Our thesis
Our take on what crypto and blockchain is all about.

Towards an Internet-native economy

  • New infrastructure enables new kinds of services
  • ​Blockchain protocols produce open, global and cost-efficient services
  • Blockchain protocols are owned and operated by global communities
  • Blockchain technology enables global services
  • ​Applications are built on top of blockchain protocols
  • ​Examples of services provided by blockchain protocols
  • ​Internet-native money (2008–2013)
  • ​Internet-native applications (2014–2019)
  • ​Internet-native economy (2020-)


​New infrastructure enables new kinds of services

The world’s most valuable companies are born during platform shifts. During platform shifts, new entrants have the opportunity to build services that make use of the new functionalities provided by a new platform. Today’s web incumbents (GAFA) managed — exceptionally — to thrive over two platforms as the primary business model (gathering data and selling ad space) remained the same over both the Internet and Mobile eras. When a new computing platform changes the prevailing business model, new entrants have an opportunity to dethrone the incumbents. Blockchain technology changes the primary business model for online businesses by making data open.
Computing platforms are the infrastructure of information technology. A new computing platform introduces new features and opens up new distribution channels. The computing power of PCs enabled the creation of tools such as the spreadsheet and the word processor; the Internet as a global information network connected the PCs into one shared communication network; and the smartphone made PCs mobile and added new features such as location-based services and the camera.
The development of information technology 1990–2020.
Blockchain technology is a new computing platform. Blockchains enable a global community to create and maintain open and shared databases. Companies have traditionally been tasked with processing and storing data, and maintaining databases. Transferring this responsibility to a global community means that businesses can now be operated in a peer-to-peer network, without the involvement of a traditional company. Businesses that are operated by a peer-to-peer network offer better services than their incumbent competitors. The services provided by blockchain protocols are superior due to their openness (open source), cost-efficiency (global competition), and distribution (the Internet).

Blockchain protocols provide open, global, and cost-efficient services

Blockchain protocols concentrate the supply and demand of a specific service into one place. The marketplaces maintained by existing companies are often siloed due to geographic and/or regulatory reasons. Blockchain protocols enable the creation of worldwide marketplaces on the Internet. The Internet created a global marketplace for information — blockchain technology does the same for value. The rules for value transfer are programmed straight into the blockchain protocol. The programmability of blockchain protocols means that they can provide any kind of digital service directly to a global audience.
A blockchain protocol as a global marketplace is the most cost-efficient way to provide a specific service. Concentrating the supply and demand of a specific service into a single place leads to most competitive prices. Due to the open and global nature of the Internet, competition among blockchain protocols means that the winning protocol is only able to extract the bare minimum fee required to keep the network secure. However, from an investor’s point of view, this is not an issue since blockchain protocols operate at unprecedented scale. Creating a payment network owned and used by 7+ billion people has not been possible before.
Blockchain protocols operate at unprecedented scale compared to traditional companies.
Blockchain protocols have powerful network effects. End user applications purchase a specific service from the blockchain protocol that provides it for the most cost-efficient price. This means that in the end, there will only be a few winning blockchain protocols for a specific use case. Investing directly into blockchain protocols is financially a better alternative than investing into the end user applications built on top of them. This is because the blockchain protocol that wins its vertical is bound to aggregate traffic from all of the end user applications built on top of it. This is comparable to if one could have invested in the SMTP (email), HTTPS (web request encryption), and TCP/IP (packets) protocols in the 90s. Each incremental email, web request, and information transfer would have made these protocols more valuable.

​Blockchain protocols are owned and operated by global communities

Ownership in a blockchain protocol is acquired by purchasing tokens. A blockchain protocol can be thought of as a company registered on the Internet. This Internet-native company is maintained and operated by a global employee pool and provides its services in the most cost-efficient manner using the worldwide distribution of the Internet. An investor can take part in the value appreciation of these Internet-native companies by purchasing tokens (comparable to shares) in a blockchain protocol. The blockchain protocol that provides a specific service in the most cost-efficient manner will eventually become a part of the core infrastructure of the Internet.
A token gives its owner both economic and governance rights. Tokens can be programmed to possess both economic (profit participation) and governance (voting) rights. It is in the interests of the tokenholders to grow the blockchain protocol into becoming a global and cost-efficient infrastructure component, on top of which anyone can build their own end user application. Similar to traditional shares in a company, tokens are created to encourage their owners to participate and contribute to the development of a blockchain protocol.
A tokenholder’s role is similar to a shareholder’s.
The more there is demand for a blockchain protocol’s service, the more valuable its tokens are. The goal of blockchain protocols is to provide a specific service as reliably and cost-efficiently as possible. The blockchain protocols that emerge as winners of their respective verticals become part of the core infrastructure of the Internet. The potential for value appreciation is significant because winning blockchain protocols should eventually mediate all value transfer on the Internet. Tokenholders are compensated by the value accrual of their tokens, which appreciate in value the more (non-extractive) fees are paid by those using the blockchain protocol’s service.


​Blockchain technology enables global services

Internet protocols transfer information between computers, but cannot store it. Internet protocols are only capable of transferring information between computers. For example, the SMTP protocol (simple mail transfer protocol), which is used in email communication, enables a near real-time and worldwide communication. The problems is that the SMTP protocol (and other Internet protocols) cannot store the messages sent through it. If the recipient of an email message does not write down the message (content, delivery time, relation to other prior messages, etc.), the message disappears into cyberspace. The user experience is very limited, even if the potential is significant.
Companies process and store information sent via Internet protocols directly into their own, closed, and proprietary databases. Since the SMTP protocol is unable to store the messages sent via it, a third-party company (e.g. Google) has economic incentives to build a database to store those messages. Based on the data stored, the companies build their own end user applications. On the current Internet, the primary business model is to gather data. The more data a company is able to gather, the better it can develop applications liked by end users. Better applications attract more users and their data, which in turn further enhances the companies’ abilities to create better applications. This is called the data network effect. The end result is that a majority of the population uses only a handful of services, and all the data gathered by those services is stored in the closed and proprietary databases of a few large incumbent companies.
Blockchain technology provides economic incentives for global communities to maintain open databases (the maintenance of a database is a prerequisite for being able to provide a service). The data concerning different services can now be stored in open databases that are collectively owned and maintained by worldwide communities. A blockchain protocol is made up of the protocol (business logic) that pertains to the service it provides, and the database that stores the data generated as a result of applications using it. Today, many industries have their databases siloed between thousands of different companies. A blockchain protocol can replace these proprietary databases with one universal and open database.
Blockchain protocols offer open services for application developers.

Applications are built on top of blockchain protocols

The open services of blockchain protocols serve as neutral tools for application developers. Application developers can use the open services of blockchain protocols as tools when building their own end user applications, without the fear of a third-party company closing their access to the service (platform risk). There are many examples of platform risk occurring in tech: Facebook/Zynga, Google/Yelp, Twitter/third-party developers. Open services promote innovation in society: the current popularity of blockchain protocols’ services among application developers serves as a proxy for the general demand that exists for open services. A single application may use the services provided by one or many blockchain protocols. As the services are open, they can easily be integrated with one another. Since the services are open, it is also in the interest of the developers of a blockchain protocol to have the protocol’s service being used by as many end user applications as possible. Compare this with the status quo, where cooperation between a platform and applications built on top of it eventually turns into competition.
Blockchain protocols eliminate platform risk from application developers.
Blockchain protocols introduce economic incentives to open source software development. A blockchain protocol contains programmed economic incentives for developers to develop the protocol. A developer of a blockchain protocol may be financially rewarded for open source development through tokens — developing the protocol to increase the demand for its service makes the tokens more valuable.
The services provided by blockchain protocols are intended to serve as reliable infrastructure for end user applications. Application developers use the open services of blockchain protocols in their own end user applications. Applications can be thought of as the marketing engine for a specific blockchain protocol, as their job is to increase the demand for the blockchain protocol’s service and thus also increase its value. Since anyone can build their application on top of the open services of blockchain protocols, worldwide competition will lead to better applications for consumers.

​Examples of services provided by blockchain protocols

The business logic of a service is programmed into the open source code of a blockchain protocol. Some important parameters for the service are often left open for the tokenholders to vote on during set intervals. Anyone can use the services provided by blockchain protocols by paying a fee and/or by depositing collateral. It is the responsibility of the tokenholders to maintain the usefulness (by voting on the parameters mentioned above) and reliability (by posting their tokens as collateral) of the blockchain protocol’s service.
Blockchain protocol
Marketplace for tokens
Digital gold
Database indexing
Private data storage
Video transcoding
Nexus Mutual
Contract for Difference (CfD)


​Internet-native money (2008–2013)

In the beginning, Bitcoin attracts technology hobbyists, cryptographers, and economic liberalists. Bitcoin and the transaction efficiency enabled by blockchain technology raises the interest of many leading technology investors. Both entrepreneurs and investors see the lack of secure token trading and custody solutions as an attractive opportunity to build companies that establish better bridges to a parallel financial system. Andreessen Horowitz and Union Square Ventures invest in the token trading and custody platform Coinbase in 2013.
Many service providers are hobbyists who lack the capabilities to operate secure token trading and custody platforms. Many token exchanges and wallets are operated carelessly, which leads to many consumers losing their assets held on these exchanges and wallets. The most famous example is the Japanese token exchange Mt. Gox, from which approximately $450 million bitcoin was stolen during the years 2011–2014. Even if there initially are many careless entrepreneurs in the space, the underlying blockchain technology still works without fault.
Bitcoin as the first blockchain protocol proves the functionality of the technology. For comparison, if the IT encryption of one company is breached due to flawed implementation, it does not automatically mean that IT encryption in general does not work. The security breaches experienced by some token exchanges do not correlate with the security of the underlying blockchain technology. Many of the security breaches experienced by token exchanges and wallets share common traits in that the companies are often operated without proper licenses, and/or in jurisdictions that lack proper financial surveillance authorities. In contrast, Coinbase, Bitstamp, Gemini, Bakkt, Fidelity Digital Assets and others, are examples of token trading and custody platforms that have embraced regulation and that have a solid track record of safely managing their customers’ token assets.

​Internet-native applications (2014–2019)

The Ethereum blockchain protocol expands the possible use cases for blockchain technology, attracting a lot of new developers into the space. The programmability of the Ethereum blockchain protocol is unlimited (in contrast with the intentionally very restricted programmability of Bitcoin). The Ethereum blockchain protocol enables the creation of blockchain-based services for all Internet applications. The diversity of the Ethereum blockchain protocol attracts many new developers to the space, and the resulting spike in developer activity entices more professional investors to enter the blockchain space.
Traditional technology, bank, and financial services companies make significant investments into blockchain technology. The entrance of more professional investors raises the bar for token trading and custody platforms. Institutional investors require secure and regulated ways to manage their token investments. Many financial services incumbents invest in companies that provide regulated token trading and custody services. The most notable example is Bakkt, a token exchange primarily aimed at institutional investors. Bakkt is owned by the Intercontinental Exchange (the parent company of the New York Stock Exchange) and launches in September 2019. Coinbase receives the status of a Qualified Custodian according to the Banking Laws of the state of New York (New York Banking Law § 100). Over 20 companies that provide token custody services have obtained the status of a Qualified Custodian. Many token trading platforms receive a similar status as well:
  • Anchorage. Anchorage is a token custody and trading platform registered with the financial supervisory authorities of South-Dakota. The company has raised over $40 million in funding from many leading institutional investors such as Visa, Khosla Ventures, and Andreessen Horowitz.
  • Bakkt. Bakkt is a trading platform registered in the state of New York. The company started its operations in September 2019. Bakkt is owned by Intercontinental Exchange (ICE), which is the parent company of the New York Stock Exchange (NYSE). Bakkt is also developing a payment service with which consumers may use tokens for everyday use cases.
  • BitGo. BitGo is a token custody and trading platform registered with the financial supervisory authority of South-Dakota. The company’s investors include Goldman Sachs and Galaxy Digital among others. BitGo’s insurance covers damage from data breaches, internal thefts, and loss of private keys up to $100 million. BitGo currently supports over 100 different tokens.
  • Bitstamp. Bitstamp is a token trading platform founded in 2011. Bitstamp supports trading of Bitcoin, Ethereum, Bitcoin Cash, Ripple and Litecoin tokens. Bitstamp is registered with the financial supervisory authorities of Luxembourg. The Belgian investment company NXMH acquired Bitstamp in late 2018.
  • Circle. Circle is a token trading platform founded in 2013. Circle has raised funding for over $135 million, with Goldman Sachs being a majority owner of the company. Circle has launched its own price stable token called USDC (the value of USDC is pegged to the dollar), the trading platform Poloniex, and an OTC trading desk for tokens. Circle was the first trading to platform to receive the NYDFS approved BitLicense in 2015.
  • Coinbase. Coinbase is a token custody and trading platform founded in 2012. Coinbase manages token assets, for both consumers and institutional investors, for over $20 billion. Coinbase has raised funding for over $500 million from investors such as Andreessen Horowitz, BBVA Ventures, Bank of Tokyo, NYSE, and USAA.
  • ErisX. ErisX is a token trading platform aimed at institutional investors. The company is funded by TD Ameritrade. ErisX supports Bitcoin, Ethereum, Bitcoin Cash, and Litecoin tokens. The Commodity Futures Trading Commission (CFTC) gave ErisX a license in the summer of 2019 that enables the company to support token futures. The service is currently available for a limited customer group.
  • Fidelity Digital Assets. Fidelity Digital Assets is Fidelity’s token custody and trading platform aimed at institutional investors. Fidelity Digital Assets launched in the beginning of 2019. The service currently supports Bitcoin and Ethereum tokens. Fidelity Digital Assets expanded to UK in December 2019.
  • Gemini. Gemini is a token custody and trading platform that launched in 2015. Gemini supports Bitcoin, Ethereum, Bitcoin Cash, Litecoin, and Zcash tokens. The company also provides its own price stable token GUSD (the value of GUSD is pegged to the dollar) and launched its custody service in September 2019. Gemini Custody is also a NYDFS licensed qualified custodian.
  • Tagomi Systems. Tagomi Systems is a token custody and trading platform aimed at institutional investors. The company launched their operations at the end of 2018. Tagomi provides its customers with services for token lending and short selling. Tagomi has raised funding for $27 million from leading venture capital funds such as Pantera Capital and Founders Fund. Tagomi received an NYDFS license for its token trading service in March 2019.
Public and worldwide token offerings (ICO) raise the interest of regulators. Initially, the programmability of blockchain protocols is used to conduct worldwide crowdfunding campaigns. In the US, the Securities and Exchange Commission (SEC) and Commodity Futures Trading Commission (CFTC) take action against crowdfunding campaigns that are deemed as illegal securities offerings. In the EU, the European Securities and Markets Authority (ESMA) publishes its recommendation for the legal interpretation of ICOs. As anyone can build an end user application on top of the open services provided by blockchain protocols, it is likely that market forces will direct the majority of monetary traffic towards those applications that serve consumer interests in the best way possible. Even if the rules are now programmed straight into blockchain protocols, in the long-run the business logic of end user applications should follow globally adopted best practices.

​Internet-native economy (2020-)

New secure and easy-to-use fiat-token exchanges enable global participation in blockchain protocols. Already today, there exists quite a few service providers specialised in providing consumers the possibility to convert their fiat currency into tokens. The integration of price stable tokens removes the inherent volatility risk of tokens, a risk currently rolled over to end users. The entrance of more regulated service providers like Bakkt and Fidelity furthers the interest among institutional investors to participate in blockchain protocols. The next major leap is to have traditional insurance companies enter the blockchain space.
Scaling solutions for blockchain protocols prove their viability. Today, blockchain protocols are able to process approximately 10–20 transactions per second. The scaling of this processing capacity is and has for many years been one of the primary areas of research in the blockchain space. Some of the already proposed scaling solutions should improve the transaction processing capacity of blockchain protocols approximately a hundredfold in the near future. The scaling debate is similar to the debate around Internet scalability in the 90s. The economic incentives available for those who solved the scalability dilemma were so significant, that solving it turned out to be a non-issue. The economic incentives for solving blockchain protocol scalability are as great — if not greater — as they were during the early days of the Internet.
Developers build easy-to-use end user applications for consumers. A person using email does not have to know how the underlying Internet protocols work. The reason today’s blockchain-based end user applications receive some critique is because they have not yet been able to abstract away all the complexity from end users. In the first phase towards an Internet-native economy, the focus lies on building the core infrastructure for the new Internet. Over time, the economic incentives for developers will shift towards building easy-to-use applications that make the UX of blockchain-based applications resemble that of traditional fiat applications.
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Towards an Internet-native economy
​New infrastructure enables new kinds of services
Blockchain protocols provide open, global, and cost-efficient services
​Blockchain protocols are owned and operated by global communities
​Blockchain technology enables global services
Applications are built on top of blockchain protocols
​Examples of services provided by blockchain protocols
​Internet-native money (2008–2013)
​Internet-native applications (2014–2019)
​Internet-native economy (2020-)