Research Summary
The report discusses the current state of the crypto industry, focusing on the trend of venture capitalists (VCs) investing heavily in crypto infrastructure. It highlights the lack of creativity and innovation in the sector, the overemphasis on buzzwords and technobabble, and the potential risks of this investment strategy. The report also suggests that the next wave of innovation in crypto may come from smaller, more creative projects that require less capital.
Key Takeaways
1. The Crypto Infrastructure Trend
- Focus on Infrastructure: The report notes that many VCs are investing in crypto infrastructure, which includes everything that is not an app or the base protocol. This trend is driven by a lack of creativity and innovation in the crypto space, and the need for VCs to justify their existence.
- Technobabble and Buzzwords: The report criticizes the use of buzzwords and technobabble in the crypto industry, suggesting that these terms are often used to obscure the lack of substance in many projects.
2. The B2B Crypto Narrative
- B2B Crypto: The report suggests that the crypto industry is increasingly focusing on a B2B narrative, as there are very few users in crypto besides airdrop-hunting bots. This narrative is attractive to VCs, as it allows them to sell to other businesses, of which there are plenty.
- Dev2Dev Ecosystem: The report introduces the concept of a “dev2dev” ecosystem, where developers are both the creators and consumers of products. This ecosystem is subsidized by VCs, but the report warns that this cannot last forever.
3. The Role of Creativity and Innovation
- Need for Creativity: The report argues that the next wave of innovation in crypto will be driven by creativity, not resources. It suggests that the majority of money funneled into resources will be outperformed by very little capital backing creativity.
- Money vs. Ideas: The report asserts that money is not the issue of innovation in crypto – ideas and execution are. It criticizes the focus on funding infrastructure and resources, suggesting that the high stakes games today are not played at the infrastructure level.
4. Infrastructure Arbitrage
- Infrastructure Projects Worth Backing: The report acknowledges that there are infrastructure projects that are worth backing, but criticizes the trend of recycling old ideas and products or shoehorning to fit current trends.
- Secondary Market Arbitrage: The report suggests that playing the infrastructure game on the secondary market could be a solid arbitrage. It notes that the early winners of the 2020 DeFi summer were not teams manufactured by VCs but projects that have been around innovating and executing for some time.
Actionable Insights
- Consider the Secondary Market: The report suggests that investors could consider the secondary market for infrastructure investments, as there are well-funded teams with heavily discounted tokens on this market.
- Focus on Creativity and Innovation: The report advises investors to focus on creativity and innovation, rather than resources, when considering investments in the crypto space.
- Be Wary of Technobabble: The report warns investors to be wary of projects that rely heavily on buzzwords and technobabble, as these may be used to obscure a lack of substance.
