LYRIK VENTURES — NEAR (BOS) INVESTMENT THESIS [2023]
The NEAR Ecosystem and the Greatest Opportunity of the 21st Century
Recent years in Crypto have offered glimpses of a digital future that lives on-chain. As we enter the 2023 bear market, there is much disorientation and soul-searching across the different Layer-1 blockchain ecosystems of the crypto-verse: What does product market fit look like? How urgent is scalability? And perhaps most importantly, how do we make our product stack accessible to the masses of more than 8 billion active internet users?
The internet of value represents a third evolution of our relationship with the world of bits. Looking to the first two (Web1 and Web2) as inspiration, we realize that a full transition to a crypto-native world will take decades to complete. It is nevertheless during this time that we will witness some of the greatest wealth creation opportunities of the 21st century as the Internet morphs around the user. The ultimate promise, known as the open web, is a digital world whereby the user maintains control over their finances, assets, and data, without overarching rent-seeking, data harvesting, and centralized control from distant institutions.
This realistic, patient, and historically informed thesis is the foundation for Lyrik Ventures’ role and investment strategy in the NEAR Ecosystem. As an original and carefully refined thesis, we are eager to support the unfolding and exponential development of the NEAR ecosystem in the decades to come.
Part 1 — NEAR Protocol: A Home For Usable and Scalable dApps
Current discussion in crypto centres largely on two topics: (1) Scalability and (2) Interoperability. D1 Ventures seems to have been on to something in categorizing the L1 landscape into a World of dApps vs. Universe of Chains design structure. This has been one of the most important architectural dichotomies in developing a thesis on the future of crypto:
On the one hand, the likes of Ethereum, Polygon, and Solana vouch for a future World of dApps reality supported through roll-ups, side-chains, or high-performance hardware. On the other hand, the likes of Cosmos, Polkadot, and Avalanche, vouch for a future in which a congregation of different chains can interoperably interact and support one another, with a combination of shared security, economics, or interoperability standards.
In all of these scenarios, the user is left on their own to navigate network switches, token bridging, and liquidity shifts between networks. In this sense, the root infrastructure grounding the crypto-verse is exteriorized and requires user participation.
NEAR Protocol is a unique outlier—NEAR offers three unique and fundamental architectural opportunities to dApp and blockchain developers that aptly creates the foundation for a NEAR Verse. It is our belief that these advantages position NEAR to be a leading Layer 1 blockchain in the decades to come.
- Scalable Execution Environments.
- Cross-shard communication and concentrated liquidity.
- Abstracted User Experience and a Flexible Account Model.
Scalable Execution Environments
Scalability has been an elusive and clear milestone for blockchain development since Ethereum began experiencing state bloat back in 2016. Since that time, the promise of scalability has come with varying tradeoffs: Centralization, fragmentation, or developer framework limitations.
NEAR’s capacity to offer scalable execution environments, has a number of competitive advantages:
First, it means that it can offer horizontally sharded dApp environments for any type of virtual machine. For example, Aurora — NEAR’s EVM compatible shard — can scale by adding further shards with identical execution environments. In a similar vein a Zk-Shard, an Enterprise Shard (Calimero) or a shard running on Carbon credits, can also be implemented in line with the user-base’s interests or specific dApp requirements. This ‘playground’ capability is a new and un-examined capacity exclusive to NEAR.
Second, it means that NEAR can scalably accommodate any existing design framework from another L1 ecosystem — whether it be a rollup, side-chain, or modular appchain. NEAR has the capability of helping these different networks scale, by offering mirrored execution environments or custom appchains for a specific dApp. From this perspective we envision NEAR encompassing and eventually eclipsing narratives and dApps surrounding Parachains, Appchains, Roll-Ups, and Fat Application Chains.
Cross-shard Communication and Concentrated Liquidity
While scalability has received the bulk of the attention and narrative development in crypto, interoperability or inter-chain communication has been a secondary, and often overlooked consideration. Going even further, the capacity to share liquidity — or compose value between different chains and dApps is a further pain point and opportunity that has not been strongly emphasized.
NEAR stands out amongst other Layer 1 blockchains, in its capacity to not only provide seamless cross-shard communication between its different execution environments, but to also leverage such communication to concentrate liquidity among dApps.
In more simple terms:
NEAR is natively designed to quickly and cost-effectively process transactions between shards, in a manner that hides the bulk of the technical complexity from the user or developer. The nature of this inter-shard communication is such that different pools of liquidity, held on different shards, can actually be sourced from any other shard using NEAR’s base-level settlement and execution layer. Whereas the rest of crypto has exteriorized interoperability between chains, NEAR has interiorized this process, and inverted the relationship between settlement layer and execution environment.
Abstracted User Experience and a Flexible Account Model
Third and finally, NEAR addresses a fundamental problem for the exponential diffusion of any general purpose technology: Mass Adoption. In order for blockchain dApps and protocols to become widespread and accessible, they must be easy and intuitive to use.
NEAR’s mission to onboard the first 1 billion users to the world of crypto, centers around its intuitive account model and flexible key structure. The possibilities of which, have yet to be fully appreciated or monetized.
Named Accounts on NEAR are natively designed as smart-contracts, with a high level account name built-into the contract. NEAR does not allow tokens to be sent to a non-existent account, while overpaid gas is automatically returned to the users wallet.
The capacity to manage access to accounts is handled by Access Keys. On NEAR, there are two different types of access keys: Full Access Keys, and Function Call Limited Access Keys. The former can be utilized to burn or generate private keys for an account, while the latter can allow dApps to simplify how a user may interact with their dApp by gaining permission to execute non-monetary function calls.
Why do all of these different technical features matter? Because with the NEAR Account and Access Key design, NEAR is natively built to (1) Abstract the majority of complexity from users, (2) Provide an in-built Domain Name Service that can allow for the purchasing and reselling of accounts, and (3) Optimize access to an account by degrees, ensuring a smoother interactive experience between users and the dApps they are actively utilizing. Recovery keys, Remote Accounts, Meta-Transactions, and Zero-Balance Accounts create a world of new possibilities for businesses, developers, and entrepreneurs to better onboard new users into crypto. Notably, many of these opportunities are unique to the NEAR network, and do not exist in any other L1 Ecosystem.
Given these three value propositions, we see NEAR as a unique blockchain ecosystem specifically designed for usable and scalable dApps and protocols, that have the potential to seamlessly interface with one another, irrespective of the diversity of execution environments and developer design preferences. This provides an optimal foundation for scaling the internet of value to a billion users, across the nascent crypto product stack. At scale, this diverse playground of dApps and users, all living on a single, sharded settlement layer, has the potential to become a composable universe of its own — the NEAR Verse.
Part 2 — A New Era of Utility Based dApps
From 2018 to 2023 NEAR has grown its ecosystem from a town of ten developers, into an emergent city of more than 200 full time developers (22% year over year growth), and 800 total developers. NEAR ecosystem growth, on the whole, is up 1000% since 2018, and third most rapid in all of crypto (behind Polygon and Solana). Alongside NEAR’s unique Javascript SDK, this momentum is a foundation from which we expect hundreds of dApps and services to flourish across the ecosystem in the coming years. The first step in this enrichment, centers on the evolving tech tree of crypto, and utility based dApps — both discussed below.
The ‘technology tree’ of crypto has expanded in recent years to encompass Decentralized Autonomous Organizations (DAOs), Non-Fungible Tokens (NFTs), and Decentralized Finance (DeFi). Accompanying Oracle, Indexing, Storage, and Bridging Infrastructure has created a new world of opportunities waiting to be explored and created on-chain.
Lyrik pioneers the belief that while infrastructure and these core products of crypto will remain highly important in the years to come, there is sufficient development of on-chain tools and products to begin to approximate use-cases fit for the real world. This new era of utility based dApps is specifically representative in the potential of Games, Entertainment, Regenerative Finance, Decentralized Science, Social Networking, and Real-World Assets — accompanied by the relevant infrastructure required for making such clusters friendly and usable..
While Lyrik actively invests in DeFi, NFT’s, and Infrastructure, it is our forward looking belief that the next evolution in crypto value creation will stem from these utility based dApp clusters.
Web3 Games: Gaming represents close to a 300 billion dollar industry today. Blockchain gaming meanwhile, remains in its infancy with an estimated size of roughly $1.5 billion dollars. In the coming four years, blockchain gaming is expected to grow 30 fold, to an astounding 50 billion dollars in value. While early concepts such as Axie Infinity have demonstrated the market interest in Play TO Earn, the future of web3 games suggests a much larger and accessible audience of gamers interested in both playing, earning and owning. We believe that games that are first and foremost playable and enjoyable, with the added benefits of asset ownership, incentive networks and composability that crypto provides, will usher in a new era of gaming.
Entertainment: Entertainment encompasses the emergent use-cases of on-chain music, media, art, content management, community and education. Lyrik is specifically interested in the network value created from dApps and protocols capable of aggregating large communities of users around creator-owned entertainment. It is our belief that the next generation versions of Spotify, Netflix, Podcasting, and News Media are waiting to be developed in the coming decade using an underlying blockchain system.
Regenerative Finance: When Climate meets Crypto, a regenerative economy living on-chain is a natural evolution. While nascent in its development, regenerative finance has the capacity to bridge the world of carbon credits, climate offsets, energy management and biodiversity conservation, with the immutable, reliable, and composable value systems of crypto. With interest in avoiding a 2 degree celsius world and motivation from younger generations, we believe that a nexus of game changing climate-oriented technologies awaits development on-chain.
Decentralized Science: Rapid disruption to academia involves new models for conducting scientific research, sharing publications, aggregating case-study and focus group data, and financing science projects outside of the ever-enclosing academic process. From on-chain IP, to monetization for research, shared test-results data, and better access to data banks (genetic, biological, and chemical), there is a robust, yet rapidly accelerating trend in merging the worlds of crypto and science, for fantastic impact and value creation.
Social: Decentralized social, and the entire suite of privacy focused messaging dApps, community platforms, and tools for optimizing on-chain dialogue holds important implications for ensuring that the future of crypto is censorship resistant and independent of centralized manipulation. Decentralized Social, in this sense, encompasses the future of social media, messaging, streaming and news.
Real World Assets (RWAs): It would be a mistake to overlook the massive potential of bringing the intangible economy of real-world assets on-chain. From the low hanging fruit of stock and commodity tokenization, to the larger potential of security token launch pads, fractional ownership of industrial processes, sports teams, and much more, there is an increasing demand and interest in exposure to tokenized assets, representative of real-world value. Such assets, their accompanying infrastructure, and the composable legos’ surrounding its creation on-chain all represent the exciting frontier of Real World Assets (RWA’s) emerging in crypto in the coming decade.
A thesis focused on utility based dApps and infrastructure, holds that while liquidity, governance, and non-fungible value are foundational layers of the crypto product stack, user focused value accrual will ‘trickle down’ into real-world applications and assets. In the coming years, our focus will be devoted to tactical and concentrated investments into products with sound crypto-economic design, capable of capturing market share from real-world industry and users over an extended period of time.
Part 3 — Lyrik as a NEAR-Native Ecosystem Fund
Lyrik Ventures originated as the first grants program of the NEAR Ecosystem. Since that time, it has been a committed and NEAR Ecosystem fund working closely with Ecosystem partners including the NEAR Foundation. Notable LP’s and backers of Lyrik include Accomplice VC, Digital Currency Group, the NEAR Foundation, UDHC, crypto-native operators such as Illia Polosukhin (Co-Founder of NEAR Protocol), and select family offices.
The Ecosystem Fund Thesis states the following: There is long-term value in concentrating investments inside of a specific ecosystem, because of the network effects, composable value, and shared community. Just as it makes sense to invest in specific regions or countries around the world, in crypto, it makes sense to invest exclusively inside of specific L1 Ecosystems — especially in their infancy. Beyond operating as a basis for the internet of value, and the billions of dollars in applications such a movement represents, L1 ecosystem’s are increasingly political, social, and cultural clusters of innovation. Lyrik’s commitment to NEAR extends above and beyond any single application or product-cluster, but all the way up to the potential of seeing NEAR emerge as a political entity of its own in the medium to long-term future.
As an embedded vehicle inside of the NEAR Ecosystem, Lyrik comfortably sits as the most involved and connected VC fund inside of NEAR.
Support from Lyrik includes:
Co-Leads in Significant Ecosystem Projects to Date. Lyrik has co-led rounds with Electric Capital (Tonic Orderbook DEX), Coinfund (Crystals of Naramunz), Khosla Ventures (Calimero Network), and FRAX (Renaissance Labs).
Recognized Partner of the NEAR Foundation. Since its inception, Lyrik has worked closely with the NEAR Foundation, across their Business Development, Education, Funding and Executive Teams. As a recognized partner of the NEAR Foundation, Lyrik has actively contributed to the NEAR Digital Collective (NDC), the NEAR Grants program, and as early partners to Proximity Labs and Octopus Network.
A Builder First, Crypto-Native Fund. Lyrik is a team comprised of builders, actively working in crypto since the mid-2010s. As crypto-natives, Lyrik’s expertise stretches from community building and crypto-economics, to technical diligence, and liquidity strategy. We are committed to investing in crypto-native projects, and maintaining the ethos of the early crypto-space.
A Hands-On, Deeply Connected Fund Within the NEAR Ecosystem. Working with Lyrik is a hands-on experience. We believe the best way to support founders inside of crypto is to work with them in making sure their network, product and fundamental design is sound, durable, and able to flourish over the long-term. To do this, we leverage our vast network within the NEAR ecosystem — from ecosystem nodes to community member support, to other ecosystem funds.
Conclusion
Crypto as a whole is no longer awestruck by the massive potential of the internet of value. Rather, it is now concentrated and distinctly aware of the need for user-friendly, scalable, and real-world focused disruption originating from blockchain based applications. Lyrik is a concentrated venture capital fund, focusing specifically on the NEAR Ecosystem and the emergent product stack surrounding real-world use-cases and exogenous value capture. While crypto-native at root, Lyrik aspires to invest in high impact decentralised applications that have the promise of re-imagining how existing systems operate.
To contact the Lyrik Team or submit a project proposal, please find more information at Lyrik.Ventures.
About NEAR Protocol
NEAR is on a mission to onboard a billion users to the infinite possibilities of Web3 with the Blockchain Operating System (BOS). Leveraging its high-performance, carbon-neutral protocol, which is fast, secure, and scalable, NEAR provides a common layer for browsing and discovering the Open Web.
About NEARWEEK
NEARWEEK is one of the first decentralised news sources within the NEAR ecosystem. Via the production of high-quality content, news, and promotional support, NEARWEEK unleashes the full potential of its media outlets to act as the social epicentre of the NEAR ecosystem.
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