Endeavor Greece: Cryptonetworks

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Endeavor Greece: Cryptonetworks


MARCH 2020

Executive Summary Believers in the crypto space often liken it to the early days of the internet. Both started within small technology circles and moved on to a more mainstream audience with their first “killer app”; email in the case of the internet and bitcoin in the case of crypto. While the internet transformed the way we create and receive information, the crypto space is promising to transform the way we create and receive value in many forms. On Thursday February 27th, Endeavor Greece and Marcos Veremis, with the support of the Athens University of Economics and Business (AUEB), hosted an event on cryptonetworks at Hilton Athens, aiming to shed light on the variety of ways in which the crypto/blockchain technology can be transformational, how professional investors evaluate companies and projects in the crypto space, and also learn more about Radicle, a peer to peer protocol for code collaboration. This report was produced by Endeavor Greece in collaboration with αθηΝΕΑ. It presents key insights that came out of the event, aiming to spark an even broader discussion on the power of crypto and its advantages for Greek entrepreneurs in the months and years to come.



Featured Speakers Thomas Bailey Thomas Bailey is a partner at Notation Capital, where he leads blockchain investments. Thomas has been investing in blockchain personally since 2014, including direct investments in Bitmain, Robinhood, Maker and Bitcoin as well as fund investments in A16z crypto, Multicoin, Pantera and Libertus. He also built two industrial scale bitcoin mines. Previously, Thomas worked at Perry Capital, a New York based hedge fund, where he covered financials and macro. Thomas went to Harvard College and got his MBA from Stanford.

Eleftherios Diachomichalis Eleftherios is the co-founder of Radicle, a decentralized network for FOSS collaboration. He was an early employee at SoundCloud, where he led the Data Science team. His scientific interests lie between network science and statistics, focusing on online communities.

David Fauchier David is the CIO of Cambrial Capital, an investment firm specialised in manager selection in the crypto space. David has been researching and investing in the crypto space since 2013 and sits on the Advisory Board of Global Digital Finance, a SRO engaging policy makers and regulators to advocate industry best practice in cryptoassets.

Pamir Gelenbe Pamir is a Partner at Libertus Capital, where he focuses on decentralised systems, enterprise blockchain and digital currency. He is an investor in Kraken and Crypto Facilities, and serves on the boards of Kraken, Peak Games, On Device Research, Souq Al Mal, Eon Aligners, and Eatupp. Previously, he served as a Partner at Hummingbird Ventures, and also worked at Morgan Stanley and D.E. Shaw. Pamir graduated from Duke University and Columbia University with a BSc. in Electrical Engineering and MSc. in Operations Research.

Marcos Veremis Marcos is currently a Managing Director at Evanston Capital Management, an investment management firm. Previously, Marcos was a Managing Director at Cambridge Associates, an institutional investment advisory firm where he lead the firm's research effort in the crypto/blockchain space from January 2018 to April 2020. In 2019, Marcos and team released the paper “Cryptoassets: Venture Into the Unknown� which mapped out the crypto investment landscape. Marcos holds a BA from Oxford University and an MA and MBA from Columbia.



Introduction “My attitude is that if you push me towards something that you think is a weakness, then I will turn that perceived weakness into a strength.” Marcos Veremis, Managing Director at Evanstone Capital Management, who has been leading the firm’s research in the crypto/blockchain space since January 2018, chose this quote by superstar basketball player Michael Jordan to kick off Endeavor Greece's recent event about the fascinating, but rather misunderstood world of cryptonetworks and cryptocurrencies. The event was attended by an audience of Endeavor entrepreneurs, who got a chance to hear from leading thinkers and professional investors in the space about the present and future of cryptonetworks and cryptocurrencies in general. The discussion also focused on the extent to which the expectations of “crypto-evangelists”, who seem to think that the development of blockchain technology could be as influential and transformational as the dawn of the internet, affecting all facets of our lives, match the realities of the trend. The speakers and panelists also shed light to the various misunderstandings that plague crypto. After all, the public has a tendency to equate cryptonetworks with cryptocurrencies, which to most people only mean one thing: Bitcoin. It is the breathtaking market rally and subsequent crash of the Bitcoin, the first cryptocurrency, in previous years that seems responsible for at least part of crypto’s “bad reputation”.



The discussion of why crypto is important is also of particular interest to Greece. Having experienced a deep and prolonged financial crisis, Greek entrepreneurs have much to gain by turning their attention to promising new technologies, such as blockchain. Greece and the crypto space have at least one thing in common, joked Mr. Veremis, they are both "underappreciated underdogs".

Why We Care At Endeavor, we are determined to raise the level of dialogue surrounding entrepreneurship, challenging existing knowledge and providing new perspectives on its development. By gathering, curating and interpreting data, we aim to provoke conversations and debates between experts, startups, scaleups, capital funds, governments and other stakeholders that make up the ecosystem. Cryptospace in particular is an area we are eager to explore. Cryptonetworks go far beyond cryptocurrencies, creating opportunities for various ventures on a never-before-seen scale. We may still be in the very early stages in crypto's development, but the bullish case is that it will develop fast, given that it is software-based and does not require hardware installation. A small ecosystem of high-quality crypto and blockchain venture funds, led by Andreessen Horowitz, has developed over the past couple of years, supporting an increasing number of projects and companies founded by some of the world’s most talented entrepreneurs and developers. Although it's too early to draw parallels, this feels like venture capital in the early 90s all over again, while traditional venture capital (with Web 2.0 based businesses) has evolved into a mature asset class. We are excited to follow developments in this space closely and, with this in mind, we present our first study on "Cryptonetworks", which builds on the insights shared by a panel of experts at our recent event in Athens.



Presentation: An Introduction to Cryptonetworks


David Fauchier CIO, Cambrial Capital

Presentation Summary Explaining what cryptonetworks and cryptocurrencies are and why they are worth our time and our consideration is a tricky business; Chief Investment Officer of Cambrial Capital David Fauchier admitted as much in his enlightening introduction to the crypto space, which was the first session of the event. And yet, “you don't need to know how a car engine works to know its value”, he aptly stressed. What we need to understand is that blockchain technology has the potential to be a transformative force, changing the way we create and receive value in a variety of forms.

“Internet is the most important piece of infrastructure humanity has built and protocols are the most important technology you have never heard of.” “Crypto isn’t about currencies. It’s a new design for internet services.” “Cryptonetworks are a fundamentally new way of coordinating economic activity. Cryptocurrencies are internal currencies to the network.” “If cryptocurrencies are genuinely viable and useful ways of delivering internet services, then cryptocurrencies are a distinct legitimately investible asset class.”



Key Takeaways: How do we think of crypto? Most of us incorrectly use the words blockchain, cryptonetworks and cryptocurrencies interchangeably, without realizing the true nature and potential of crypto, which is a new internet architecture that could help solve a number of problems that we encounter online. Looking back, even though the computer was invented by Charles Babbage in the first part of the 19th century, it took more than 100 years for Alan Turing to build the world’s first functioning computer, which helped the Allied Forces win the Second World War. Eventually, we built more computers, which got cheaper over time. And yet, we only realized how useful they were once we had enough of them out there. How do cryptonetworks work? The interesting question is not so much how they work, but why they are useful to us. You don't need to know how a car engine works to understand its value. You know it because you use the car. Cryptonetworks are a fundamentally different way of organizing economic activity. It is a new method of enacting and enforcing rules that does not depend on a central management or supervisory authority, but harnesses the power of technology to record and execute transactions of any nature, through a structure designed to inspire trust to the network participants. To understand how this alignment works, think of the taxis in New York City, at least before the entire market was disrupted by Uber and the like. To be a taxi driver, one had to obtain a "medallion", a taxi license which had a certain initial cost, and which could be taken away if the driver committed an offense by the regulatoty authority. Drivers and passengers were participants in the city's taxi network and were motivated, with the help of economics, via the central authority that controlled the licensing process and pushed them to abide by certain rules.



In the work token model, a service provider stakes the native token of the network to earn the right to perform work for the network and receives fees from those in demand of the service provided. In that sense, the staked token is like a NYC taxi medallion, since it gives you the right to be a supplier in the network and to earn fees. As in the taxicab models, where the "medallion" is "staked" but fees are paid in US dollars, fees in a cryptonetwork can also be denominated US dollars or, indeed, any other currency. All well-designed token models help align the incentives of all the participants in the cryptonetwork. Token design is developing rapidly and new models might evolve. Now, unlike the NYC taxi network, which is run with the help of a central authority, the internet is filled with cases where rules are inapplicable and/or unenforceable. Think about how many online problems could be solved if it were possible to impose and enforce rules by the very architecture of a network itself. A cryptonetwork that could ensure that the motivations of all players involved are aligned and that all sides would be rewarded for their contributions would be enormously beneficial. Therein lies the enormous importance of cryptocurrencies for Web 3.0. Thus, if cryptocurrencies are genuinely viable and useful in delivering internet services, then cryptocurrencies are a distinct and legitimately investable asset class, in which one can invest under the right conditions.



Panel Discussion: Investing in Cryptonetworks


Marcos Veremis Managing Director, Evanstone Capital Management


Thomas Bailey Partner, Notation Capital

David Fauchier CIO, Cambrial Capital

Pamir Gelenbe Partner, Libertus Capital (joined via teleconference)

Discussion Summary: The next session was a panel discussion moderated by Marcos Veremis, who invited three professional crypto investors to share their thoughts and insights regarding investments in the broader space. The panelists spoke of the variety of ways in which an investor can partake in this trend, through tokens, but also equity, by investing in companies that use blockchain technology, specific crypto funds, or even funds of funds. On the financial instruments side, the discussants spoke of the novel ways in which traditional managers transpose their existing strategies and tools on this emerging market.

“In software, just like in language, you can describe any kind of logic you want. So, on a philosophical level, crypto allows us to turn governance into software.” “Throughout history, every time there was something really innovative or transformational being built, there was an initial period of speculation.” “At some point, we are going to shift to that iPhone moment for crypto, where all the pieces will be in place for a hundred flowers to bloom.” “I think of Bitcoin as the inverse of money. It is a hard asset and all hard assets are the inverse of money.”



Key Takeaways: People get into crypto for all kinds of reasons, through a variety of backgrounds. Some have experience in cryptography or computer science, others come from a background in economics, business or finance. Marcos Veremis asked the panelists to share their personal stories of how they got involved in crypto. Thomas Bailey, a Partner at Notation Capital with a background in history and economics, was enthusiastic about the potential of blockchain technology from early on, asking himself how, aside from purchasing tokens, he could participate in this emerging trend. Having started his career at New York based hedge fund Perry Capital, where he covered financials in economies such as Portugal, Greece and Argentina, he remembers asking people what they were doing with their savings in tough times. Some people said they were in fact buying Bitcoin. Since then, besides investing in the space, he has also built two industrial-scale Bitcoin mines. It took David Fauchier months to figure out what crypto was really about. Once he did, he realized that if you could produce scarcity in a verifiable way, the way blockchain technology does, that would be an interesting value proposition, which could solve some of the biggest problems facing the internet today. If cryptonetworks are a useful way to provide online services, then crypto is a separate asset class, on which one can apply traditional strategies and products, albeit in a far less regulated and very volatile environment. As for Pamir Gelenbe, a Partner at Libertus Capital, who participated in the panel via teleconference, from a traditional venture capitalist with a background in electrical engineering and operations research, he became a crypto venture capitalist when he discovered Bitcoin. “I couldn't ignore how revolutionary it was,� he noted.



What about the darkest aspects of crypto? Many people still regard crypto with suspicion, as fertile ground for speculation, scams and fraudulent activity. Why should people be taking this, at best embryonic, space seriously? After all, the crypto debate divides even the most seasoned and experienced investors. On one side of the debate there are people like Warren Buffett, who have repeatedly criticized cryptocurrencies, and on the other people like Marc Andreessen, betting that this new technology will change the very nature of the internet. What is the cause of this great divergence? “Whenever something truly innovative and revolutionary is built, there is an initial period of speculation - from the railroads to the dot-com bubble,” Mr. Bailey points out. Perhaps what is different with crypto is that cryptocurrencies relate to our monetary system. So, it didn't help that the first and best known blockchain product, Bitcoin, is a cryptocurrency that competes with other governments' currencies. A second issue is the difficulty of explaining what cryptonetworks are. This does not, of course, diminish the value of the technology or its capabilities. “In software, just like in language, we can describe any logic we want. So, on a philosophical level, with crypto we can turn governance into software. It's an experiment in alignment of motivations,” said Mr. Fauchier. Since the panelists are all professional investors in the space, they were also asked about the types of investments they are looking for. For Mr. Bailey, it all starts with the people he is dealing with, same as with traditional investments. Do they have relevant expertise to build the product they are promising to build? Do they understand cryptography and alignment of incentives? Do they understand what decentralization really offers? Can they apply traditional ideas and techniques to the particularities of crypto? For his part, Mr. Fauchier explained he is looking for funds with a track record and discipline, which have the flexibility to react and invest in ways that make sense at any given moment.



Mr. Gelenbe pointed out that we are still at the stage where key cryptospace infrastructure is being built. “We have not seen millions of people benefit from and participate in this emerging technology. At some point we hope to get to crypto's 'iPhone moment' when all the parameters are there for a hundred flowers to bloom. ” According to him, we are still 2 to 3 years away from that moment. The panel also discussed investments in Bitcoin, which many have described as the ”killer app” of cryptospace. They all agreed that it remains the dominant cryptocurrency, despite its disadvantages as a product of “first generation” blockchain technology. “Bitcoin has its own brand,” said Mr. Gelenbe, adding that at this juncture, perhaps the responsible thing to do is to invest 1% of one’s net worth in Bitcoin. If that fails, it’s okay. If it ends up becoming digital gold and rising to 100 times its value, it would be a very good investment. As for Mr. Fauchier, he thinks of Bitcoin as the inverse of money. “It's a hard asset and all hard assets are the inverse of money. As such, it is a global hedge against global fiscal and monetary irresponsibility.” Finally, asked about Libra, Facebook's cryptocurrency, the discussants seemed to agree that Mark Zuckerberg's engagement with crypto seems to be a harbinger of the wider disruption that blockchain technology is likely to cause, especially for super-centralized data monopolies such as Facebook. “Zuckerbeg understands the disruptive nature of this technology and feels his own franchise is under threat. Remember that crypto allows you to own your own data,” Mr. Bailey noted. “Facebook pivoted to mobile soon after going public, and I think they are going to masterfully pivot into a decentralized Facebook as their next iteration”, Mr. Fauchier predicted. Mr. Gelenbe also agreed that Libra is likely to play an important role. After all, “it could put crypto on all of our phones”.



Presentation & Fireside Chat: Radicle Showcase


Eleftherios Diachomichalis Co-founder, Radicle

Marcos Veremis Managing Director, Evanstone Capital Management

Discussion Summary: Co-founder of Radicle Eleftherios Diachomichalis and Marcos Veremis discussed the promise of Web 3.0 and how that relates to blockchain technology and the crypto space. Web 2.0 was all about free products and the sale of data, but if you're not paying for it, you risk becoming the product yourself. What’s the promise of Web 3.0? A web of collective ownership that respects user privacy, where security is a priority and where users are in control of their data. Mr. Diachomichalis also explained how Radicle, a peer to peer protocol for code collaboration, works, allowing engineers to interact with each other in a secure and sustainable way online.

“Our democracies and societies fundamentally depend on the internet, yet our internet infrastructure is compromised.” “I didn’t know what the thing that hooked me was, but I knew that crypto was the kind of transformational technology that comes around once every 20 to 30 years.” “With crypto you get to have sovereignty over your identity. Your data is yours and noone can take it away from you.” “Technologies rarely go from nothing to everything. As an entrepreneur you need to think of how to take one step at a time.” “Crypto and Greece are a good technology-market fit. When you ain't got nothing, you got nothing to lose.”



Key Takeaways: What are cryptonetworks? Computer networks organized in distributed or decentralized architectures that use cryptography and economic incentives in order to coordinate a set of anonymous actors around a common goal, without trusted intermediaries. Whenever a radical new technology comes around, it reshuffles things and, in the beginning, it feels like we are in the Wild Wild West. This is natural - we saw the same thing happen with the dot-com bubble. Then the whole thing collapsed, but what came next was a set of very successful companies that became big, safe and boring. We were looking for something to come and reshuffle things all over again. Crypto is a foundational technology. It is the best, most cost-effective way to do massive transactions - crypto is a massive improvement to what we had seen before. At the same time, it is incredibly helpful when it comes to microtransactions. How would you send 10 cents up until recently? You wouldn’t, the financial infastructure simply wasn’t there to complete these, but blockchain changes that. It is also a massive improvement in anything relating to identities and data. Most of the identities we have in the internet today we don’t own. With crypto you get to have sovereignty over these identities. Your data is yours and noone can take it away from you. The way that cryptonetworks are designed allow you to decide what you want to reveal to the rest of the world.



Interoperability, in other words making cryptonetworks compatible with one another, is still a massive limitation for the crypto space, although a lot of interesting use-cases have been popping up. Once we achieve interoperability, it is likely to be a gamechanger, and yet, it is difficult to say how close we are to that moment mentioned by Pameer Gelenbe of "a hundred flowers blooming". Decentralization cuts out a ton of intermediaries. Is it a threat to banks or will it be helpful to them? The internet was a threat to media companies and it ate a lot of them up, but the smart media companies stuck around and found new ways to use it. Disintermediation doesn’t mean a world without intermediaries. It’s about reshuflling; the dynamics will change. What makes a bank appealing in 10 years is very different to what makes a bank appealing today. The game will change and decentralized finance (or DeFi for short) is a threat but again, the smart companies that can adapt quickly will survive. Finally, asked whether Greece could ever become a hotbed for crypto startups, Mr Diachomichalis responded that even though he is not aware of a lot of crypto entrepreneurs in Greece at the moment, there is a big Bitcoin community in the country. Bearing in mind that, having emerged from the financial crisis, Greeks have more to gain by taking on risk, he concluded that crypto and Greece are a good market fit. “After all, when you ain't got nothing, you got nothing to lose.”



Waves of Crypto Innovation

The exhibits presented in the following pages belong to Andreessen Horowitz and are shared by Andreessen Horowitz for the purposes of this report. The crypto industry is still in its early stages of development, having gone through three broad development cycles in 2010-2012, 2012-2016 and more recently 2016-2019. Each cycle has been preceded by price appreciation, which has piqued new interest and brought in new ideas, startups and projects into the space. Over the past 10 years, the industry has seen very substantial growth with a compound annual growth rate of 74% and 54% in developer and start-up activity respectively, according to Andreessen Horowitz. In the recent 2016-2019 cycle, a wave of new developers and entrepreneurs entered the space, pushing its development and maturity much further along. Furthermore, numerous high quality dedicated crypto funds raised substantial amounts of capital, in order to support entrepreneurs. Lastly, large corporates also entered the space with projects like Libra.



The Insiders’ Take: First Wave of Innovation 2010–2012

The Insiders’ Take: Second Wave of Innovation 2012–2016

The Insiders’ Take: Third Wave of Innovation 2016–2019

©2020 Andreessen Horowitz. Proprietary and confidential. Charts provided herein are for informational purposes only and should not be relied upon when making any investment decision. Developer activity based on crypto stars on Github.


Startup activity based on crypto first rounds funding via Pitchbook.


3 Social media activity based on comments on crypto-related subreddits.



Crypto Innovation: All Waves

Crypto progresses in waves that from the outside look chaotic but have an underlying order

BTC Price $USD

Developer Activity1

Startup Activity2

Social Media Activity3

The result is consistent long-term growth, driven by a feedback loop between interest and innovation.

Š2020 Andreessen Horowitz. Proprietary and confidential. Charts provided herein are for informational purposes only and should not be relied upon when making any investment decision. 1

Developer activity based on crypto stars on Github.


Startup activity based on crypto first rounds funding via Pitchbook.


Social media activity based on comments on crypto-related subreddits.



Appendix: Further Reading

a16z Podcast: From the Internet’s Past to the Future of Crypto | Andreessen Horowitz / Marc Andreessen & Katie Haun. A Crypto Thesis | Pantera Capital / Joey Krug. Crypto Canon | Andreessen Horowitz / Sonal Chokshi, Chris Dixon, Denis Nazarov, Jesse Walden & Ali Yahya. On Crypto and Its Implications for American Technology Innovation | Andreessen Horowitz / Scott Kupor. On Portfolio Construction in Crypto Assets | Multicoin Capital / Fred Wilson. The Meaning of Decentralization | Medium / Vitalik Buterin. Why Decentralization Matters | One Zero / Chris Dixon. Crypto’s Business Model is Familiar. What Isn’t is Who Benefits | Jesse Walden / Jesse Walden.



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