How to build with tokens; news you can use; latest trends

8.10.24

Editor’s note: This post originally appeared in our web3 newsletter — a guide to trending topics in crypto with insights and resources from engineers, researchers, and others on the a16z crypto team. Subscribe to see it in your inbox every other week.

🛠️💪 Your guide to tokens: How to design, launch, structure rights in term sheets, and more

Tokens are the technology that defines and distinguishes web3. Because they’re still new — and best practices are rapidly evolving — we get lots of questions about tokens; it’s best to approach them with caution and care.

So in this special series of posts continuing our Token Launch Playbook series, we cover token “do’s and don’ts”; how to think about tokens as part of overall compensation; new financial models for application (vs. infrastructure) tokens; and the art of tokencraft.

We also share how to structure deals involving token rights and restrictions — including especially how to avoid predatory term sheets! Previously, we covered 5 rules for token launches and strategies for managing risk; what you need to know before you launch a token, as well as an operational readiness checklist from token creation to custody — you can also find those posts in the link below.

check out our guide to tokens

🌍⚡ Spotlight: Where innovation happens

Where do entrepreneurs and startups — and with that, economic growth — thrive? In a special episode of our web3 with a16z podcast, we cover innovation ecosystems at both a structural and individual talent level.

We cover what does and doesn’t work when it comes to top-down government involvement and bottom-up community. We explore when is the best time to intervene in entrepreneurial talent; the nature of ambition, yearning, and finding one’s path; and more broadly, mindsets for navigating risk/reward and dynamism in different regions including London and Europe. We also discuss new ways of funding breakthrough R&D at a national level, tech trends of interest including crypto, and much more.

Our special guest is Matthew Clifford, the co-founder and Chair of Entrepreneur First and also the Chair of the UK’s Advanced Research and Invention Agency (ARIA). Matt was also the Prime Minister’s representative for the AI Safety Summit; and was recently appointed by the UK secretary of science to deliver an “AI Opportunities Action Plan” to the UK government. Fittingly, this episode (hosted by Sonal Chokshi) was recorded live from Andreessen Horowitz’s first international office, in London.

listen to the episode/ read the Q&A

see also:

📰🪪 News you can use: digitizing the DMV

California is a global leader in technology innovation, and the fifth largest economy in the world (according to the U.S. Bureau of Economic Analysis). Now, the state is integrating blockchain into its government operations — including with its Department of Vehicles (DMV).

Just a couple weeks ago, it was announced that 42 million car titles were digitized as part of an ongoing effort by the state to modernize and streamline the title transfer process for residents and DMV office workers. Avalanche, Ava Labs, Oxhead Alpha, and the DMV are doing this by building a DMV-run blockchain.

On a related note, the state’s DMV has also been working to bring mobile driver’s licenses to California residents. Last year, the state expanded its initial pilot program to allow residents to download a mobile driver’s license on their smartphones through the DMV app. The privacy-first approach is powered by SpruceID products, including an open-source toolkit for decentralized identity that enables secure wallet construction; and a platform that enables credential lifecycle management from issuance, presentations, and updates to revocation.

📝📄 Latest in research: reasoning about the risks of restaking

Under what conditions can validators be safely reused across multiple services? A new paper by Naveen Durvasula and Tim Roughgarden (Head of Research at a16z crypto and Professor in the Computer Science Department at Columbia University) offers a framework to reason about the risks of restaking.

The paper answers when a restaking network is “robustly secure” — that is, a small shock (like a bug causing slashing and the sudden loss of stake) won’t cause a catastrophic attack. The authors characterize the robust security of a restaking network as a function of the buffer between the costs and profits from attacks. They also provide local analogs of these overcollateralization conditions and robust security guarantees that apply specifically for a target service or coalition of services.

Finally, the authors bound the maximum possible length of a cascade of attacks. The findings suggest measures of robustness that could be exposed to the participants in a restaking protocol.

🔆🌐 Trend resource: decentralized energy

A couple years ago, we highlighted decentralized energy as one of the themes we were excited about; and last week, we announced an investment in the space. Because today, U.S. energy — a collection of highly regulated monopolies — is ripe for disruption. Most power grids are dated, centralized, and face other issues such as incentive problems… which makes it ripe for decentralization, a key benefit of crypto and blockchains.

In recent years, we have indeed seen broader deployment of distributed energy resources — like solar panels, battery powerwalls, smart thermostats, and other connected devices — which can reduce load (or supply power during peaks) to the energy grid. But these sources are often individual households or businesses that don’t have a clear incentive to provide support when needed. Solving this collective action problem would be invaluable for our energy grid. There is also a large untapped market for better information about such connected devices at the edge of the grid — since energy utilities still have little visibility into these resources, and it takes too long for them to aggregate the information. This is where a decentralized protocol that allows developers to program the energy grid through distributed energy resources comes in.

For those interested in learning more about the topic of decentralized energy, a16z crypto’s Guy Wuollet has put together a list of books, articles, podcasts, reports, and code so others can also explore this complex topic. Whether it’s to learn more about other kinds of networks — or because you’re interested in atoms not just bits — there’s something in here for anyone who is curious about infrastructure.

see the list

…data olympics

— Sonal Chokshi, Tim Sullivan, Robert Hackett, Stephanie Zinn, & a16z crypto teams

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