Ali Yahya: Crypto Business Models

TL;DR

The heart of crypto business models lies in layer 1 and layer 2, leveraging multi-sided platforms and network effects for value capture.

Transcript

thank you all right well thank you everyone for joining my name is Ali yahia I'm a partner here on the investment team I work on the on the crypto team at Andresen Horowitz and before and recent Horowitz I spent some time at Google I was there for three years uh two years was at Google X and then one year at Google brain and I worked on distributed... Read More

Key Insights

• 🛟 Layer 1 protocols serve as multi-sided platforms, capturing value through tokens and network effects.
• 👨‍💼 Layer 2 smart contracts build upon layer 1 to create additional multi-sided platforms and unique business models.
• 🐎 Speed and traction are crucial for gaining momentum within layer 1 and layer 2, driving network effects and value capture.
• 🎁 The potential for data-driven value capture in oracles and unique algorithms presents opportunities within the crypto ecosystem.

Questions & Answers

Q: How do layer 1 protocols capture value in the crypto ecosystem?

Layer 1 protocols capture value through multi-sided platforms, leveraging tokens to incentivize miners, developers, and users to interact directly, fostering network effects.

Q: What differentiates layer 2 smart contracts in terms of defensibility and value capture?

Layer 2 smart contracts function as multi-sided platforms on top of layer 1, benefiting from network effects based on the composability of applications and ease of interaction.

Q: How does speed and traction play a role in gaining momentum within layer 1 and layer 2 ecosystems?

Speed is crucial in gaining traction within layer 1 and layer 2, as network effects lead to winner-takes-all dynamics, making early momentum essential for long-term success.

Q: Can layer 2 smart contracts adopt transaction fee models that differ from the traditional supply-side charging seen in web 2.0?

Yes, layer 2 smart contracts can introduce innovative fee models, such as having the supply side or a third party cover transaction fees to enhance user experience and drive adoption.

Summary & Key Takeaways

• Understanding the business models in crypto involves delving into layer 1 and layer 2 technology.

• Layer 1 acts as the foundation, with protocols as multi-sided platforms capturing value via tokens.

• Layer 2, composed of smart contracts, builds upon layer 1 by creating further multi-sided platforms with unique business models.