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Thursday links: Crypto success stories
Delphi co-founder Yan Liberman details the investing case for a much-needed crypto success story: Venice AI.
It’s an asset-lite business: It doesn’t own any GPUs or develop any models. Instead, Venice offers access to open-source LLMs and makes money by marking up the inference it buys from hyperscalers and sells to users.
Users pay the mark-up because Venice enables them to use the models privately. For the more technically minded, Venice offers “anonymous proxying, open-source model routing, hardware-attested TEE inference, and end-to-end encrypted inference.”
Liberman says this makes Venice the “most complete privacy solution in the AI market today.”
Note that he didn’t say the crypto-AI market. He said the AI market.
Venice is a rare case of crypto tokenomics enabling something unique — and genuinely useful — in a market that otherwise has nothing to do with crypto.
Also rare for crypto: Its token is reasonably priced.
Liberman does a lot of work to estimate that Venice is currently on pace to hit $260 million of ARR a year from now. On that basis, the VVV token — pseudo-equity in Venice — is currently valued at about 3.2x forward revenue.
That seems unusually reasonable considering the current growth rate: Subscribers grew 50% over just the last three months. Better yet, token usage tripled over the same period.
It’s funny — and perhaps telling — that one of crypto’s most substantial projects ever gets one of crypto’s most modest valuations ever.
That’s not to say it’s obviously cheap. Liberman walks us through a long list of risks to the investment case, including competitive threats from every direction.
But it’s already quite the success story.
Crypto’s most cypherpunk project has earned a profile in the epitome-of-establishment Wall Street Journal. Zcash is a “more secret version of Bitcoin,” the headline reads, “and it's on a tear.”
Indeed. The token is up about 10x since crypto people renewed their enthusiasm for privacy less than a year ago.
Bitcoin is down about 50% in that same time, which is probably no coincidence. The Journal reports that “longtime crypto enthusiasts are souring on bitcoin as it goes mainstream.”
“Zcash is what bitcoin should be,” Tushar Jain of Multicoin Capital says. “It’s what bitcoin was originally meant to be.”
True. But it’s always been that, so why it’s catching on just now remains an open question.
It does not appear to be driven by demand for privacy. The share of transactions that users choose to shield on Zcash is still modest, suggesting the renewed interest isn't primarily driven by utility.
Instead, the Journal attributes the booming price action to “receding fears that US regulators will take issue with the coin’s privacy features.”
If so, that would be a historic development, because Zcash's shielded transactions aren’t just private — they’re anonymous.
Persuading the US government to tolerate anonymous financial transactions might be the biggest possible success story for crypto.
The CFTC has approved crypto’s most popular innovation — perpetual futures — for trading on US exchanges.
The official statement leaves a lot of things unclear: Will every listing require the CFTC’s approval? Will they be approved for any underlying? Or just crypto tokens?
But markets seem to be taking the broadest possible interpretation of the new guidance: Shares of CME and CBOE fell 8% and 18%, respectively, on the news.
The fear is primarily that those incumbent exchanges will lose business to the upstart perps exchange Hyperliquid, which is now in the process of transcending its crypto beginnings. “The platform’s perpetual futures, especially those tied to traditional assets such as stocks and commodities, are capturing Wall Street’s attention,” the Wall Street Journal reported this week.
The HYPE token — pseudo-equity in Hyperliquid — hit a new all-time high this week and is up 90% over the past year.
A recent paper from the IMF estimates that the passage of the GENIUS Act in July of last year was responsible for incumbent payment companies losing $300 billion of market capitalization.
That’s nearly $1 incumbent valuation for every $1 of stablecoin AUM. An impressive ratio!
The biggest losers were shares of companies primarily in the business of cross-border payments, like Western Union, Payoneer, and Remitly. Least affected were companies with strong network effects, like Visa and PayPal.
“Incumbent firms that had already started offering crypto-related services or issuing crypto assets before the GENIUS Act passed were also insulated from the market shock,” the study found, “as investors likely viewed them as well-positioned to adapt to the new technology.”
The paper also documents a sharp spike in executives mentioning "stablecoins" during earnings calls after the GENIUS Act passed. I’d guess it was the market reaction — not the law itself — that got their attention.
Nothing says success like making your competitors’ stocks go down.
When I wrote about the success of Collector Crypt’s onchain gacha game a few weeks ago, I thought I may have marked the top, because how much money can people possibly spend spinning for Pokémon cards?
A lot, apparently. Collector Crypt did another $2.4 million in revenue last week.
If Pokémon is not your thing, there’s now a Baxus gacha, as well. I tried my luck and landed a highly alluring bottle of single-barrel Russell’s Reserve Kentucky bourbon (pictured above).
Unfortunately, it’s wasted on me: I quit drinking about 10 years ago. So, as a thank-you for reading, I’ll send the Baxus NFT that can be redeemed for the bottle to the first person to respond to this email and promise to put it to good use.
Only possible with crypto!
Blockworks Research analyst Kunal Doshi explains how to acquire PAPER, the token of a soon-to-be-launched perps exchange, papertrade.xyz: “The only way to acquire PAPER early is to lose money trading.”
I can do that!
“When you lose money trading,” Doshi writes, “the protocol mints you a token called PAPER. And if you stake PAPER, you earn a share of future trader losses in USDC.”
That could add up because, in my long experience, most traders are even better than I am at losing money.
Doshi does some simulations to determine that “at sufficiently high token prices, it becomes economically rational to intentionally lose money trading.”
Amazing.
The trick is that the protocol will take the other side of every trade — they are the house — and winning trades will get a small haircut. Like tipping the dealer in Vegas after a winning hand.
I may be jumping the gun by including an exchange that hasn’t even launched yet in a list of crypto success stories. But I don’t see how an exchange that rewards traders for losing can be anything other than a hit.
Only crypto could make such a magical thing possible.
— Byron Gilliam
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