Where did Degen.VC come from?
A big thank you to the #degenhorde for making the first Degen.VC project launch ERCAU a great success. Here’s a bit of a back story
Following the successful “Pure Launch” of ERCAU last night, Degen’s founding team — Fraser Brown and Paul Scott — wants to extend a heartfelt thanks to the Degen community.
We also want to say; We are just getting started.
Degen VC is a call to all of crypto to join its liquidity pool and help launch the projects that will suppress the endless pumps and scams of crypto and ensure that quality, authentic teams and technologies rise.
When Degen VC reaches scale it will disrupt traditional venture finance, transplanting controlling venture capitalists with the crowd. Proper order.
In this article, we also wanted to explain the origins of Degen VC. Its provenance if you like. It is not a fly by night outfit.
Here’s a bit of our story
When Fraser Brown an Irish Olympian turned entrepreneur and Paul Scott a blockchain specialist and former bank treasurer from South Africa met in mid 2018 they shared an acute disappointment that the promise of token generation via smart contract, or “ICO”, had failed to put the opportunity of capitalizing on early-stage investing into the hands of “Average Joe and Jill”.
They distilled from the wreckage of the market crash earlier that year that the possible solution was to use a decentralised curation market — basically harnessing the wisdom of an incentivised crowd to filter good projects from bad. But when they went to market with a working Ethereum based prototype of this curation market there were no investors remaining with any appetite for such a thing. Unless a well known VC was onboard, projects during these times were going nowhere.
Their next attempt to introduce their blockchain solution for project curation came in early 2019 after Uniswap emerged. This new AMM (Automatic Market Maker) was being hailed as a revolutionary new form of decentralized exchange that simply existed on the Ethereum blockchain “permissionlessly” for anyone to use. The two entrepreneurs saw its potential immediately and added to their curation market an automated Uniswap market launch that was conditional on the outcome of the curation process.
However, this idea again received lukewarm feedback from a market that was at that time fixated on “security tokens” and fearful of heavy-handed SEC action amidst a slew of ICO-related ramification. And this iteration still contained an element of “ICO”, which the team knew was going to be a hard sell primarily as a result of the hangover from 2018, even though fundamentally it remained a very powerful launch tool particularly when embedded with adequate project curation and seamlessly integrated with Uniswap.
Around August 15th 2020, a project dubbed $MEME launched during a maturing DeFi (Decentralised Finance) boom and altcoin recovery dubbed “Altseason” (which had actually seen a few false starts in preceding years). The promise of DeFi was outweighing some spectacular early hacks and downright failures and Uniswap was front and centre of the wave of innovation.
$MEME was (in its original form) an idea that anyone could “spin up” a copy of their favourite DeFi project with a few clicks which, of course, is in general terms possible due to their largely open source nature. It was actually a gimmick of an idea and the media picked up on it in a passing-gimmick kind of way, but MEME token was nonetheless launched, airdropped (this means given away for free) and had a market on Uniswap all within less than 30 minutes. At the time of writing one $MEME is valued at $180 and the project’s market cap of $5million. What had just happened with MEME smelt like the spirit of the ICO — where Average Joe gets in first — had returned. And, importantly, it was not an ICO — no tokens were sold — which mitigates risks as no money is taken from an investor and the investor now no longer needs the “protection” of the regulator.
It is worth speaking to the culture behind these events. The “crypto” community at its core does not want the VC to own the show. In general they also shun the formality of “investing” and wear the badge “degenerate” or degen, which describes someone who basically does nothing but trade crypto. Uniswap was the degen’s playground, and $MEME showed that the degen spirit was strong and their numbers were growing.
Fraser and Paul saw the potential of the MEME launch model and within hours they had launched Degen.VC.
They created a telegram group, told a few friends and within minutes there were over 100 people in the group. The next day there were over 1000. They airdropped 75% of their token supply to the wallet owners that could demonstrate some “degeneracy” and launched a Uniswap market with an initial token price under 2 cents. At the time of writing the token is persistently worth over $1.
Degen.VC’s launch represents a huge departure from existing early financing options. No tokens were sold. They simply gave tokens away in conditions that resulted in the market discovering its price on Uniswap. The tokens that the project retained now have real market value — seed capital enough to sustain the project until its revenues streams develop.
Taking back Alpha from the suits
As mentioned previously, in 2018 venture capital had capitalised on the void created by ICO’s frauds and foolhardiness. There were two main reasons that this was able to happen: Firstly there were no ICO buyers anymore. Secondly, VC was equipped to filter out the scams and back the best projects. But Fraser and Paul believe that the exploding interest in Uniswap markets has also resulted in renewed appetite to take good technologies back from VC ownership and control.
$MEME was exactly this. It was initially about taking cloned VC-backed projects to market. And there are other prominent examples such as Pantera Capital backed Ampleforth which saw rival Antiample emerge days later proclaiming “Projects are no longer deemed interesting without the backing of top tier VCs. Speculators clamor at news of big banking institutions and governments allowing their technology to operate within their system. Is there no more dignity to the crypto movement?”
What’s next?
With these events in frame, the Degen.VC team’s next move was to launch Degen Labs to fast track projects that their community wants to launch. It has also launched a “Citadel DAO” similar to MEME’s, which is only open to the DGVC LP and where the community can discuss and (soon) vote on what project should launch next. In the coming weeks and months we could see a new DeFi project announce it’s raft of big name investors only for a competing project to launch days later with Degen.VC using DAO governance and leveraging the backing of a vast crowd rather than a handful of VC’s and elites.
Conclusions
It is worth noting that competing models to venture capital are few and far between. Inherent in blockchain technology is the potential to remove such hoarders of alpha in favour of the everyday person “Average Joe or Jill”. If Degen.VC is about anything it’s about that struggle — democratising investing. When it scales and succeeds it will become a pre-eminent launch platform where millions of small investors participate in the earliest financing rounds of high-potential startups.
This story is essentially a call. All crypto should join the DGVC LP so that VCs are replaced. Yes, we see millions of participants. We will be able to launch projects even at the scale of Telegram for example in days — no ICO, no crowdsale, just crowd.
