Purpose: This “Entrepreneurship In Web3 Lec 5: Web3 landscape (III)” is likely the most practical presentation Balaji has delivered. Many of the mental frameworks and problems listed could easily inspire multiple future startups. I highly recommend watching the presentation.
- Note: Balaji’s recent book “The Network State”, is a great read, I highly recommend it.
Disclaimer: This is not a polished blog post. Below is more like a parietal transcript, with links, and my thoughts sprinkled throughout. These notes are for my own use, but I wanted to share them with those interested in open problems within crypto.
How to approach open problems as a ~student~
- I’d argue this is a good flow for anyone, not just students
FLOW → Blog Post > Github > Microsite > Then Startup
“Open problems” in this context are non-sexy Web3 problems that are likely to get funding.
Examples of this flow
- Blog Post (a few days to a week) > Jay Grabers – Decentralized Social Network
- Write Code (few weeks) > Turn that blog post into code
- Microsite (few days) > Create a microsite to share your ideas with your community or a niche community interested in the idea
- Then Startup (years) > Create a company around this idea after you’ve gained traction from previous steps
Throughout this flow, you’re increasing commitment, while gaining traction on interest for the idea from those around you.
Important statement – “Web3 is a boring backend technology. Only the price is flashy”
This is a useful lens to look through when ideating on potential problems Web3 can assist in solving.
Web3 Open Problems
How do we decentralize social media login? (4:08)
- Create a portable profile via ENS or something like it. Instead of logging in with Twitter, Facebook, Gmail, etc., we’re instead logging in with a universal profile that we hold ourselves. Removing the authorization service providers in the middle (i.e. those mentioned above)
- Example piece written on this topic – The Billion User Table
How do we decentralize social media backends? (5:18)
- Instead of or in addition to replacing the login, we could also attempt to replace the entire back end of social media. Meaning, that all the likes, comments, shares, etc. are stored “on-chain”.
- A prominent example today would be Deso.
- Note: Instead of placing everything “on-chain” you could take another path that is slightly more centralized, but highly discussed and that’s layer 2 and eventually layer 3 chains. An example would be Ethereum having a layer 2 chain such as ZKsync, then a layer 3 extension such as Opportunity (ZKsync layer 3 extension). Most of the data would be stored on layer 3, then trickle down in size to layer 2, then eventually layer 1 (Ethereum).
What does optimal DAO tooling look like? (5:48)
- DAO is a misnomer (not fully autonomous), it’s more accurate to label these “tokenized communities”.
- The ideal state could be creating a platform that stitches together multiple services from other providers such as treasury management (i.e. coinshift), DAO governance (i.e. snapshot), and fiat on/off ramps (i.e. Wyoming DAO acceptance). This is an improvement on the current stopgap – Discord.
How could you tokenize an open-source project? (7:50)
- The open-source community isn’t the most financially resourced due to goodwill and wishful thinking. One idea to improve this would be (direct quote from Balaji)…
- Be open source dev
- Issue a token
- Hold X% of it
- Has 0 value initially
- Award (100-X)% of it over time to folks who contribute code
- Companies then buy tokens to prioritize bugs & features
- Suddenly, an economy arises!
- Resources to better understand the problem, Nadia’s
What does Postgres for web3 look like? (8:35)
- To be honest… I didn’t really understand this problem or solution. 😂 – Check the timestamp here to unravel it yourself.
- My guesstimation of what’s being said – Many chains have to recreate the wheel when integrating into each other, as well as the outside world. If you’re able to create a standard API that queries external information such as geolocation similar to PostGIS (Coinbase example), then you could tokenize that and profit. Sounds similar to Chainlink, but maybe I’m wrong.
How do we migrate between blockchains? (9:49)
- Plenty of examples of this being done, Balaji highlighted Blockstack (now stack) migrating to Bitcoin and Binance BNB moving off Ethereum.
- There are many approaches to solving this problem such as atomic swaps, cross-chain bridges (otherwise known as attacker honeypots), freeze and restore (one implementation of cross-chain bridges), etc.
How to quantify and optimize decentralization? (10:25)
- Balaji wrote a piece on his ideas around quantifying this labeled “minimum Nakamoto coefficient”.
- Creating a dashboard that allows projects to objectively rate how decentralized their project is could be a useful problem to solve within the ecosystem. Solving the silly Twitter banter, as well as providing a clear lens into who’s truly decentralized on what axis.
How can we visually unify coin tables and cap tables? (11:45)
- Cap Tables: Simply put, who owns which shares within a startup, what’s the vesting period, purchase price, etc.
- Coin Tables: Similar to cap tables, but for coins. So who owns what share of the coins, their vesting period, etc.
- Creating a single dashboard that presents all this information to a company that has both coins and equity for contributors.
Can we automate accounting with triple-entry bookkeeping? (12:37)
- Double-entry bookkeeping (wiki and video) was a revolutionary idea back in the ancient economic boom of Florentine Italy, forcing merchants to track both debits and credits. Now the big four accounting firms are using the blockchain to incorporate a third element, creating triple-entry bookkeeping. This allows the debits and credits to be cryptographically signed and committed to a public (or private) ledger, which provides an immutable shared ledger that creates trust between auditors and the public.
- The idea is to automate triple-entry bookkeeping through continuous streaming of financials, such as allowing real-time income statements to be published and tracked on a chain. This would include an income statement, balance sheet, and cash flow statement all continuously updated and tracked. The assumption here is that companies continue to adopt the use of stablecoins like USDC. Like a crypto NetSuite.
- Note: My guess would be that most of this tracking would take place on a ZK roll-up with ZK actually enabled to ensure the companies are only exposing their books to the necessary auditors.
Can we put Sand Hill on-chain? (14:59)
- There’s a lack of economic alignment within Web3, specifically when it comes to distributing and liquidating tokens. We can attempt to incorporate many VC best practices on-chain such as waterfalls, drag-along, lockup, vesting, etc.
Can we get a dashboard of dashboards? (16:34)
- The tons of crypto-related dashboards in the market today such as Coin Market Cap, Defi Pulse, Crypto Fees, etc. Is it possible to create an aggregation dashboard that acts as an index or search engine similar to the old-school Yahoo home page. Due to the open-source nature of crypto, we’re able to scrap and visualize all kinds of data. There are a few startups targeting this problem such as Dune Analytics and Nansen, but it’s still an open space.
Can we develop user-aligned metrics? (17:28)
- This one is a bit far-fetched, but if done right could be very impactful. So… Currently in Web2 we have user metrics like the number of clicks, views, comments, etc., which have led to click-bait and me vs. you culture. Is it possible to create user-aligned metrics that lead to intended results? For example, in a world with “Bloomberg 2.0” terminals could we correlate the financial content consumed with the increased revenue in (X) number of days/weeks/months?
What does delegation look like for DAOs? (19:31)
- The “principal-agent problem” arises in any hierarchical relationship between two parties. Most of the time we want to have a “win-win” or “lose-lose” situation, so the parties are moving in tandem, not against each other. Although, there are moments where we have a “win-lose”. Ideally, within DAOs, we’re able to make explicit every relationship within the structure, limit permissions, tasks, etc., as well as automate as much as possible.
- FYI… This one was a bit vague and confusing to me too. 😉
Can we do pure CPA for Web3 commerce? (21:14)
- Web2 metrics today are opaque at best for both the merchant and provider (i.e. Google, Facebook, etc.), which leads to uncertainty if the purchase originated from the provider platform. This is why today many providers focus on user metrics such as cost per click or cost per thousand views. Sadly, neither track the connection between ads and purchases. What if we could evolve to “Click per action” (CPA), meaning the user saw the ad and bought the merchandise (i.e. action)? Balaji has already invested in one startup attempting to tackle this problem – Spindl (Antonio García Martínez)
Could we fairly benchmark blockchains? (23:16)
- Instead of subjectively arguing on Twitter about which blockchain is “better”, what if we had an open source bench-marking challenge comparing each blockchain on a set of agreed-upon variables? This exists for comparing programming languages – The Computer Language Benchmarks Game (Wiki and GitHub site)
Can we enumerate the nouns and the verbs? (24:58)
- Attempting to enumerate all the nouns and verbs that follow you can open up an ocean of features and products. For example, with PoS “holders” (noun) “stake” you “earn” (verbs)… Now the question is what nouns and verbs are undeserved, and how can you serve them?
Can we get a status dashboard for assets? (26:16)
- Many coins are evolving, moving from state to state, with the status continuously changing, which is difficult to track as a user with many coins. How can we aggregate the coins and status into a single location, allowing the user to know if the coin is per-launch, test net, post-launch, etc.? Additionally, what’s the next action the user needs to take for the next state (i.e. pick up our coins, migrate them, etc.)