Maven11 is one of the foremost crypto-venture funds renowned for its early trend detection and deep focus on the infrastructural layer of the crypto space. In this episode, we dive into the secular trends that crypto investors should be aware of, particularly the Modular Blockchain thesis.

Watch this episode to keep up with the next wave of blockchain evolution and its potential to shape the future of the crypto landscape

Chief Investment Officer Balder Bomans and Mathijs, Associate Partner of Maven11 shares with us:
- What exactly is the Modular Blockchain thesis
- Which layer accrues the most value in Modular Blockchains
- 4 interesting verticals other than Modular Blockchains

Host: Jason Choi @mrjasonchoi . Not financial advice.


Timestamps:
(00:00:00) – Introduction to Maven11
(00:03:38) – How Maven11 came about
(00:08:19) – Maven11’s secret to forming theses
(00:12:48) – Real-world Assets, Credit & Privacy
(00:16:15) – Modular Blockchains thesis
(00:20:25) – Data Availability
(00:25:02) – Future of Roll-Ups
(00:31:15) – Roll-Ups-as-a-Service
(00:37:09) – Value accrual across layers


Sponsor message:
Filecoin is enabling open services for data, built on top of IPFS.

Today, Filecoin focuses primarily on storage as an open service, but looks to build the infrastructure to store, distribute and transform data.

Read the full 30-page report on the future of Filecoin written by Blockcrunch over here: https://bit.ly/41gLdUm


More Resources:
Guest
Maven11’s Twitter: https://twitter.com/gizatechxyz
Maven11’s Substack: https://maven11.substack.com
Balder’s Twitter: https://twitter.com/BalderBomans
Mathijs’s Twitter: https://twitter.com/MathijsvEsch

Blockcrunch
Blockcrunch VIP: https://blockcrunch.substack.com/
Blockcrunch Twitter: https://twitter.com/theBlockcrunch
Jason Choi’s Twitter: https://twitter.com/mrjasonchoi

 
Disclaimer:
The Blockcrunch Podcast (“Blockcrunch”) is an educational resource intended for informational purposes only. Blockcrunch produces a weekly podcast and newsletter that routinely covers projects in Web 3 and may discuss assets that the host or its guests have financial exposure to. Views held by Blockcrunch’s guests are their own. None of Blockcrunch, its registered entity or any of its affiliated personnel are licensed to provide any type of financial advice, and nothing on Blockcrunch’s podcast, newsletter, website and social media should be construed as financial advice. Blockcrunch also receives compensation from its sponsor; sponsorship messages do not constitute financial advice or endorsement.

Full disclaimer: https://blockcrunch.substack.com/about

Crypto, blockchain, cryptocurrencies, cryptocurrency, Bitcoin, Ethereum, investing, venture capital, investments, DeFi, NFT

Before we get started, just a reminder for you guys out there, the Blockrunge Podcast is intended for informational purposes only.

Neither the host nor its guests are licensed financial advisors, and nothing discussed should be construed as financial advice.

Views held by Blockrunge's guests are their own and sponsorship messages do not constitute financial advice or endorsement.

With that out of the way, let's jump right in.

Today's episode is brought to you by Protocol Labs, the team behind Filecoin.

And with me today is Colin Efron from Protocol Labs, who leads ecosystem there to tell us why people should choose Filecoin over alternatives.

So Colin, why should people be using Filecoin over other competitors?

Filecoin believes that Web3 will only win by offering a better product at a better price point.

When it comes to storage, Filecoin offers the most scale at the cheapest price with the strong guarantees uniquely enabled by its open market of storage providers and its crypto economic incentives.

Now, smart contracts on Filecoin, which launches in Q1 of 2023, only make this more powerful.

It enables users to create perpetual storage deals to store data forever at costs that are a small fraction of centralized storage providers, I guess.

Now, before I move on, I'd love to thank the hundreds of you who have subscribed to BlockCringeVIP because with your support, I've been able to share my real thoughts on specific projects that I don't usually share on interviews in a format that I enjoy more, which is by weekly written posts.

We've also been able to offer exclusive AMAs, sharing my investment frameworks, interactable models, and breaking down important trends before they become big.

Now, we even had Elon Musk comment on 1 of our threads recently.

So if you haven't already, head on over to theblockcrunch.com slash VIP, and you can access dozens of hours of research for what you'd spend on a coffee a day.

Companies with lawsuits like Coinbase and Binance.

But on the back of that, we also have some of the largest asset managers in the world, like BlackRock and Fidelity applying for ETFs.

So amidst all this noise, I thought it would be a great idea to talk to the few surviving investors who are still investing their time and money into what they consider to be secular growth trends.

And 1 of the funds that have come to known over the years and deeply respect for their originality and conviction is Maven 11.

Maven 11 recently raised a 120 million venture fund, and they're constantly early to very big trends in crypto.

And I've noticed this over the past few years of knowing the guys there.

There were early investors in things like Olympus before SteFi became a major thing.

There were seed investors in a company called Genshin, which is now a company helping AI models run in decentralized networks, that recently raised a $43 million round in this market, which is no easy feat at all.

But I think most interestingly, Maven was 1 of the first funds ever to talk about this idea of data availability, and they were 1 of the first to invest in Celestia, which for the tech savvy among you know that it's becoming a major part of the rollup thesis and the entire Ethereum roadmap.

So to find out what still excites these prescient investors in an otherwise very quiet market, I'm really excited to invite my friends, Baldur and Mathijs from Maven 11 onto the show.

So why don't we get started by telling our listeners a little bit of the story for Maven 11.

What is Maven 11 and what does the name mean?

Perfect, well, I'll kick off and Matthijs obviously fill in where needed.

So yeah, the backdrop of Maven 11 is that the 2 co-founders have been investing in the space since 2011.

And Maven Maven is sort of a marketing slang for experts.

So they've been investing in the space for quite some time, then in 2015, decided to sort of more institutionalized is set up a fund that took a very long time back then, right.

So they wanted to set up a structure here based in based in the Netherlands.

They have been very keen on putting it up in the Netherlands because back then, right, asking investors to wire money for for this industry back in 2015 was a little bit more complicated if you could come up with a with a BVI or came like structure.

So they were very adamant on setting it up in the Netherlands, which was extremely difficult.

Getting a bank account took around 18 months back then.

So essentially, it got launched start of 2017.

That was the first fund, it was an open ended structure.

And that has indeed been invested in investing since and is currently in a more harvesting modus.

And then on the back of that first fund, which has been alive since then, we raised a second fund like you just alluded to in at the end of 2021.

That's currently still in deployment modus and indeed very big on the modular thesis, but also other verticals like DeFi and NFTs.

So that's sort of the high over backdrop of the company.

My background personally is has been in investment banking.

So I joined the firm in 2017 after being very excited about what crypto has to offer for the future.

Now there's a lot of obviously angles towards that.

So I've been with the company since and Matthijs is always making the running joke if we're getting into a call with founders that he has joined the firm before me.

I was buying and selling in-game items And I got paid via Ether, started reading up on it more, fell down the rabbit hole with Augur, which I think recently prediction markets have gotten more attention again, right, with PolyMarket now.

And consequently joined Maven because I was spending all my free time on this industry anyway.

So I figured why not make some money while doing so.

I was studying part time and part time analyst at the fund.

Graduated in 2019 at like depths of the bear market, decided to go in crypto full time, and not without some hesitation because back then it was really like, okay, this industry, is it going to survive for a year or 2 more?

I've been helping build our like infrastructure thesis, um, and venture investments since then.

And I guess all of us have been around since the pretty early days.

Do you guys feel like this time around for the bear market, is it worse than 2019, 2018 or better?

There's less like fundamental risk of this industry existing in 2 years.

Whereas in 2019, I definitely remember that there was more like, okay, is this thing going to be around at all?

Maybe the regulatory climate is but yeah,

I think it's maybe even way better, right?

I mean, if you see the use cases that have been building over the last couple of years on Ethereum, other chains, right, around DeFi, Open Finance and NFT use cases, we have a lot more stuff you can use, you can build upon a lot more users overall, although we're somewhat in a sort of a downtrend for now.

But compared to the end of 2018, everything was sort of vaporware, right?

And the pricing is obviously a result of the phase where we are in the market, but also a result of the fact that there's a lot of players who were over levered over the course of 2022, that's out of the market.

So I think overall we're in a way healthier market than we have been then in

And I'd love to dive into the thesis that I think a lot of people know you guys for, which is the modular blockchain thesis.

But before that, I guess at a high level, because when you guys first started investing, a lot of these things weren't around, right?

So can you guys walk us through how you approach thesis formation and whether there's been any major changes to your thesis since the beginning of Maven 11 to today?

In general, obviously you have a thesis, but we're also a seed fund, right?

So in general, our thesis is also derived by the founders we back and where we see them having their interest in building.

And they also educate us and we sort of return and align our thesis with what they're doing.

So I think especially the modular thesis you mentioned is a good example of that.

It's not like we came up with the modular design.

It was more like, hey, we saw these 3 founders, Ismail, John and Mustafa, building something extremely different than the rest of the industry back then.

And then we started to form a thesis around that.

So in general, I would still say we back quality founders and then we build a thesis around what they're building and if that sort of fits our world view.

And in that sense, the Mojto narrative or thesis with like roll-ups, et cetera, definitely fit that sort of domain.

You know, these new ideas and trends are being built by a lot of these amazing talented founders in the space, obviously.

And you read up on these trends and you start to form a new idea or you see something happening or you have sort of an idea in the backdrop of your head and you think, oh, well, there's something happening here.

But it's also, I think a lot of the stuff in terms of thesis is maybe somewhat timing, right?

So I think open finance, you know, the fact that we can automate transactions via smart contracts has been a break to development.

And that's how Open Finance and DeFi has have been built today.

But for instance, 1 of the, I think, sub-verticals there is obviously real-world assets, which a lot of people have been chatting about over the last 6 to 8 months.

And I think that's because there's a lot more regulatory clarity happening, which allows that thesis now to start playing out right if you would have done you know, start tokenizing real assets probably 2, 3 years ago, it would have been way too early.

So I think as an investor in this space, you you have sort of a base thesis and you also start to, you know, look into new sub-verticals as the industry matures.

That you need to have the flexibility to understand new domains and also start investing in these new domains.

Obviously, 1 of these newer verticals, I think we have been seeing a lot of investments into is gaming.

It's something we're closely looking at, but I wouldn't call us, for instance, a very gaming expert fund today, right?

So we say, okay, we think it's interesting.

We follow all the trends and there might be in due time that we're going to be allocating more capital into that subthesis.

Yeah, I think that process is really interesting, right?

Because from what Matthijs was talking about, I think that type of approach for some VCs who are not as on the ball as you guys, it would tend to lead them to FOMO into things that they don't fully understand.

So for instance, if a lot of people are talking about AI, suddenly all the VCs are trying to pile into AI without really fully understanding the unit economics.

But for you guys, you seem to have a track record of being consistently early to big trends before they become a big thing.

Like let's take the example of like Jensen, for example.

This is way before people even connected crypto and AI.

And then you guys back the seed round for this company that's doing decentralized compute for AI models.

So how did you guys kind of come up with that thesis?

Yeah, I think sort of the thesis is maybe, which also, yeah, what Baldassai said just remind me of that, like, you look for problems that these companies solve, right?

And with the modular thesis, it was like scaling, okay, we saw that scaling was an issue, I think everybody saw, and then okay, what's the solution to this?

For Jensen, the problem is clearly that AWS is just making a lot of bank on selling compute resources, right?

And then especially with the rise of AI, compute resources are only going to be in higher demand.

I think the Jensen thesis is even that there won't be enough compute to satisfy training all these models that are going to be out there.

And then on top of that, there's always the angle that crypto offers, right, the permissionless and decentralized angle.

So the Jensen founders are very clearly thesis driven on this, like, hey, training these models is just going to be politicalized almost, right?

It's going to be a weapon, they say, almost.

So does it make sense to make that decentralized and permissionless?

We would argue yes, because that's, I think, why we're building in crypto.

And there are also use cases where maybe that makes no sense, right?

And I think the last thing to touch on, the kind of broader thesis part before we dive into modular blockchains is I'm curious what type of verticals you guys are still interested in?

Because I think in this bear market, at least personally, we've seen a lot of verticals that were very much driven by Hive, kind of disproven.

So for instance, I think the idea of like decentralized virtual metaverses are like 10 years way too early.

So like these are just like that probably, you know, I'm not going to be putting a lot of my capital to work there anymore.

Are there examples of thesis that you think have been somewhat disproven by the bear market?

Or in other words, what are the verticals that you guys are still incredibly bullish on and paying attention to?

Well, I'm going to be bullish, this is obviously a big statement, right?

But I would say that DeFi and Open Finance are going to be here to stay.

And I think they are definitely in sort of in a somewhat darker place in terms of performance.

A lot of these tokens have not as well as people expected.

I think TVL has dropped massively across the board over the last 1 and a half years.

So I think there's a lot of arguments for people to make to maybe not invest in DeFi or shy away for this moment in time.

For us, I don't think that's really an issue, right?

1 angle on the DeFi side, or actually 2 angles, obviously the real world assets we just chatted about, I think that's definitely gonna be an exciting domain for the years to come.

Although it will probably move slower than DeFi as we have known it today, right, because there is a sort of a regulatory angle there and you need to educate the sort of more threat environment on the topic.

And secondly, is everything around credit, I think is extremely exciting, right?

Credit has been completely, well, almost near went to 0 over the last 1 and a half years, a lot of blow ups, especially on the credit side.

So, and we are definitely of the opinion that that will come back.

Is it gonna come back in a different and more transparent and a more robust form?

I hope so, because obviously, credit hasn't done particularly well.

And we have seen that all the trust assumptions which we have tried to build away from have been baked into our system over the last couple years.

And so, yeah, we hope that a new form of credit underwriting, using more transparent and using sort of the blockchain scale, the blockchain angle there, I think is going to be extremely important.

So we continue to invest in DeFi and Open Finance and definitely credit is an angle we're very interested in.

Yeah, for me, I think it would maybe also be privacy tech.

And I know this is maybe less popular, right?

It's quite hard to convince people like, hey, privacy matters.

But we see a lot of adoption on the stablecoin side.

And I think that's sort of the original Bitcoin use case.

Hey, remittance, you can send money to somebody very easily, cut out the middleman, save fees, etc.

But I do think that you need privacy on like a payment level before that gets widely adopted.

I don't want to send you maybe some USDC, and then you being able to see my mortgage payments, my ghost, you know, all my transactions.

So I think in that sense, just being able to confiscate a lot of your financial history makes a lot of sense to me for a lot of use cases.

And I think a lot of people make it sound more controversial than it is, right?

There are privacy means money laundering.

But if you think about our bank services, it's de facto private already, except to your bank, obviously.

But if I wire you money today, you know, Bonder's not going to know.

And I think it makes a lot of sense for us to see that in DeFi.

But I'd like to kind of pivot quickly to talk about a big focus for you guys, which is modular blockchains.

So I think 1 of the early big successful bets that you guys made was Celestia, previously known as Lazy Ledger.

But before we even dive into that, what exactly is a modular blockchain and what kind of gave you guys a conviction that, hey, this is the way that this is the future paradigm?

It's just a blockchain that splits execution from data availability and consensus.

You could also say execution and settlement, but there's a little bit of semantics about this, right?

But in general, it's just the roll-ups that we see where you move part of the execution of chain or to a sequencer or another blockchain, you could say, and thus scale the underlying base layer.

How does this fit in with the layer 2 vision?

Because it seems a large part of the modular blockchain thesis is to increase scalability.

But at the same time, a lot of people seem to think that maybe layer twos alone in the current form are sufficient to scale Ethereum or maybe monolithic chains like Solana, where you increase centralization a little bit, but you spit out a lot of blocks in a short amount of time is sufficient.

So where does, how does a modular blockchain advance the dialogue?

Yeah, I think what it allows for is way more scaling than that.

And indeed, Ethereum scales quite well right now.

But if you imagine that there'll be 10 more rollups, I think the data availability needs for a lot of these rollups are not going to be able to be satisfied.

And so there is a limit to the users that can get onto these L2s today.

In addition, maybe to go a little bit of a step back, right, when we initially found Lazy Ledger, we reached out to, I think, Mustafa out of the blue then, you had a lot of these scaling solutions being built, right?

State channels or Lightning network for Bitcoin was 1, you had, I think, plasma and plasma cash, which eventually turned into like the optimism group and the optimistic roll ups.

And that was sort of 1 big trend that we saw.

And I think that got sort of cultivated even more when Vitalik posited his roll up centric roadmap for Ethereum.

And then at the same time, you had all these more monolithic L1s, which are very interesting in their own right and have strong engineers behind them, etc.

Like Solana, which was also being pitched back then.

What was just noticeable on the lazy ledger side that they took this very radically different view, right?

Like all these monolithic ones want to do as much as they could on 1 layer and here you had these 3 guys who were like, okay, we're going to do as little as we can, which is in the name lazy ledger on 1 layer and just specialize in that 1 thing, right.

And if you look at like a very high level that fits with how we see like economics develop, where you specialize in 1 thing do it extremely well and thus be more efficient.

And I think that's like very high level, the modular blockchain thesis.

And I think to add to that is I think it's also been somewhat, oh, it's definitely been ingrained in the thesis and as an investor is that we do think decentralization is extremely important, right?

So I think also back then, 2018, 19, indeed you saw layers or layer 1 sacrificing decentralization to a certain extent and you know, improve the, or boost up the hardware requirements and then sort of, yeah, spitting out blocks like you just said and being a little bit more centralized, which I think is fine for a lot of use cases that will work extremely well.

And I think at that time we all said, well, we think that, you know, you need to ultimately completely trust and be a first class citizen as Celestia calls it, so you can verify the blockchain yourself, right?

So that's definitely very important in the Celestia and I think just generally whole high over the modular ecosystem.

When they hear about modular blockchains, you know, you can't talk about modular blockchains without talking about data availability, But a lot of folks out there might not be familiar with what this concept is and why it's such a big, big market to solve for.

So can you guys walk us through just what exactly is data availability and how does Lazy Ledger or currently known as Celestia kind of fit into that?

Yeah, so data availability, I think maybe the term in hindsight was poorly chosen.

But what it means is that you ensure that all the data that's in a block has been made available, right?

So that there's not like a part of a block that has been kept away from the rest of the network.

And how you typically solve this is that you let every node in the network download every block in full and they just verify it entirely, right?

If I download the whole thing, I know it was all available because I can download it.

The downside to that is that there's quite a high resource constraint, unlike the nodes, because they do need to download the entire block, which is also where the whole block size debate in Bitcoin originally comes from, right?

Do we increase the blocks and does scaling, but at the cost of making it more expensive to run a note for the average user?

And I think the Bitcoin core developers are very much like everybody should be able to run a full note on like a home laptop almost.

And the Ethereum folks are in the same camp.

Whereas I think maybe Solana makes a trade of like, hey, running a full node, it can be a bit more expensive, right?

It's fine to ask for more requirements there.

That's like data availability in like a nutshell, just ensuring that the data of a block has been made available to the entire network, Not to be confused with, will it also be stored forever?

And I guess for Lazy Ledger, what exactly, well, Celestio, we should probably call them by the current name.

Like how do they make data availability more available, I guess?

Yes, so they do that by introducing something called data availability sampling.

This was introduced by Vitalik, Mustafa Albasan and another guy which I can't remember his name right now, sorry for that.

But in a paper back in 2018, they use a technique called eraser coding.

I think they use it on CDs to recover data.

But what you do there is You push out more data, but you fragment it in a certain way.

And by sharing these fragments, you allow a group of people to be able to recover the full block of data.

So what that means in practice is that no longer does every likelihood or need to download the entire block, but they just download samples of a block and in doing so, they assure that the entire block was made available and this sort of surpasses the earlier, the issue we saw, right?

If you increase the block size, everybody needs to download more data because they need to download the entire block.

Well now they can just download a subset of the block, let's say 10% right, just making up this number, but and in doing, in downloading just at 10% you can verify that the whole block was available with like a 99.9% certainty.

I think that's like the unique innovation that sets sort of the base layer or the basis of the whole Celestia or modular thesis.

And we're also seeing Ethereum moving this direction, right, with They also want to implement data availability sampling.

Is it safe to say that, I guess, the core thesis for Celestria and the modular blockchain thesis is basically making it much, much cheaper for people to create and run their own chains or their own rollups?

Yeah, and maybe also for end users to verify them.

And also, if you ask me, like, how do you want to make the bear case for the whole modular blockchain thesis, that would be like users don't want to verify the chain.

See all The Blockcrunch Podcast with Jason Choi transcripts on Youtube

Top Crypto Fund on What's Worth Backing in Crypto - Balder and Mathijs from Maven 11, Ep. 243