​​Recapping ETHCC 2023

Parker Jay-Pachirat
DeFi @ FTC
Published in
10 min readAug 2, 2023

Coming out of ETHCC 2023, three things were clear: progress is palpable, but challenges still remain, and we will soon face a crucial new set of path dependencies.

🕗 First: What is ETHCC? Why does it matter?

If you're new here, let's set some context.

Earlier this month, over 5,000 crypto-enthusiasts gathered at the largest annual Ethereum conference in Europe: ETHCC. This was the sixth-annual year the event was hosted. Industry players from across the globe assembled for four days of intensive talks and social events, with over 200+ side events hosted.

ETHCC remains one of my favorite crypto conferences.

In addition to the opportunity to ride electric scooters around Paris and discuss DAO governance with like-minded individuals at Au Pied de Cochon, ETHCC provides something even more valuable: a dedicated time and space to regroup and critically reflect on where we stand today as an industry.

For me, ETHCC is a great time to meet founders and peers (IRL) and share and challenge my thinking. It's also a great time to reconnect with what initially motivated me to join this space. Doing so renews me with energy and inspiration. I truly believe that blockchain is one of the most viable technological tools we have for creating a more fair, democratic, and transparent society. Blockchain and crypto have flashed the potential to bring about values I'd like to see more of in the world (financial autonomy, individual sovereignty, and the right to privacy), while helping mitigate against things I'd like to see less of (bureaucracy, authoritarianism, political corruption, and structural injustice). Now, diving into my takeaways from the conference.

💡6 Key Takeaways from ETHCC'23

Takeaway #1: Many previous technical limitations are being solved.

New technical breakthroughs are enabling progress.

We are beginning to overcome numerous technical challenges that presented significant limitations in the past.

Account abstraction, greater diversity of data availability solutions, shared & decentralized sequencers, and L2 interoperability are top of mind.

These developments invite exciting new opportunities for innovation but also present unique challenges. More on this below.

Takeaway #2: DAO Governance is professionalizing.

… Particularly for DAOs whose Treasury > $1B.

DAOs with $1B+ treasuries have begun hiring full-time governance steward roles, sourcing from outside their immediate ecosystems. Some larger DAOs in the space are allocating up to $5m+ in budgets to support these efforts.

We will likely witness the rise of service-style recruiting businesses specifically focused on DAO governance. In thinking about building this out, liberal arts schools might be a great place to start for top-of-funnel sourcing. This would help optimize for candidates with exceptional analytical skills, formal training in research, analysis, and writing, and experience with discussion-based problem-solving. Additionally, sourcing from liberal arts schools could help filter for subject-matter expertise in DAO-relevant fields such as political science, behavioral economics, and law.

DAOs to watch: Optimism, Uniswap, ENS, Arbitrum

Takeaway #3: Many startups during the peak of the last bull run are pivoting out of niche crypto verticals, realizing they need to cater to broader mainstream markets.

I caught up with numerous startups founded in 2021 and 2022, many of which are now pivoting. This was not an uncommon theme — there was a consensus that finding new ways to bridge the gaps between crypto and mainstream is a high priority for our industry now.

Consistent with this, there was a significant increase in startups building products, services, and tools to service crypto activities at traditional and institutional firms (think 'Carta for Web3').

The trend of startups pivoting to serve larger markets is healthy and pragmatic, especially against the backdrop of the current bear market.

Projects to watch: Entendre Finance, Acctual, Liquifi

Takeaway #4: Hot in real-world-asset ('RWAs') is the tokenization of T-Bills.

DeFi goes full circle, with a desire for stability remaining high.

Demand for traditional asset exposure remains high across the industry. More and more products and services are building to supply this demand through tokenized T-Bills.

Anecdotally: U.S. T-Bills are being utilized now more than ever by behemoth industry players, who are leaning on T-Bills to prop up operations and balance sheets:

  • USDT is the largest stablecoin on the market, with over 70% market share. Today, T-Bills compose ~87% of collateral backing $USDT. Tether's latest Q2 report show T-Bills represent $75.2B of $86.4B total reserve assets.
  • Coinbase, the largest centralized exchange in the world, holds most of its earnings in T-Bills, according to its recent 10-Q released for Q2 2023.
  • For MakerDAO, the largest DeFi lender, T-Bills generate the majority of fees (revenue) across all collateral types supported.

Real-world yields remain higher than on-chain DeFi yields. The desire for stability is high, especially in a volatile market. Tokenized T-Bills are becoming increasingly recognized as stable and attractive investment instruments by startups, retail, institutions, and DAOs.

Projects to watch: Centrifuge (Centrifuge Prime), MakerDAO, Maple Finance (Cash Pool)

Takeaway #5: Consumer crypto gains traction with rising demand for new users and applications.

Consumer crypto gains traction as the growing need for end-users on new infrastructure increases.

Another notable takeaway from ETHCC was the growing interest of non-consumer VCs in the crypto-consumer sector. With recent advances in crypto infrastructure, many are beginning to ask: what are the end use cases? Who are the end users? What applications will they use?

Increased interest in consumer crypto can be attributed to rising demand for new users, applications, and use cases on new infrastructure. As the space evolves and matures, developing robust and user-friendly platforms are essential to attracting a broader audience. Consumer crypto aims to offer simplified and accessible solutions that meet users' end needs.

Projects to watch: FUEL, Rainbow Wallet, TYB

Takeaway #6: Infrastructure was the predominant theme this year.

Infrastructure was the #1 theme at ETHCC'23.

80–90% of panels, discussions, and side conversations at ETHCC revolved around infrastructure. Two likely reasons driving this are: I) infra is often more resilient of a vertical than others during crypto bear markets, and II) increasing system complexity creates the need for even more infrastructure.

Every sustainable ecosystem is built from the 'ground up,' from cities to interpersonal relationships. Especially in crypto, our ecosystems are methodologically rooted in a 'bottoms-up' architecture.

So what? The renewed interest and development in crypto infra today is exceptionally bullish. It signals progress — indicating we have progressed far enough to need to build something new. One viable takeaway is that our industry is well-positioned for a defining new era of innovation.

Within the discourse on infra, four main categories emerged. I. RaaS and L2s/L3s as Commodity Services, II. Interoperability, III. Enterprise App-Chains, and IV. Emerging Data Availability Solutions.

Infrastructure at ETHCC: The Breakdown

Infra was a hot topic at ETHCC. Let's break it down into 4 main categories.

1) Rise in RaaS (rollups as-a-service), and L2s/L3s as commodity services (commodities-as-a-service).

RaaS enables faster and cheaper transactions with little to no congestion. More importantly, RaaS enables developers to quickly and easily spin up their own rollups with minimal overhead.

The rise in RaaS and L2/3s as commodity services will do for Web3 what AWS did for Web2: adding an elastic execution layer to efficiently boost scalability and performance as needed, minimizing overhead and chain-specific limitations.

RaaS, in conjunction with the adjacent and overlapping rise of L2s-and-L3s-as-a-commodity-service-layer, will democratize the creation and proliferation of new chains and networks.

Projects to watch: Starknet, Caldera, AltLayer, OP Stack, ZK Stack, Arbitrum Orbit, Celestia // L2/L3s (as a commodity service): Celo L2, Zora Network

2) Interoperability between RaaS, L2/L3s, and super-chain ecosystems is important.

With the rise of rollups-as-a-service, democratized access to spin-up L2s/L3s, and the emergence of competing SuperChains, infrastructure to support unification and interoperability between these ecosystems is critically essential.

Without sufficient interoperability, we will be left with fragmented networks and fragmented liquidity. We know this pain all too well from our experience with L1s. It would be naive not to try and solve for interoperability as early as possible. We must be actively building for this with a sense of urgency.

Projects to watch: Chainlink Operability (CCIP), Espresso (shared/decentralized sequencing)

3) App chains: Favorable entry points for enterprises and institutions.

App chains are attractive to enterprises and institutions because they offer customizable, flexible solutions that serve these users' unique needs — offering permissioned whitelisting, OFAC sanctioning/censorship, and KYC/AML (at both the user and validator levels).

Projects to watch: GoGoPool (check out GoGoPro, making subnet and app-chain creation easier than ever before), Avalanche, Violet (Mauve)

4) Emerging Spectrum of DA (Data Availability) Solutions.

Data availability (DA) solutions are becoming more widely available. Until recently, the only DA solution for rollups was Ethereum. Not ideal for many reasons — primarily due to the high costs involved.

The spectrum of DA solutions is growing, with a wider array of solutions. Increased competition in the DA space will help reduce barriers to entry for rollups, increase cost-efficiency, and solve customizability needs in DA storage solutions. This will ultimately result in increased operational efficiency and improved end-user experience.

In particular, I'm highly excited about Starknet's Volition DA solution — set to launch later this year — which will allow users, with every transaction, to decide whether they want to store their data on or off-chain.

Projects to watch: Starknet (Volition), Espresso, Eigenlayer, AvailProject, Celestia

TLDR: Long-standing competition and coordination models are ripe for disruption.

We're at an inflection point.

The complexity of crypto-ecosystems is set to increase dramatically. This will manifest in new and different ways than we've seen before.

With more chains & rollups comes greater complexity.

The democratization of RaaS and L2/3 development means spinning up a new chain, rollup, or ecosystem is easier and more democratized than ever before. We can expect the levels of complexity in our crypto-ecosystems to increase dramatically as this next wave of infrastructure gains adoption. Why?

More chains and ecosystems mean more stakeholders to align.

This results in increased competition for resources within and across these ecosystems.

Competition schemas within crypto-ecosystems are also at a critical moment.

Our current models of competition in crypto-ecosystems will likely be unfit for the future. We expect to see a proliferation of novel competition models emerge as newer infrastructure networks in the space begin to mature.

Where does this leave us? Growing complexity implies a sumptuous need for graceful coordination (and new types of interoperability).

This is something we, as an industry, have yet to master. As intricacy increases between networks of actors, stakeholders, and incentives in the crypto-ecosystem, our long-term longevity and sustainability will depend more than ever on our ability to coordinate. Governance matters, and recognizing the need for more research, experimentation, documentation, and iteration in gov design and execution is an imperative first step to ensure we are well-positioned for the future.

Now, moving onto the market. What was market sentiment like at ETHCC?

Market Sentiment: Temperature Check

The sentiment is undoubtedly better than it was, but not yet back to 2021 levels.

Disclaimer: It'd be wrongful to assume the in-group market sentiment at ETHCC is aligned with the market sentiment of the broader public. ETHCC as a 'sample group' is self-selecting (incentive-coordinated and ideologically homogeneous), and therefore biased.

With that said, many at ETHCC shared the perspective that a new bull market is around the corner. Some believe we're seeing the early stages of a bull market right now.

The "bull market is happening now" perspective seems like an overshot to me. Still, just for fun — let's do a thought experiment. What are a few reasons another bull run might be just around the corner?

1. Lots of former technical blockers are getting solved, faster than anticipated:

Innovation in DA solutions, technical progress for rollups, and democratized access for building and utilizing single-use-case blockchains.

2. Ripple case was bullish, showing not all tokens are securities:

This assuaged some psychological fear and pain for both retail & institutional. The Ripple case showed that securities law may be more relevant for transaction type than asset classification type itself. With fears of a mass crackdown mitigated, the minimum-viable conditions for an increased appetite for tokens have been paved. Increased appetite for tokens has catalyzed all previous bull runs in the past.

3. Significant ecosystem and industry unlocks are coming over the next few months:

Proto-danksharding (EIP-4844) in November, BTC halving in March, and more…

4. The timeline of crypto market cycles is increasing at a faster rate:

… Due to industry maturation and faster proliferation of information across networks in the ecosystem.

Conclusion

In conclusion, ETHCC 2023 highlighted significant progress within the crypto industry and emphasized the challenges ahead. The conference showcased the rise of technical breakthroughs, particularly in areas like RaaS, account abstraction, data availability, L2s/L3s as commodity service layers, and rollups-as-a-service.

Additionally, the event underscored the increasing trend of startups pivoting towards mainstream markets and the tokenization of T-Bills as a stable asset in the DeFi space.

One prominent theme at ETHCC was infrastructure. The growing complexity of crypto ecosystems necessitates graceful coordination and new forms of interoperability, and the industry is urged to pay close attention to governance design and execution to ensure long-term sustainability.

Regarding market sentiment, attendees were cautiously optimistic about a potential new bull market, citing the resolution of technical limitations, legal clarity for tokens, upcoming industry unlocks, and the accelerated pace of crypto market cycles as potential catalysts. However, consider that the sentiment at ETHCC might not fully represent the broader market's sentiment.

The market sentiment at ETHCC does not reflect the author's sentiment.

As we move forward, the crypto industry must continue to address challenges, increase collaboration in the space, and maintain a strong focus on governance, coordination, and interoperability in preparation for exponentially-growing ecosystems of chains & rollups, greater overall complexity overall, more stakeholders, and diverse new waves of participants — such as enterprises and institutions — entering the space.

Special thanks to Steven and Deana for their feedback on this piece.

By Parker Jay-Pachirat and DALL-E

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Parker Jay-Pachirat
DeFi @ FTC

Early-Stage VC, DeFi Fund @ FinTech Collective (fintech.io). Founding team, Boys Club (@boysclubworld). Cyborg. Ex-Juuler.