, etc.). PowerPool did this when they launched CVP and their network, and they divided the liquidity mining project into four phases: Alpha, Beta, Gamma, and the main network.

Priority-based rewards: Reward users based on their loyalty and historical activities on the chain in order to attract the users you want into your network. Are they, for example, a mobile miner on the move? Or the typical long-term investor who votes to run a network? This data will be done under the chain using the data on the chain.

Development 2 / Fair Issue will receive non-venture capital funding

As we saw in YAM's experiment, fair issuance can attract a lot of investor interest and their capital, but it can also lose that money very quickly, especially if the contracts are unaudited and people are too worried to withdraw their money as soon as they make a certain profit. For fair distribution to be a long-term success, they need to find a new way to get expensive security audit money from top companies before publishing to the main web.

Today, it is almost impossible for the average developer to have a well-functioning fair offering without first seeking venture capital to fund security audits. As a result, there are usually two patterns:

(1) Raising venture capital -& GT; Initiate an audited security contract

(2) Fair release of unaudited (and potentially unsafe) contracts

But what if there was an alternative? What if something new happens in the middle? In the near future, two exciting new experiments specifically explore this question:

Experiment 1 / Launch fair issue investment

Some of my IDEO teammates, friends and advisers have launched a "Fair Launch Capital" -- offering fair Launch founders * free * money to pay for security audits and other start-up costs with no strings attached. Fair Issue Capital will provide founders with free money for fair issue to cover security audits and other start-up costs, with no strings attached.

Fair Issue Capital also has a prepayment mechanism that helps with the next fair issue, the next fair issue, and so on... And so on and so on. Fair Issue Capital, which went live on August 26, has received a lot of attention and support from the encryption community and is currently accepting proposals.

Experiment 2 / Yearn Finance Unsecured Financing DAO

On August 29, just three days after the launch of Fair Issue Capital, Andre once again introduced a new (unsecured) method of borrowing for the founders to finance fair Issue projects.

The reaction from the crypto community has been overwhelmingly positive, with many expressing disbelief at Andre's vision, altruism and generosity.

In the months to come, more networks of community governance (no pre-excavation, no venture capital) will emerge from fairrelease Capital and yearn Finance. Cryptovc firms had better pay close attention. Remember: Fair Issue Capital is less than seven days old, which means the craziest and best is yet to come.

Development 3 / Fair Release will support more advanced agreements

One of the direct criticisms of fair distribution from skeptics and crypto venture firms is that fair distribution is only for bifurcations or simpler money games, and cannot launch and develop more advanced protocols.

This is a fair argument, because building, launching, developing, and maintaining a healthy protocol requires much more than security audits. For example, the agreement may require a strong engineering, marketing, and business development team for long-term success.

For supporters, however, it is some of the most exciting, innovative and counterintuitive things that could be seen next year. Here are a few examples:

Free help: Fair Distribution teams receive free support from people and organizations (such as other cryptographic project teams, build-centric investors/incubators, and so on) to design, build, distribute, and extend their protocols.

Reverse funds: Design, development and operations teams with a fair post-launch reputation will apply for large grants from the community to continue to build and develop the network over the long term. This can also happen with other important functions that the network requires, such as marketing, business development, and law.

Liquidity mining Activist: Following a fair offering, large liquidity mining companies with substantial stakes in the Fair Offering network will begin to allocate and invest resources to support the development and growth of the agreement over the long term.

These are just a few ideas that can be imagined at the moment, but who knows what new things will emerge in 3-6 months.

Venture capitalism to altruistic capitalism

Fair distribution is really exciting, and proponents can't wait to see what happens next and how to launch new products fairly, which will take venture capital by surprise. Fair issuance does more than make venture capital a commodity; it may make venture capital unnecessary.

So what else is there in the post-venture world?

We'll see, but for now, what founders value and seek most is not money, but generosity, contribution, networking, competence, community and values. It is believed that this will benefit those who are competent, networked, and share the same values (such as generosity, selflessness, etc.).

It takes a lot of trial and error, review and trial and error, but it's incredible that fair distribution could break the current promise of encryption and encrypted venture capital. If fair issue to become successful in the certain scale, encryption funds are not completely disappear, because they may be from private markets investment to open the market, but at least fair distribution will be meaningfully fair competition, making people more equal opportunities to participate in the next few decades the most exciting and important network in the world and the development of technology and development.

Isn't that the ultimate vision of encryption and decentralization?