Crypto Startup Ideas

"Real-World" Financial Applications

Crypto Payment

Stablecoins are the first and by far the largest non-speculative use case of crypto.

According to a Brevan Howard Digital report, "In 2022, stablecoins settled over $11T onchain, dwarfing the volume processed by PayPal ($1.4T), surpassing the payment volume of Visa, and reaching 14% of the volume settled by ACH." It always baffles us that people think crypto still hasn't found a killer use case beyond trading.

We don’t believe crypto payment startups should compete with the likes of Venmo or Revolut. Instead, they should identify and focus on underserved user segments such as traditionally underbanked industries (often taboo industries) or cross-border payment.

We are particularly interested, for instance, in stablecoin payment appplications for Latam, Africa, the Middle East, South Asia, and Southeast Asia, where fiat debasement and censorship are more prevalent. We have a lot of anecdotal data points from talking to startups that stablecoin adoption is hockey-sticking in these regions of the world.

"Binance P2P" or "Local Bitcoin" for Developing Nations

However, in order for crypto payment to be useful for consumers in these regions of the world, it needs to solve the last-mile problem, ie, onramp from local fiat and offramp into local fiat. Otherwise, the recipient wouldn't be able to use the payment in "real life" and the sender would be restricted to crypto-natives.

One solution for this is similar to Binance P2P or Local Bitcoin, where a network of agents help facilitate on- and off-ramps in a peer-to-peer way.

Crypto Neobanks for Developing Nations

These neobanks were all the rage 2-3 years ago, but few focused on developing nations where demand for stablecoins and yield is disproportionately strong.

We are excited about the idea of offering yield on top of stablecoins to consumers in developing nations. Although in certain parts of Latam it's fairly crowded, we still believe opportunities exist across the globe.

A further tailwind is the proliferation of onchain RWAs, such as US treasuries, which enable uncorrelated and often higher yields than crypto-native yields from Aave and Compound. These RWAs make high-quality assets from developed nations easily accessible to developing nations.

Real-World Asset (RWA)

There's now $1.5T worth of onchain wealth. This onchain wealth seeks diversification.

• Ever since the 2023 banking crisis onchain treasury diversification became a hair on fire problem for many crypto-native organizations. MakerDAO, for example, leads the charge here.
• Crypto-native speculators are now wealthy enough that they too want to diversify their holdings beyond the highly correlated cryptoassets.
• Consumers in emerging markets want to own high-quality assets. Today they have USD stablecoins, which are better than their native currencies but still suffer from endless debasement.

The types of RWAs we are interested in include but are not limited to:

• Financial assets such as treasuries, stocks, corporate debt
• Hard assets such as real estate and commodities
• Collectibles such as watches and Pokemon cards.

RWA Collateral Lending

A different spin on RWAs. Allowing off-chain assets, such as real-estate, treasury bills, or other RWAs to to serve as collateral.

The obvious way is to tokenize the asset and treat it as collateral on-chain. An example is 4K tokenizing a watch, and using the watch NFT on Arcade to take out a USDC loan. With all asset classes in the world on a single ledger, we can dramatically improve lending/borrowing experience. Any asset can be collateralized to borrow any other asset. This is something not possible before crypto.

But there is also a possibility to forego the tokenization. Maybe just keep an oracle, or maybe even less. An example is Maker. They've effectively created a collateralized debt position, DAI, partially backed by RWAs (treasury custodians), but their RWA positions are not tokenized.

Another potential example is unlocking a fund's RWA capital efficiency by making use of it in crypto, without having to fully tokenize it.

Crypto-Native Financial Applications

Continuous Prediction Markets

Most people want continuous, unlimited upside. They don’t want to be limited by discrete, binary outcomes, which is the case in traditional prediction markets. We believe truly crypto-native prediction markets are actually meme coins in the form of plain-vanilla fungible tokens, like $BIDEN and $TRUMP.

Under-Collateralized Lending

As on-chain reputation becomes more important, under-collateralized lending becomes possible. In fact, most corporate lending in TradFi is under-collateralized.

A number of recent developments make under-collateralized lending increasingly more feasible:

• Offchain attestations like Coinbase or Clique
• Increasing adoption of ENS and other domain names
• Increasing number of people receiving regular onchain cashflows

A specific example of under-collateralized lending is to enable onchain individuals or organizations to borrow against future cashflow.

Privacy DeFi

Privacy finds PMF in unexpected places. For example, centralized exchanges are also used by whales to anonymize their transactions. We also suspect Thorchain, which is branded as a cross-chain swap, to be a de-facto privacy solution. It might be seeing usage that would've gone to Tornado which is now defunct, because tracking transactions cross-chain is much more difficult than tracking transactions on the same chain.

Regardless, we are interested in novel solutions to this old problem. For example, zero-knowledge proofs (ZKPs) can be used for compliance (to prove the user is not a citizen of a sanctioned state or is accredited) without breaking pseudonymity. We are also fascinated by other technologies like multiparty computation (MPC), fully homomorphic encryption (FHE), and trusted execution environment (TEE).

Rari Reboot

We have learned that numerous projects across verticals and across the world have rolled their own lending platforms by forking and modifying Aave or Compound. This incurs substantial cost when it comes to development, audit, and maintenance. Reducing this cost at scale is the original thesis behind Rari Capital, which can be thought of "Aave/Compound fork as a service". But now that Rari is defunct due to hacks, there are opportunities to fill this gap again.

M&A Investment Banking for DAOs

In 2021, Fei Protocol merged with Rari Capital. That will not be the last DAO merger we will see. More DAOs will be under distress, and more will want to acquire horizontally or vertically. There is an opportunity for somebody to build reusable tools (smart contract and legal structures) that will facilitate this process and make it more sophisticated.

NFT Derivatives

NFT options, perps, and futures can help NFT holders hedge their position or simply speculate on the prices of NFTs.

Index price is difficult to calculate and easy to manipulate due to illiquidity of the underlying. So perhaps physically settled derivatives are the right design.

Prime Brokerage

Capital efficiency is constrained by the fact none of the protocols talk to each other in terms of risk. Perp protocol A doesn't care that you have a hedge on lending protocol B.

One approximation to this is to pool assets together into one giant account on each protocol. Create an accounting layer to handle risk for every clients' account. Are there better ways?

Non-Financial or Semi-Financial Applications

Fully Onchain Games

On-chain games are those where the entirety of the game state and game logic (not just in-game assets likes currencies and NFTs.) is written to the blockchain.

Consider Tic-Tac-Toe. The concept of turns, a 3x3 board, players and a sequence of three must be unchangeably documented as the rules. The history of player moves must also be recorded. On the other hand, the colors of the board and pieces, the shapes of the pieces (X and O can become Y and Z for all we care), the animations, the sounds, etc. can all stay on the client-side.

Putting all states and logic onchain unlocks all sorts of novel behaviors:

• Smart contract-based players (as opposed to human players) that play the game. One of the earliest instantiations of this is actually MEV in DeFi. Trading is the game and MEV bots are smart contract-based players. Notice that in this case the smart contract-based players not only compete with each other, but also compete with human players.
• Game mods built by third-party developers without fear of getting deplatformed. Mods are the lifeblood of Web2 games, and many generational games started out as mods (eg, Dota 2, Counter-Strike, and PUPG). However mod devs are at the mercy of the original game studio due to the permissioned nature of Web2 games. In fact many have gotten either de-platformed or would never have started modding for fear of getting deplatformed.

Eventually, the game studio can become a game publisher. If Web2 history is any indication, it’s highly likely that the first successful onchain game engine comes from a successful onchain game studio. Think Unreal (the engine) and Epic Games (the studio). By the same token, the first successful crypto game publisher will also likely come from a successful crypto game studio. Think Steam (the publisher) and Valve (the studio).

Onchain Social Networks

The winning Web3 Twitter will ultimately offer the features we have been eager to see: user-owned data, client diversity thanks to permissionlessness, and/or resistance to speech censorship.

There’s only one problem. If history is any indication, it’s highly unlikely that the first successful Web3 Twitter will start out as something that wants to be the next Twitter or looks similar to Twitter. Perhaps the Web3 Twitter will start out as a game, a DeFi super-app, or something so novel and seemingly so inconsequential that it gets laughed at, or so outrageous that it upsets a lot of people. The weirder or the more controversial your product is, the more we are excited to try it!

Anonymous Social Networks

A specific example of an onchain social network is a anonymous social network where individuals use ZKPs to prove certain identities, eg, they are employees of company X, or have an net worth of over $Y. Anonymous gossip will always be in high demand. Think back on the early days of the internet with Ratemyteachers.

Personal Tokens

Despite failed experiments like BitClout and drama around Frientech. The idea of personal tokens is fundamentally novel, as it enables people to speculate on a new and possibly enormous asset class. We expect future iterations of this idea to find product-market-fit.

The most interesting thing about Friendtech isn't the alpha sharing, the private groups, or the social networking, but that it solved social consensus. Say 5 people create 5 different plain-vanilla ERC20s called $VITALIK, which one is the "real" Vitalik coin? Friendtech solved this problem by asking creators to log in with their official Twitter account. Bam, social consensus solved.

In other words, Friendtech mixes two orthogonal ideas into one: alpha sharing and token speculation. What if we decouple the two and focus exclusively on personal token speculation? Alpha sharing already exists in Web2 at scale in the form of Substack, SeekingAlpha, and Telegram paid groups.

Creators and Luxury Brands

For these user segments, blockchains can fundamentally be two things. First, they can be factories for digitally native goods. Image-based NFTs (eg, PFPs and generative art), language-based NFTs (eg, novels), or audio-based NFTs (eg, music) are all examples of digitally native goods. They offer creators and brands a new way to monetize their brand and artistic prowess. For buyers, these NFTs are speculative collectibles, and that's an under-appreciated carrot for the early adopters. But the creator/brand could also decide to offer benefits such as exclusive access and royalty.

Second, they can be databases of redeemable receipts for physical goods. For example, a pair of Nike sneakers can come with an embedded physical chip that's digitally linked to an NFT. Some call this "phygital". Others call this "digital twin". You can even consider this as an "RWA" if that's helpful. An onchain representation of physical merchandise offers the creator/brand a new channel to engage their customers, the customers strong assurances against counterfeiting, and the asset itself the potential to take advantage existing DeFi/NFTFi infrastructure such as lending.

We are excited about startups that start off with a very specific vertical of creators or brands and help them offer new experiences to their customers. The narrower the vertical the better.

10k PFPs

PFPs will probably remain the leading category of NFTs for a while, despite being so simple. The key insight here is that large distribution channels already exist for these NFTs, and these are Twitter and other social networks where the NFT holder can put their Punks or Pudgys as their PFP.

Contrast this with gaming NFTs, music NFTs, and others. Gaming NFTs need new games that natively support them to get built and reach mass adoption, or existing blockbuster games to adopt them. Music NFTs aren't supported by Spotify, Youtube Music, or Apple Music. You can flex a generative art NFT on Twitter, but it takes a tweet to do that and the tweet fades into oblivion 24 hours later. But your PFP is a constant flex, it's there every time you tweet and every time someone lands on your profile.

PFPs are simultaneously the most boring yet the most exciting category of NFTs.

Habit Formation Apps

StepN has shown that token incentives can be effective in encouraging people to develop healthy habits. This could include activities like running, sleeping, meditation, diet, or learning something new. Some research has suggested that it can take anywhere from 18 to 254 days for a person to form a new habit, with the average being around 66 days. Getting over this initial hump can be difficult for many people, but the use of financial incentives through tokens may provide the motivation that people need to stick with their new habits and make them a permanent part of their lives.

DAOs as Digital Nations

One of the end games for crypto is to deprecate nation states as humanity's basic organizational unit.

Crypto enables us to implement property rights via encryption, constitution and laws via smart contracts, taxation via token issuance, national currencies via cryptocurrencies, transparent policymaking via decentralized governance, and international trade via DeFi.

The idea then is to start as an online community, with a shared set of interests or beliefs, a meticulously designed governance structure, and a path to grow economically. Most DAOs don't realize this yet, but they are effectively on path to become digital nations.

Decentralized Scientific Crowdfunding

One of the biggest problems plaguing scientific communities is the lack of funding. And the lack of funding stems from the risky and speculative nature of scientific discoveries. On the other hand, crypto capital is risk-seeking, open-minded to new speculative ideas, and abundant. The idea is match the two groups.

Despite the bad rap around "ICOs", it is fundamentally one of the biggest unlocks of crypto.

Decentralized 23andMe

Another major challenge, particularly in health science, is the lack of adequate datasets to test their hypotheses. One possible solution to this problem is to use tokens to incentivize individuals to contribute of health data for scientific research and drug development.

For example, individuals could share their genotypic and phenotypic data, creating a decentralized version of 23andMe where participants are rewarded for their contributions. Another example is the sharing of physical activity data, heart rate, sleep data, and other types of data collected by wearable devices. Universities, hospitals, and pharmaceutical companies could access this data through a marketplace for research and commercial applications.

Open and Market-Based Scientific Publications

Another futuristic idea in DeSci is to leverage crypto primitives to disrupt scientific journals. These journals traditionally serve as curators and distributors of scientific research. But as curators they are plagued by perverse incentives and as distributors they are often paywalled. Perhaps crypto can help create open, market-driven scientific journals. For instance, every paper automatically comes with a prediction market on the integrity of the research or probability of theoretical proposals translating into practical results.

Decentralized GLG

Consultation networks such as GLG (650m$ annual revenue) are popular ways for people to request very specific experts that cannot work as full-time professional consultants, but still have extremely valuable insights to share. These networks are extremely monitored and highly regulated, limiting their value and creating a general chilling effect over the product. Crypto-social-networks such as Friendtech have emerged, suggesting at least the possibility of expertise-sharing for niche thinkers. We think that crypto, with its abilities to preserve privacy, resist censorship and transfer value, is uniquely suited to reinvent the expert consultancy.

Infrastructure

DePIN

Tokens have been proven to be a phenomenal mechanism to coordinate large-scale human activities. We are interested in startups that leverage tokens to incentivize people to create

• telecommunication networks
• clean energy infrastructure
• large datasets for AI training
• Other areas we haven't thought of.

This is widely known as proof of physical work (POWP) or decentralized physical infrastructure network (DePIN). Take renewable energy as an illustrative example. It can also be unpredictable due to the intermittent nature of sources like wind and solar. Batteries can help solve this problem by storing excess energy for use when it is needed. The more batteries that are connected to a public energy network, the more useful they become. The PoPW / DePIN network uses tokens incentives to encourage households to deploy their batteries and to pool them together to for later use.

Battling AI Deepfakes

ChatGPT may have stolen the spot light from generative AI models that focus on generating pictures, audio, and videos. However, these models are currently capable of generating realistic deepfakes. The recent AI-generated Drake song is a good example of what these models can achieve. As humans are programmed to believe what they see and hear, these deepfakes represent a significant threat. There are a number of startups that are trying to solve this problem with Web2 technologies. However, crypto technologies such as digital signatures are better positioned to address this issue.

In crypto, transactions are signed by the user’s private key to prove their validity. Similarly, content whether it be text, pictures, audio, or video can also be signed by the creator’s private key to prove its authenticity. Anyone can verify the signatures against the creator’s public address which is provided on the creator’s website or social media accounts. Crypto networks have already built all the infrastructure needed for this use case. Many reputable VCs and hackers are already linking their existing social media profiles to a cryptographic public address which gives credibility to the use of digital signatures as a method of content authentication.

The product we’d like to see is a protocol that existing social networks integrates with, and automatically verifies the digital signature when the creator publishes and signs a piece of content.

ZKP Hardware Accelerators

Specialized hardware companies that target specific use cases and build an early market lead turn out to be massively valuable companies. This was true for AI when Nvidia became the most-valued North American semiconductor company by specializing in AI hardware. This was also true in the Bitcoin mining space when Bitmain, Canaan, and Whatsminer became unicorns by specializing in ASIC miners. Companies that design and build efficient ZKP hardware accelerators will follow the same trajectory.

Specialized ZK Compute Networks

Currently ZkRollups such as ZkSync and Starknet are general-purpose. However it’s possible to create specialized ZkRollups that use faster and cheaper ZK circuits. For example, if an application is a order book-based DEX that lives on a ZkRollup, it only needs circuits that perform order creation, cancelling, and matching. The ideal ZkRollup in this case is one that optimizes for these operations and is not concerned with anything else.

Another example is an offchain AI compute network that settles onchain. Because AI inference can be too expensive to run chain, they need to run offchain. But how do you prove that the models ran properly? By using specialized ZKPs that are optimized for operations such as matrix multiplications.

Bitcoin L2s and MEV

Although we don't know if Bitcoin L2s can inherit security assumptions from the underlying L1 without a fork, we are excited about the general idea of adding more expressiveness to the smart contract capability on Bitcoin. The thesis is simple. There's $1T of wealth on Bitcoin, and at least some Bitcoiners would want to do something degen, entertaining, or productive with it beyond hodling. In order to enable these use cases, Bitcoin needs a more programmable layer.

Many of the existing and upcoming Bitcoin L2s are trying to maximize their alignment with the Bitcoin L1. One way to achieve that is to use the Bitcoin L1 for DA and to delegate the L2 transaction ordering to the Bitcoin miners. This means that extracting MEV will be in the hands of the miners. Similar to Ethereum, there is a chance to build massive companies, similar to Flashbots, to work with miners to order transactions in certain way or to execute bitcoin transaction bundles. If bitcoin L2s are to become a reality, the company that builds the dominant L2 MEV extraction platform is an easy unicorn.

Solana Infrastructure

We are bullish on Solana as an monolithic, engineering-driven alternative to Ethereum's modular, research-driven approach. However, Solana infrastructure is quite nascent across the board. There are potentially opportunities to build 10x better developer tools (eg, Foundry for Solana), smart contract wallets, block explorers, onchain data indexers, and other areas we haven't thought of. Solana infrastructure developers have an opportunity to build something that's tailored specifically to Solana, while learning from mistakes from predecessors on other chains.

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