A central concept on the internet is Layering. Each of the protocols in the internet stack talks to the layer directly above and below it — new protocols can be added as long as they speak the language of their layer. Protocols at one layer can be upgraded so long as they don’t break compatibility with the layer above or below it. This architecture maximizes interoperability and allows for a great deal of flexibility. The shape of the layers has been described as an hourglass, like this:
(credit: University of Calgary)
Beyond layering at the protocol level, we have gone on to build layers at the infrastructure and application levels. Infrastructure like AWS and Cloudflare, software libraries like Node, Rails, and jQuery, services like Twilio and Stripe. To build an application today, you do not need to go build a data center (or many of them), think about how to manually process HTTP requests, or write bare-metal adapters to the payments or telecom systems.
In the crypto/blockchain space, we are just at the very beginning of establishing layers. I think it’s safe to say that today’s blockchain landscape looks more like the early days of AOL, Prodigy and Compuserve (standalone, disconnected networks) than like the open, interconnected internet. A major reason for this is the introduction of cryptocurrencies and tokens, which provide a strong incentive — for now at least — for starting new networks and maximizing value of existing networks. But, as teams continue to build, and continue to build the same things over and over again, layering seems both inevitable and needed.
Within blockchains, layers delineate networking (libp2p as a leading tool), consensus (tendermint, hashcash and others), applications/smart contracts, and perhaps indexing/search (something everyone is doing on their own right now, but that thegraph is looking to solve as a layer).
Perhaps the most interesting question is how different blockchain systems may layer together. Cosmos and Polkadot are building systems for interoperable blockchains via a hub-and-spoke model, with shadow assets pegged to outside chains for interoperability. Interledger is attempting to be a more universal cross-ledger (ledger, meaning blockchains and otherwise) protocol, akin to TCP/IP in the core internet stack.
How these systems interconnect, and layer atop one another, seems like a fundamental question as we move from the speculative phase to the functional phase. We are just now beginning to get glimpses of it.
One of my favorite things about the cryptocurrency / blockchain space is that our conception of “what it all means” is still very much in flux. Nic Carter just published a nice analysis of how the functional narrative around bitcoin has changed over time – (roughly) from e-cash, to e-gold, to private currency, to a… Read more »
In June, the SEC gave some of its most concrete guidance to date that cryptoassets can start out as centralized projects, possibly initially sold under securities laws, and eventually become “decentralized” and thus no longer sponsor-controlled, and no longer sold or transferred under securities laws. It makes sense that a decentralized protocol does not fit… Read more »
I was at an event last night, where the moderator, Preeti Varathan from QZ observed that there seemed to be a lot of cynicism in the blockchain / crypto space — in other words, that the whole thing was essentially premised on a distrust of existing systems (fiat currencies, large internet companies, etc). It’s an… Read more »
There is no shortage of writing and punditry about the power of compound interest. As usual Naval has a pithy tweet about it: Play iterated games. All the returns in life, whether in wealth, relationships, or knowledge, come from compound interest. — Naval (@naval) May 31, 2018 I have been thinking about this a lot… Read more »
One of my former colleagues, Rob Marianski, and I used to have a running joke — we would be building and debugging something, and he’d finally say, “Oh, so you just want me to set just_work = true?”. That was over 10 years ago, but it still gets me every time for some reason. (as… Read more »
Ryan Caldbeck is on fire on Twitter right now. Ryan is the CEO of our portfolio company CircleUp, and he just joined Twitter for the first time earlier this year and is, I may say, feeling very comfortable in the medium. Over the weekend he put up a great diagram-oriented tweetstorm with a bunch of gems… Read more »
As readers of this blog can tell, I’ve been spending a lot of my time recently focused on cryptonetworks and blockchains, and in particular, working through the complex legal and regulatory issues involved. Explaining what cryptocurrencies, cryptonetworks and blockchains are is hard to do. As Naval recently said on twitter: It is the mark of… Read more »
On Tuesday we announced our investment in Cryptokitties, and, as you might expect, received a combination of enthusiasm and skepticism in response. Bitcoin and cryptocurrencies already sound ridiculous to most people, and virtual “real” kittens made out of cryptocurrency take it a step further. But, as with many new technologies, these first use cases just… Read more »
An idea I like from Zen Buddhism is becoming a Bigger Container. My understanding of the idea is this: There are a lot of difficult/bad/sad/scary things going on in the world, ranging from serious global issues, war, famine, terrorism, etc; to things in your city like homelessness or joblessnes; to things in your family, like… Read more »
“Cryptonetworks” can help us build a more competitive, innovative, secure and decentralized Internet. “Tokens” (also known as cryptocurrencies or cryptoassets) are integral to the operation of cryptonetworks. As we design new laws and regulations in this emerging space, we should keep these concepts in mind, beyond the financial aspects that are today’s primary focus. In… Read more »
We are in the middle of our 2018 Analyst hiring process at USV. For the last several hiring cycles, USV has had an open process where anyone can apply. I actually wrote about it back in 2011, right before I joined, remarking at the high quality of applicants that the process produced. That is still the… Read more »
I’ve written a bunch about why it’s expensive to be poor, why we need better tools for managing money, and how to move from a labor mindset to a capital mindset. A big takeaway for me is that accumulating wealth isn’t just a functional activity, it’s a mindset that needs to be learned, and taught…. Read more »
Avoidance is to be avoided. — Nick Grossman (@nickgrossman) February 22, 2018 I’m on a plane right now. I always find plane/train rides to be some of the best times to focus and get work done. On this trip, I managed to get two “monkeys” off my back — little tasks that have been lingering… Read more »
I’ve written for a long time about my desire to re-build personal finance infrastructure in ways that benefit people with the least money. We see new personal financial products all the time targeting high value customers, but it still feels like they are ignoring a huge, and important part of the market: people scraping by… Read more »
We have spent a fair bit of time over the past year working on security at USV and across the USV portfolio. Anyone who has spent time working on personal or corporate security — and in particular information security, knows that there are a million ways in, and you’re never “finished”. Fred wrote a bit… Read more »
I’ve been quiet on the blog lately — writing is one of those things that’s hard to build a habit for, but always pays big dividends when you do it. Every time I’ve gotten into a good blogging rhythm I am undoubtedly surprised by the feedback I get (good and bad!), but more importantly, by… Read more »
The week before last, we lost a dear friend to cancer. Deb was an incredibly sweet, caring and giving person. The memorial service last weekend was held at the elementary school where she taught first grade for the past 15 years. The room was decorated — to the hilt — with hearts, butterflies, and ribbons,… Read more »
Today is the last day of September, and I’m happy and relieved to see it go. I’ve been holding my breath. September is a violent month. That may seem like a ridiculous thing to say, but I think there’s some truth in it. Something about the end of the summer and the abrupt change to… Read more »