Over the holidays I had a chance to sit down and carefully reread Ryan Selkis’ (https://twitter.com/twobitidiot) Crypto Theses for 2022 (https://messari.io/pdf/messari-report-crypto-theses-for-2022.pdf). Regarding Web3, Balaji Srinivasan said of this PDF: “If you understand everything in here, you are up to speed.” While I certainly agree, this 165 page paper is not for the faint of heart. Ryan covers narratives and investment themes, people to watch, thoughts on Bitcoin, American crypto policy, market infrastructure, NFTs, Web3 plumbing, DeFi 2.0, Ethereum layers & bridges, and DAOs. I’ve been reasonably following and investing in this space for 5+ years, and I still had to read many sections multiple times to wrap my head around it. Overall, I’m super impressed with the thoroughness of the document. He wrote this up in Oct/Nov 2021 and many of the predictions/theses have already become reality just a few months later.

The opening

This is great:

One you’ve staked tokens and participated in liquidity pools, for example, a traditional bank account seems laughable. Obviously it will take time for the world to catch up and offer economic pathways for everyone to pay for our food, bills, houses, etc.. directly with crypto, but I’m done trying to convince my friends/family/colleagues that Web3 has any value. At this point I just refer people to Ryan’s paper, all my podcasts and articles on Web3, and tell them if they don’t yet “get it” then it’s certainly not an information availability issue.

To be fair, I still enjoy attempting to explain Web3 and its value to people (e.g. I recently wrote an article entitled Why Web3 matters for human flourishing). Overall, talking about the Web3 value proposition over and over again frankly helps me better digest it and decide how/where to act. For example, I recently decided to work real-time on a Web3 book that I’m now using to frame my own mental understanding of Web3. I “pin” things I learn to the different sections so I can better wrap my head around it.

Narratives and investment themes

Houston, we have a problem:

Where I come from (and work in) we call this a significant opportunity. People now have the freedom in Web3 to form and/or participate in DAOs that they believe are both competent and ethical. This is not just a future theoretical state; you can right now spin up a wallet, do work, get paid, invest, earn 50%+ APR on your money, and participate in the New Internet.

This section (Chapter 1) is a great deep-dive into Ryan’s thoughts around crypto narratives and investment themes. For those newer to Web3, just reading someone share their thoughts in-depth is a helpful perspective to learn about what’s going on (and where things may be headed).

People to watch

Many of these folks I hadn’t yet really followed or learned about, so - while in general I try to avoid watching social media and such very closely - this section does a great job introducing some neat players in the space.

Bitcoin

I have to admit, while of course Bitcoin is an important factor of the overall crypto movement - and I’m bullish on it as a long-term store of value - I’m less interested in it in terms of how it will impact the practical daily lives of billions of people this decade. For this, the new ecosystems in Web3 (i.e. beyond Ethereum, such as its sidechains & rollups, plus Cosmos, Solana, Polkadot, Avalanche, etc…) are paving the way to provide affordable and accessible chains on which to build and participate in DAOs, DeFi, NFTs, and other types of decentralized applications (dApps).  

American Crypto Policy

Here is where I had a lot to learn. There is a ton of history and a long battle with US crypto policy that hasn’t been the friendliest to Web3. I’ve been closer to the “build” side of Web3 and less involved in the interface with jurisdictions (especially in the USA), so while it’s clear that Ryan is pretty fired up about all this, my takeaways were:

1. I’m thankful that people like Ryan are paying close attention to this.
2. Politicians need to better understand what’s going on here so “the left” doesn’t just blindly think that all crypto is bad.
3. Policymakers in the USA had better catch up quick, as more “advanced” web 3 jurisdictions - or at least those more friendly to it - are going to house the future of online technology.

Market Infrastructure

The important implications of how Centralized Exchanges (CEXs, part of “CeFi”) helped usher in crypto into a safe(ish) legal space in the USA is hard to overstate. Still, the future of decentralized exchanges (DEXs) and automated market makers (AMMs) is looking extremely bright. Here, Ryan dives yet again into a long section that finance and regulators/policymakers will want to pay close attention to, and the rest of us should appreciate being a fly on the wall as to what’s going on in this space (because - frankly - the whole rest of the year I’m not following a lot of these spaces; not enough time in the day).

NFTs & Web 3 Plumbing 

If you look at who is guzzling gas right now on the Ethereum mainnet, chances are you will see “OpenSea” at the top. For quite some time now, they have been occupying 20%+ of the activity on Ethereum. Yes, this is quite literally people buying and selling NFTs on a single platform.

Interestingly, OpenSea is actually a centralized entity; the owners have structured themselves as a traditional company. I’m less upset about this than many others are, since I know we gotta start somewhere. But, personally, my money is on future decentralized NFT marketplaces outside of the Ethereum community (e.g. the upcoming Stargaze).

Beyond art, Ryan does a good job in this section explaining how NFTs are going to be playing a key part of the Web3 ecosystem moving forward. There are plenty of other assets that require unique identification (credentials, licenses, deeds, tickets, keys, etc…) that are going to leverage NFT technology as we move forward together online.

DeFi 2.0

Not surprisingly, stablecoins are going to play a key part of our transition into Web3 and help usher in an important “bridge” to traditional finance systems. In this section, indeed you will quickly get up to speed on both new and “old” DeFi instruments, stable coins, automated market makers (AMMs), and DAOs that are working to lay the tracks for a global economy on-chain.

ETH, Layers, and Bridges

For better or worse, Ethereum is the trillion-pound gorilla in the room right now and has an impressive market share (and volume share) of all-things Web3. Importantly, “The Merge” into Proof-of-Stake (vs. the more energy-consumptive Proof-of-Work), is going to lock up a LOT of capital and force creative ways to unlock liquidity to keep markets moving. Thankfully, there are plenty of mechanisms to do this.

In this section, I appreciate how Ryan paid close attention to Solana, Polkadot, Cosmos, and Terra. This helps readers - especially those new to Web3 - understand the similarities and differences between the different “Layer 1” ecosystems.

Plus, while of course the Ethereum mainnet is clogged right now, the final sections on sidechains, rollups, and bridges in the Ethereum ecosystem provide excellent insight into how the scaling problems are being addressed right now in order to help save Ethereum users gas fees. (Indeed, even just recently updating my ENS (wclittle.eth) metadata – which you can see https://wclittle.eth.xyz - everyone’s ENS profile can be looked-up similarly - cost well over $100 USD in gas fees).

The DAO of DAOs

While I won’t list them out here (and instead refer you directly to the PDF), Ryan does an impressive job not only describing what DAOs are and some of the hot-button issues, but also to name specific DAOs going after specific goals.

Recently, I’ve been writing and podcasting a fair amount on DAOs. I’ve been working on spinning up DAOs with practical tooling (mainly Discord, Coordinape, and DAOHaus) to carefully consider how starting, growing, and managing a DAO is different from doing so with a traditional organization.

Interestingly, I read a 315 page doctoral thesis on DAOs and wrote up my notes on it here. I don’t think Ryan has read the thesis, but he does a great job summarizing the legal framework options for DAOs that Dr. Sims’ writes about in depth. I’ll refer you to my write up - as well as my DAO articles/podcasts - for my longer-form thoughts on DAOs, but my overall reflection is that we are very, very early and will likely see lots of mistakes, legal crack-downs, and people wishing they had better legal clarity and protection before participating in DAOs. (To that end, hat-tip to A16Z for their A Legal Framework for Decentralized Autonomous Organizations paper that Ryan mentions).

All of the above being said, I’m still incredibly bullish on DAOs. With the right legal setup, DAO founders (“summoners”) and people jumping in have an incredible ability to leverage transparent treasury management and governance to create a huge pie for each other (and to do real good in the world).  

Ryan’s Bonus Section

I’m glad that he tossed this section in at the end. It’s important to not only get to know the human behind the writing, but he makes extremely good points about why to write, where to get information, how to be more productive, and how to properly live life.

Obviously, as someone who enjoys writing and publishing, I couldn’t agree more about the “fun” of getting thoughts out for discussion. My strong preference, of course, is a simple newsletter that I use to communicate with my friends/family/colleagues/followers (you can subscribe here), however - no matter how (or where) you like to communicate - I’d echo Ryan’s call-to-action to start writing more. Especially in Web3, the more people we have sharing their insights/thoughts, the better.

To that end, I’d like to welcome you to join our BanyanDAO, which is dedicated to helping each other learn Web 3, practice "on-chain" governance, and create/join other DAOs to build a better Internet together. If you don’t want to publish articles/podcasts on your own site, I very much welcome you to join us in our Discord channel and share a few thoughts. There, I’ll also be sharing my various Web3 notes and learnings, and asking questions of other subject-matter experts in various Web3 niches.

As a final plug, I’ve begun scaffolding out my own Web3 book here. While for the past month or so I’ve been referring everyone to Ryan’s PDF, I’m increasingly convinced that it will be helpful to lay out a more concise structure of Web3 topics and then refer people generously to seminal works like Ryan’s annual crypto theses.

Overall, I’m incredibly thankful to Ryan (and his team at Messari) for producing such an amazingly thorough and insightful document. I’d highly recommend you share it with friends/family/colleagues who are interested in diving much deeper into this space, especially if they tend to learn more in the finance/policy/investor direction. Thanks for reading!