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A Summary of

The State of Crypto: A Builder’s Guide From Crypto Startup School

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a16z editorial
a16z
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Crypto Networks and Why They Matter

  • Crypto networks may lead a new wave of innovation, with the transformative implications of its technology.
  • Crypto’s “price-innovation” loop.
    • Crypto cycles have an underlying order. 
  • Blockchain in a new type of computer.
    • Hardware is governed by software.
  • The idea maze 
  • Scalability 
  • The pattern of technological evolution 
    • It takes a few years for application-level entrepreneurs to fully explore the design space and figure out what is the best thing to do. 
  • The current landscape of crypto investing 
    • The video game world is a nice entry point 

Blockchain Primitives: Cryptography and Consensus

  • The four layers of blockchain 
    • Consensus Layer 
    • Compute Layer 
    • Applications 
    • User Interface
  • The “state machine replication” problem 
    • Can’t achieve consensus if you don't have authentication 
  • How blocks get added to the blockchain 
    • Sybil attacks 
    • Running applications on the blockchain 
  • Cryptographic primitives 
    • Looking into the future: private data on a public blockchain.
    • A blockchain is not a database.

Setting Up and Scaling a Crypto Company

  • Advantages: Crypto makes it easier to 
    • Acquire customers 
    • International expansion 
    • Raise money
  • Drawbacks
    • A lot of legal risk 
  • The steps to starting a crypto company
    • You have to make something that people want

Secure Smart Contract Development

  • Security is not just code 
  • Threat modeling
  • Smart contracts and inflexibility 
  • Best security practices 
  • “Rolling your own crypto” - building your own chain 
    • If you start from scratch, it is costly and not a good idea security wise.
  • Sharing security among different chains

Applications: Today and 2005

  • Bitcoin was invented to replace a centralized bank
  • Ethereum and smart-contract programming 
  • The ICO boom is technologically significant
  • Crypto compared to internet 
    • Present in crypto can be compared to roughly 2000 in the internet 
  • Blockchain-first is the new mobile-first 
  • Crypto boosts network effects 
  • Crypto aligns currency holders’ incentives 
  • Blockchain monetary policies as experimental science 
  • Crypto applications today 
    • Exchanges, miners, issuance, etc. 
    • In 2025, there could be privacy coins, scaling tools, insurance apps, etc. 

Protocol to Product

  • In the blockchain space, you may build a dApp on top of already infrastructure 
  • Think about your users 

Opportunities for Crypto in Gaming

  • Blockchain could potentially change the business model of games
  • True ownership of in-game assets by gamers 
  • Provenance of digital assets 
  • Creating new marketplaces in games 
  • Designing incentive structures in games 
  • Aligning incentives between players and developers 

Business Models and Value Captures

  • The layers of the crypto stack 
    • Each layer has various challenges
  • Multi-sided platforms 
    • The core template for value creation and value capture in crypto 
  • The Layer 1 flywheel 
    • Once the token value exists, miners have more incentive to provide resources for security and functionality
  • The value-capture paradox 
  • Smart contracts 

Cryptoeconomics 101

  • Designing economic cames appropriately can push humans to exhibit useful behaviros 
  • Bitcoin incentive system
    • Reward people for securing the network and processing transactions 
  • The moral hazard of incentive systems 
    • Overpower the moral frameworks that most people live by 

How/Why to Decentralize Your Project: A Deep Dive

  • Progressive decentralization
    • The process by which crypto project creators…
      • build a useful product
      • create a community around that product
      • gradually hand over control of the maturing network to the community. 
  • Community ownership is important 

Building a Community of Developers

  • Appealing to the open-source community 
  • Simplicity as a community driver 
  • Market to developers 
  • Manage a globally distributed team 

Managing a Distributed Workforce

  • Onboarding is important.
  • Clarifying job roles and structure is essential.

Crypto regulators and Token Securities

  • Crypto builders must navigate traditional financial-services regulatory structures.
    • Securities law, The “Howey” Test, etc.
  • The membership model 

Fundraising and Deal

  • Community ownership and operation mode
  • Dilution in crypto deals 
    • Giving community members a stake in the network grows your company.
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