Lab Summaries - Rather than Wen Moon - ask Why Moon?

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Being in the bear market, now's probably as good a time as any to revisit the reasons why crypto is developing rapidly as we speak.

A Sequoia article from 2021 gives us good insights into the evolution of crypto, how it came about and where it can go next.

As always, here's a short summary distilling the key points from the article. Check out the full Sequoia article at the end.

Why Crypto?

Money stems from trust.

Trust in institutions to keep our money safe without reckless loans; Trust in our governments to prevent hyperinflation; Trust our central banks to not devalue our currencies over night.

Trust seems to be eroding among people who have access to financial systems. Worse still, many people do not even have access to financial systems.

Crypto can be seen as a natural evolution of our financial system: From a barter economy, to metal coins, to paper money, to digital money.

The main aims of crypto is thus to provide:

Better money - More trustworthy and accessible financial systems, money free from arbitrary monetary policy, censorship and surveillance

Better internet - Users own their data, creators get fairly rewarded, communities governing applications

The great crypto evolution

New asset class -> New market for financial services -> New crypto stack

New asset class

Crypto, blockchain and digital currencies can grow in their use cases (e.g. as censorship resistant stores of value, mediums of exchange, investment vehicles) over time, creating a new asset class.

New financial services market

This likely creates a new market (both CeFi and DeFi) that is expansionary to current financial services. Users can perform various activities such as buying, selling, trading, lending, fractionalisation and much more.

New crypto stack and internet services

This new market requires a new emerging crypto stack, alongside internet services around the principles of user ownership, creator rewards and governance.

Mental models for crypto

Looking at crypto across space

The ecosystem can be organised into various categories - from hardware to base layers and their applications, as well as the infrastructure stack that supports them.

Examining crypto over time

Crypto will likely progress and evolve over time across a few phases. This starts from:

Phase 1: Crypto being isolated from non-crypto world, serving mainly crypto natives

Phase 2: Crypto being bridged between crypto and non-crypto worlds, with a growing infrastructure and tools and use cases

*Sequoia believes we are just starting Phase 2

Phase 3: Crypto maturing and fusing with non-crypto worlds where they are no longer distinct. Crypto would have crossed the chasm to become commonplace and mature.

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