‪I’m excited to announce that I’m joining Paradigm’s investment team to help Fred Ehrsam, Matt Huang, Charlie Noyes, and Dan Robinson build the best asset management firm in the cryptocurrency industry.

I’ve had the pleasure of collaborating with the group through the process of testing my own theses over the last couple of years. After leaving every conversation with new perspective, I was convinced I didn’t want to stop talking. As we discussed working together, I was attracted to the team’s intellectual rigor, long-term commitment to the industry, and optimism about the future.

My focus will primarily be on cryptocurrency markets and investments in public blockchains. I’ll also be on the hunt for exciting early-stage opportunities. If you’re working on anything I’d find particularly interesting, please feel free to reach out (arjun@paradigm.xyz). …

Why do we fight? A framework suggests deeper reasons

By Yassine Elmandjra and Arjun Balaji

Conflicts raging within “crypto” are endless. Heated debates take place on a wide spectrum of issues, with little attempt to devise compromises acceptable to both sides. Interestingly, it is the same people who consistently position themselves on opposite sides of these issues. From monetary maximalism and wealth distribution to governance and consensus algorithms, the issues vary tremendously while the formed groups of opposition remain the same. Naturally, this creates an unproductive habit of each side blindly talking past the other.

In A Conflict of Visions and The Vision of the Anointed, political economist and social theorist Thomas Sowell argues that this phenomenon comes from fundamental differences in people’s assumptions about the nature of systems and their limitations. While seldom consciously recognized, these sets of assumptions are the largest drivers influencing people’s opinions. Since visions are rarely examined but have profound impact, Sowell introduces the “conflict of visions” as a mechanism to think about these assumptions. …

Grading Grin among a sea of cryptocurrency distribution models

By Hasu and Arjun Balaji

When Grin launched in early January after years of anticipation, it faced material pushback from prominent Bitcoiners who labeled it a “VC coin” and compared it to offerings from the 2016/18 ICO era. We think that criticism is unjustified as Grin’s launch was one of the fairest launches ever, if not the fairest.

What constitutes a fair launch?

Philosophers have debated questions of fairness for thousands of years, so we won’t pretend to have any new insight there. …

A historical and technical overview

MimbleWimble, a blockchain protocol focused on fungibility, privacy, and scalability, was released in the wild in July 2016 on IRC channel #bitcoin-wizards by pseudonymous Tom Elvis Jedusor. The paper proposed a novel way of combining transactions to improve the privacy features in a public blockchain.

Jedusor’s paper was built on the work of another anonymously posted paper from 2013 using one-way aggregate signatures (OWAS), which required a novel cryptographic primitive, pairing crypto, which wasn’t well trusted in academia. It also drew inspiration from Confidential Transactions and CoinJoin, two privacy proposals by Bitcoin Core developer Gregory Maxwell.

The original MimbleWimble paper used the same elliptic curve cryptography Bitcoin uses, catching the attention of many Bitcoin researchers including Andrew Poelstra, a mathematician and applied cryptographer at Blockstream, who further improved on the MimbleWimble white paper, releasing a “precise” version in October 2016. Poelstra’s work has long been focused on privacy, having worked on Confidential Transactions and scriptless scripts in Bitcoin. …

My thoughts on the state of crypto in 2018 and where we’re headed

As another year wraps up, I started writing an email to close friends and investors on the “state of crypto” and my forecasts. As it got longer, it turned into this sprawling post. A few notes:

  • This write up contains wide-ranging theses and obvious biases (my own) and is by no means authoritative. Please don’t nitpick.
  • Where I make predictions, I try to be as specific as possible (inspired by SlateStarCodex’s format). Not all predictions are quantifiable. Some will be off and many will likely be directionally incorrect. That’s OK.
  • Unless otherwise specified, my criteria for a liquid, actively-traded project “dying” is either (1) < $100k volume/$20m market cap or (2) primary development abandoned, whichever comes first. …

Reorganizing the firm presents new principal-agent problems

The Zcash founder’s reward is likely the best founder-alignment mechanism that has been designed in the (brief) history of crypto-networks.

The majority of participants in today’s cryptocurrency ecosystem weren’t around for the initial launch of most of these networks — a time where any project launching without a fair mining process was controversial, before the gold rush of ERC-20 “token generation events.”

The latest round of controversy in this discussion stems from this week’s disclosure from the Zcash Company’s presentation on burn rates and founder’s reward allocations at Zcon0:

Let’s stop playing pretend and start building

Crypto projects are raising tens or hundreds of millions of dollars, but they’re rarely treated as real fiduciaries.

Investors have relaxed due diligence because of “liquidity” in the form of a never-before-seen greater fool to hand off poor investments to. Combined with inexperienced mostly-dev teams, first time founders, and Series B or C capital, this is a recipe for disaster.

Sentiment is polarizing with traditional venture investors, though the consensus seems to be: “This looks interesting but 95% of these projects are expensive operational disasters with no investor protections.”

The entire lifecycle of the ‘firm’ has been compressed into an overnight process because of the mechanics of an ICO. This often results in dysfunction, misaligned incentives between stakeholders, miscommunication, internal conflict, ineptitude, and in some cases: outright fraud. …

Wait, did we just put Beanie Babies on a blockchain?

Short answer: kinda, yeah.

Paintings, sculptures, coins, dinosaur bones — people have long put their money into artifacts that help define their identity since the beginning of civilization.

The talk of the town over the last several months has been around digital or “crypto-collectibles”. One definition of crypto-collectibles from Decentraland:

A crypto-collectible is a cryptographically unique, non-fungible digital asset. Unlike cryptocurrencies, which require all tokens to be identical, each crypto-collectible token is unique or limited in quantity.

Typically, crypto-collectibles are visualized as real-life objects such as pets or avatars. …

An ELI5 explanation of ASICs, decrypting marketing speak from the tech.

“ASIC resistance” has been a popular buzzword that many alt-coins use to describe their relative advantages. As with much of the technical jargon used when describing different cryptocurrencies, it’s important to distill this to first principles. Is this marketing speak or a legitimate feature?

What are ASICs? 🤷

ASIC stands for “Application Specific Integrated Circuit.” While that’s a mouthful, you can understand it as “computer chip designed to complete a specific task.” ASICs are designed for all sorts of specialized computing tasks: while they are limited in their use, they are extremely effective when operating on the specific tasks they are designed for.

An ASIC can be thought of as a race car: very expensive to design and manufacture and very useful for competitive racing. However, it’s sub-optimal for highway driving or once it falls off peak performance. …


Arjun Balaji

professional risk taker. enjoy: markets, watches, meta-twitter, and documentaries. open-sourcing my thinking

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