Read Write Own and Kwenta

Happy Sunday Friends —

This week’s edition of Internet Capital:

1. Sideways Markets 🤔 - up, down, more sideways?

2. Read, Write, Own 🟧 - Chris Dixon’s vision for crypto as the next evolution of the internet.

3. Kwenta 🎰 - gambling or the future of finance?

Markets

As one trader I know put it, “BTC looks like it’s choosing between $30k and $70k”. It’s a description that fits most of the market at the moment. BTC ETF euphoria has faded and investors don’t seem as eager to empty their bank accounts for the coins.

On the other hand, a favorable 2024 outlook thanks to upcoming FED interest rate cuts (probably) and crypto-specific developments (Ethereum Upgrade, Bitcoin Halving, Airdrops etc.) is protecting markets from a large move down.

If you know where the coins go from here, please let me know - thanks in advance 🫡. Now let’s take a look at some price movements over the past week:

• BTC - as the largest crypto asset, Bitcoin is a market leader that sets the tone for all other price movements. A second straight week of positive returns is generally good news for markets but 1% is basically nothing in crypto-land. Sideways it is.

• ETH - mirrored BTC on the week with a 1% gain. The ETH:BTC price ratio retraced most of its increase from the beginning of the month. Many analysts believe ETH will continue to struggle against other large-cap coins as the crypto bull market continues. As always, time will tell.

• COIN - the largest US crypto exchange’s stock was up 3% on the week. Hardly worth a glance for tech investors in a week where Meta returned over 20% after announcing its first-ever dividend. Maybe Zuck will get into crypto?

• SOL - keeping with the theme of being extremely boring, Solana barely moved this week. BUT, Solana meme coiners did put a hat on the Wall Street bull this week. I’ll admit it - good marketing

• JUP - the highly anticipated Solana airdrop closed its first week of trading with a $5 billion valuation. For reference, that’s higher than the valuation of some companies in the S&P 500.

• RNDR - the AI + Crypto token was one of the few performers of the week. The AI + Crypto theme doesn’t seem to be going anywhere. Definitely one to keep an eye on.

Read, Write, Own

In his new book Read, Write, Own, legendary venture capitalist Chris Dixon frames crypto as the next evolution of the internet rather than just a financial innovation. He argues that crypto revives desirable features of the early internet that were destroyed by Big Tech platforms.

Before understanding crypto’s potential to make a better internet, let’s take a look at the internet’s three phases according to Chris:

• Phase 1: Read - democratized information. For the first time, people had access to virtually unlimited information on a global scale. Publishing information was still difficult and required technical skills. Websites were mostly static and interactivity was limited. [1990 - 2005]

• Phase 2: Read + Write - democratized publishing. Internet users could now easily and quickly distribute content. Better infrastructure and platforms (Facebook, Instagram, Twitter) enabled everyday internet users to become creators of content rather than mere consumers. Consequently, online interactions became dynamic, interactive, and multi-directional. [2006 - 2020]

• Phase 3: Read + Write + Own - democratizing ownership. Internet users can now own the platforms and networks in which they participate. By not giving unilateral ownership and control to a small group of (mostly corporate) entities, internet networks and apps can be more egalitarian, transparent, and interoperable. This is crypto. [2020 → … ]

Phase 2 was a massively positive development for the internet. It created billions of dollars in value by enabling new kinds of networks and marketplaces. We all understand how much YouTube, TikTok, Twitter, Airbnb, Uber, and Amazon have changed our lives and the world.

The problem with Phase 2 is that it gave control over the internet to a very small set of corporate entities. They have the ability to unilaterally influence public opinion, deplatform users who oppose their worldview, squash competition by revoking access to their technologies, and stifle innovation for the sake of corporate profit, to name a few.

In short, the corporations that operate internet services don’t always have incentives that align with users or the best interests of society at large. What if we could build networks that aren’t controlled by corporations but are democratically controlled by users? Networks that, due to their design, can make unbreakable promises to users and developers about what they can and can’t do. Networks that are designed to align the interests of all stakeholders - not just shareholders of the controlling corporation. This is what crypto networks aim to provide.

Without delving into the specifics here (it takes a while to unpack), crypto networks have the following characteristics that could help make the internet better:

• Open Source - the code for crypto networks and apps is open-source meaning that anyone can see it and use it for their own purposes. This results in massive amounts of innovation because creative developers can build off of each other’s inventions without the risk of being cut off or price gouged.

• Decentralized & Democratic - no one “owns” crypto networks. They use economics, cryptography, and game theory to align the incentives of different users and participants. No one can cheat the system or change the rules. As a result, they are governed in a much more democratic, decentralized way than current internet networks and apps. The result is a more transparent, fair, and inclusive system with economic upside for more groups and individuals.

• Ownership & User-Centric - in crypto networks, your “account” is portable across all apps. You own all of your data and assets (think followers, posts, settings, as well as financial assets such as crypto tokens) and the apps essentially “come to you”. The benefits of this include interoperability between apps resulting in new and interesting use cases, improved data security and privacy, and immunity from having your digital assets stolen or revoked.

What I’ve shared here is only a sliver of what Chris talks about in his new book. There’s only so much I can share in the limited space we have here. Chris is also much more experienced and articulate than me, so if you’re at all interested in crypto, how it might make the internet better, and why it’s not all just nonsense, I suggest that you read Chris’s book. Let me know your initial thoughts in the comments.

Protocol of the Week: Kwenta

To balance Chris Dixon’s idealistic crypto vision with some degeneracy, let’s take a look at Kwenta.

What is it?

Kwenta belongs to a class of apps called perpetual futures exchanges that allow users to trade cryptocurrencies with leverage - with just $1,000, users can trade up to $50,000 of crypto (50x leverage).

The term “perpetual futures” comes from the fact that users are not trading the actual crypto token every time they buy or sell but are trading a derivative of the token called a perpetual future. This is a bit technical, and it all happens in the background anyway, so we won’t dive into the details here.

The big idea is that Kwenta users can bet on the prices of cryptocurrencies with way more money than they actually have. This is a double-edged sword. With good judgment, you can make way more money than you otherwise could have. If you’re wrong, you can lose all your money very quickly.

Why does it matter?

Besides being a good way to speculate (read gamble), perpetual futures’ “funding rates” are important in crypto markets - they represent the interest rate that traders are willing to pay to bet on the price of an asset.

High funding rates (positive or negative) represent a demand for betting that the price will move in a certain direction. This gives traders and investors an idea of market sentiment and potential price movements for the asset.

To be fair, leverage exists in traditional finance as well. The difference here is that crypto assets are very volatile and using leverage is a risky play. But traders will be traders and perpetual futures are just another tool in their toolbox. For more info about Kwenta read here.

Other News

• Mode Launch - a brand new Ethereum layer 2 network attracted over $60 million in just 4 days.

• Farcaster Growth - the first crypto social network to gain traction has emerged. The app is quickly approaching top 50 status in the Apple app store.

• Points Mania - why are crypto apps offering points instead of airdropping tokens? Take a listen here.

• Jupiter Airdrop - remember the $5 Billion JUP token from the markets section? Despite some criticism, the token was airdropped this past week and made some lucky users tens of thousands of dollars for free.

Take of the Week

Not crypto related but just a good thought from a founder of the world’s best startup accelerator.

Questions

Crypto is extremely confusing, especially when you’re first starting out. If you have any specific questions you want answered let us know!

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