VCs Big Bet: The Abstraction Advantage

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1. 0:08

   okay now that I'm off to a really really bad start how about you guys introduce yourselves hi I'm uh uh Tom I work at fabric Ventures so fabric has been investing in the space uh since 2016 uh we're big Sports of near we invested in near back in 2019 uh and we're very excited about chain of c u my name is Emerson I'm from long has Ventures um we are in Singapore based fund Venture fund and accelerator specialized in bootstrapping ecosystems

2. 0:43

   um and we have actually a couple of portco uh who are really deep into the chain exraction ecosystem um let the preed round for for particle Network um and uh invested in lit protocol as well and of course uh also invested in safe just building smart accounts and future in the future have a key store rollup as well so um yeah um personally was onboarded through a smart account and through crypto as well so this a topic that means a lot to me um and uh I think

3. 1:18

   is a key element to mass adoption awesome um John I am with outlier Ventures ob's been around since about 2014 running accelerators since since 2019 um so I think we're the kind of oldest accelerator in the space uh web 3 exclusive uh accelerator uh we have near is a partner of ours we did an ecosystem development program with them uh last year we have um a goric is actually a portco of ours um so yeah we we have

4. 1:48

   deep interest in in uh chain abstraction looking forward to uh talking about how and why so on that note I've heard probably 20 definitions of what chain account abstraction everything like that is what is chain abstraction that's an open-ended question for all three of you I mean I think Ethan gave a good for everyone that missed it yeah yeah I think Ethan gave a good definition of it um well to me it's really about um abstracting away

5. 2:21

   the the interaction of like extracting away the the knowledge that a user is interacting with a certain chain um I think the the first example of this was like 10 years ago a coin base um where you can just trade any token um and uh but of course in a centralized way so that's my definition yeah I think um I won't I won't even go into the definition uh I think that's that's a great one I think you know when I think of the I was just thinking about this earlier you know the

6. 2:58

   uh the meme the bell curve meme where it's like everybody's like struggling with it and then it become or I mean it's like kind of a really great idea and everybody's struggling with it and then it just becomes like it's so easy right I mean it's just making things I feel like it's like that like everybody's just we just kind of like had this really complicated idea but it's a I mean it's an amazing it's just like an amazing thing and we should we should all like be embracing it and the

7. 3:21

   fact that there's like we're ever not really just talking about this doesn't make any sense actually right why not why not why not I mean I don't think it's a hot take I don't think anybody would disagree with the fact that we need more demand for everything that's happening in the space um you know in this this infrastru like infra is great you know things faster cheaper that's

8. 3:44

   great but um we need like we need more people to be coming in and feeling comfortable using the products and the infrastructure we have um so that's what this is all about is like making just making this all more accessible uh yeah so so I guess it's my turn to to find the to find the answer uh it's good they got three three VCS and they say you say you have three VCS on a panel you end up with four different

9. 4:08

   positions um so I mean I mean for me I think chain abstraction and account abstraction for me chain abstraction is more a recognition that one of the biggest things that has been lacking in terms of innovation in the space has been around like the user experience and chain exraction for me is kind of an attempt or or a movement to try and put that kind of front and center so we should think more carefully about making these things seem easy making these things more accessible um ACC exraction

10. 4:39

    for me is slightly more specific it's it's kind of for me account exraction is around replacing uh EA wallets um with kind of a more general definition of wallet a a smart account that then allows you to do some of the things that lead you towards a more abstracted user experience so so for me C abstraction is part of chain abstraction uh but I think I think the reason why it's hard to kind of nail a single person down on chain

11. 5:05

    abstraction is for me it's more about the philosophy of the space has kind of become very comfortable with very difficult ux and very difficult easy experiences and very fragmented type of approaches to things uh and it's a kind of a goal to try and make that stuff more accessible to to to new users so thank you for that thank all three of you guys for giving me completely different answers I don't know if mine was an answer actually but they were pretty good they were pretty good I think they were pretty aligned

12. 5:35

    they were pretty honest I appreciate it but I'm not answering then um so really I guess we've already kind of said you know there's not too much of a hot take or anywhere but what kind of cases are there against chain abstraction what what what are people hating on well so I think chain abstraction in of itself Sid steps um another question which is like what is it for and what specifically

13. 5:59

    mean is like what is the application for now you're taking my questions uh and so you know so so the idea of being able you know so so when you kind of talk about user experience in general you want to think in terms of what users actually want to do and accomplish and so talking in a board concept I think is helpful in terms of framing the debate but it doesn't get to the specifics of like what specific problem are you solving for a specific subset of users who are trying to accomplish a

14. 6:24

    particular goal uh and there is a risk therefore that it then becomes one of many narrative and and isn't able to kind of follow through follow through beyond that so that is for sure a risk I think in order for any kind of philosophy to get broad adoption there has to be kind of very specific pieces of tech underlying it that Define something specific that makes a particular application much much easier

15. 6:47

    um so for example we've seen I mean you know in the account instruction space you know we uh we we invested in Argent a while ago and you know we've seen that so certainly for use cases around things like gaming it's really important you have a very seamless us experience you're not signing every transaction um and so some of the mechanisms way you accomplish that is using technical features like you know session Keys using smart contract wallets and so there you can very much see how this

16. 7:12

    abstraction applies to a use case I think a bunch of folks who were thinking about you know intense infrastructure and and other aspects of chain abstraction or or what I was refering to do earlier with what n is trying to do is around kind of like abstracting with like a lot of the trading trading experience so I think it's important that you know this this overall goal is is admirable but it it's coupled with a very specific uh user Journey that solves a very specific

17. 7:36

    problem do of you guys want to hop in on that I think the biggest case against chain abstraction is if an app wants to be a wall Garden um say frch was one um where you have a preer um own wallet on an own app and the tokens on frch aren't portable from one chain to another um I think that is quite against the web 3 ethos um of composability of of tokens from one chain to another um so I'm hoping the core values uh Prevail there but I think

18. 8:24

    in this permissionless Innovative ecosystem it's a very M it's it's a very easy path to take yeah yeah I think just very simply there's always the trilemma there's always a trade-off right so why why like what's the application what's the use case and I think that's always important and it's not formulaic you know it's funny you talk about what the business application is because my next question down here was what do you see as some of the most applicable business uh business cases

19. 8:58

    for chain abstraction do you have any do you guys have any actual specifics since we're talking about how the problem is we're not being very specific yeah I mean I mean clearly in terms of trading um fragmented liquidity is a genuine issue uh and it stops people from doing things they want to do which is the kind of you know base definition of a of a poor ux um so the ability to aggregate like liquidity across multiple chains is not only a problem today it's likely to be a growing problem in the future um

20. 9:29

    particularly as people kind of look to build their own nap chains and the infrastructure around building all of these different na chains has vastly improved in the in the past couple of years um so that I mean like that I mean that feels like you know within the kind of chain abstraction world that feels like probably the most concrete problem to solve um I don't know if we're going to go into Emerging Markets I kind of mentioned this when we were talking

21. 9:52

    before but I mean I think um you know we're at outlier Ventures we're thinking really deeply about open finance and you know it's kind of been thrown around a lot recently um I it's it's more than just kind of a rebranding of defi it's really meant for like these real world applications and people who um are really transacting and and and uh need some kind of embedded or could use some

22. 10:16

    kind of embedded Financial product whatever they're using so I think um you know anything that involves payments like building being able to build credit regardless of what what chain you're on um being able to blend and borrow and and you know abstracting away all of the intricacies of like you know wallets and uh uh the things that we all think about on a daily basis um and and what I was

23. 10:41

    going to say about you know going a little bit deeper into Emerging Markets um we have an opportunity I think with all the adoption that's taking place if in latm for example um people are there's like a massive amount of of adoption and people are jumping through all the Hoops that we in you know in this part of the world don't think like or won't do at least like most people

24. 11:04

    won't do but there's a real product Market fit so it's happening and I think the opportunity is to go to be able to you know Target those those areas where there's already a lot of adoption use them at like they're already un okay with the discomfort that we that we talk about um but you know be able to test out some of the abstra you know some of the other the other properties that we have here with chain abstraction and and account abstraction um and and use it as

25. 11:30

    a Proving Ground so that when you know whenever it comes out to the rest of the world for example it would be um you know it it'll be all figured out so people aren't like well this is supposed to be easy but it's not so really like nail it and then roll it out right yeah I resonated with that a lot because I mean I'm based in Southeast Asia um and Emerging Markets you especially in inflation ridden um countries you do

26. 11:56

    need um way way easier experience on ramp off ramp um in order to access these and I think the back to theed question around um what's the business case uh for for chain abstraction is when there is a breakout app and any breakout app will eventually create their own app chains because no current general purpose chain will will be able to satisfy demand so as more breakout apps

27. 12:27

    emerge as more um demand for these new tokens um emerging from the new app Chains new um nfts new new lrts and whatever new assets will be created in the future um will require um assets to be ported from one place to another and so I think um what I'm trying to say is the more app chains the more need for chain instruction that's also my uh my next question that I was going for was how do

28. 13:01

    we kind of see uh you know infrastructure apps accounts how do we see the landscape changing and evolving over time as we go forward what's next what's what's your goal and ideas about the future yeah what's a big question I mean I so I mean so one of the where we've come from so what we've seen is like so a lot of the infrastructure around spinning up chains has significantly

29. 13:24

    changed and improved in the past couple of years it's become incredibly easy and those Chang are coming closer and closer to being you know the case of L layer twos being true layer twos as opposed to side chains and we've seen a lot of kind of infrastructure around that and scaling and an ability to do that and So within that Paradigm there is kind of more need for this stuff uh what we are seeing what we want to see in the future is like what people are working on today

30. 13:48

    become real so I would say in particular there's been a lot of folks working on things around intense most of that isn't real it's a very clear direction of travel uh but there's a lot of technical problems to solve um so like those sort of areas I think are are are definitely something we're we're actively looking at at the moment so how do you as a VC with a portfolio company help your team your Port codes differentiate between

31. 14:13

    what's real and what's a buzzword I mean ultimately it comes down to building things that people actually want so it's it's a case of I mean our recommendation kind of consistently is there there's lots of kind of ways to get distracted within crypto it's it's often very easy to get get grants and to you know develop Partnerships But ultimately if you are an infrastructure company where you're building in this

32. 14:35

    chain obstruction world and you don't yet have kind of very clear product Market fits like someone like safe does um then it's about really focusing on like what will move the needle for your product to get there um knowing that a lot of the technical heavy lifting takes kind of months even years to to execute on so it's kind of having a very like clear idea of what your singular vision

33. 15:00

    is and how you get there and doing things that move the need towards that rather getting distracted by some of the more ephemeral parts of the F system that same question goes for you too as well how are you helping your teams kind of navigate what's what's a buzzword what's real what's hot right now and what's probably lasting how do you how do you deal with that encourage Med

34. 15:24

    meditation drink a lot I think it's um separating what is incentivized and non-incentivized um I think we definitely want we definitely advise support codes not to launch a token or launch points without clear validation that this is something that they want that users want um um what kind of things do you look for is validation that it's something a user wants points are points are a hot one right now how how are you finding out who's uh really there for it and who's just there for the points I I think I

35. 16:14

    think the answer is people like no so I mean I mean for example you know I think any any and it's something that we talk about a lot with Founders is you know like let's say you're you're a layer to or you're you're building in that infrastructure area and you know like it's very clear when people are coming because they're looking for points or they're looking to game airdrops and it's very clear if users are kind of genuine or not and so it's important

36. 16:38

    that Founders are honest about that with like their investors and investors are honest about that with you know their Founders and are kind of candid um so I think it's actually like you know if if it's your project and people are kind of using it you should have a pretty clear idea about whether it's real or not you should but John you're you're looking very pensive in the corner there I saw some faces out of you I'd really like to know what's going on your mind right now yeah um no I cuz actually I was just

37. 17:02

    reflecting on something that I that I wrote a few and I trying to remember what I wrote a few months ago like internally about um about some of the fragmentation that happens when there's like mercenary behavior for from startups and from from teams of course you would like discourage that um but it's natural you know it's it's like people Founders are going to go where they get the best deal sometimes it's not um it's not always healthy uh but in

38. 17:28

    fact I you know what I was writing is that it's clearly not healthy um so you know the question is like what's the value of loyalty and and sticking to like a certain ecosystem and being able to grow within it and and I think that comes down to ultimately not chasing the shiny object but really embedding yourself getting close to the team getting close to the Devall getting close to whoever it is that you need to get close to and and and again like building loyalty it means a lot to I think consumers as well

39. 17:59

    um so you know the more we have like abstraction and and and uh the more we might see that but of course it's a um discouraged uh I think we would just kind of discourage that and encourage teams to once they start building figure out why they're building there and then like embed themselves with that ecosystem thank you for that sure appreciate you sharing what's going I'm glad I got that off my chest um let me see I had a bunch of questions and none of them are very interesting now that I'm up here um

40. 18:32

    really what I've got for you on this one is we've been talking about you know chain attraction and it's kind of role in everything how do we see it playing into this long-term growth and sustainability too because there's there one thing to you know have points and move on to the next thing or whatever and Chase the shiny objects or not but how do you make sure that that doesn't

41. 18:48

    happen to a company in your portfolio how do you know when something's gone off the r i mean there are when things have gone off the rails for sure yeah share with the class um I think yeah I mean it's ultimately it it comes down to kind of building what people actually want and I think also there is there's often a disconnect between what people like to say that people like and what people actually do like um and so you know I think I mean so some of the I don't I don't think this is a hot take at all

42. 19:23

    but well it's really not a heart take at all but you know there's very little evidence for example that consumers care about decentralization and so decentralization is a worthy go in and of itself but consumers don't care right and so if you're arguing that people are using something because it's decentralized as a as an illustration then that doesn't feel at all plausible and so understanding like what is kind of your your users motivations and whether that's real or not uh is is is

43. 19:48

    is incredibly important um so that's kind of like normally Step One is like yeah understanding like the US of behavior what's step two well I mean ultimately it's for the found you know ultimately like it's it's you know we you back Founders who you think can build um like incredible world changing products in kind of important areas and so you know to a certain extent you know we do as as from our side of table we do what we can to

44. 20:12

    support them um and we try and give advice but ultimately you you're backing Founders to to be able to understand the problems great fair enough do you guys have anything to add to that no I think that was great that's all great okay yeah I'm hearing a lot of you know we've got big problems and big things we're solving and world problems but I'm not hearing a lot of fun how are

45. 20:36

    we making sh that things on chain are actually kind of fun games I mean I actually think a lot of the games are today are underrated I think there's a general impression that games in web three are not super like not fun but I've actually played a couple that are pretty fun um shout anybody out parallel is great I think parallel card game is great um Cipher on IM X is actually pretty good too so um and these are like live games

46. 21:10

    launched and playable um so I think that's a sector that's being slept on yeah I think I mean I think in terms of kind of like making things fun I think I think that speaks to I think like something that we kind of I believe very strongly is when consumers tell you what they like M don't shy away from that so famously you know in the in the early 2010s when when mobile kind of blew up and then mobile

47. 21:35

    gaming started a lot of the kind of gaming folks were very snobby about M gaming because things like Candy Crush didn't seem particularly interesting right when you had like GTA 4 and GTA whatever and they were they were kind of like very simple games they didn't really kind of you know tick that intellectual where kind of expanding the industry but users really loved them and

48. 21:52

    they loved what casual games allowed you to do on a mobile device and now casual games and mobile games are by far the biggest segment of the gaming Market which is also an enormous Market in all of itself and so I think leaning into what people care about in the space is really important um you know the pum do fun team uh based just out the road from uh Us in in Oxford uh and they kind of you know really understood what people

49. 22:17

    wanted and were able to give it to them in a in an environment that kind of Lent into what sort of behavior they were seeking to kind of capitalize upon and also in a very seamless and easy way right they abstracted away a lot of the kind of underlying complexity their clear their their clear value prop was allowing users to do something that was kind of possible before but was very difficult was very scammy it was it was very unclear where and they packaged

50. 22:40

    that nicely in a nice platform and have kind of since reaped the rewards so we've got maybe five minutes left here um and I really want to just ask all of you one question for everyone in the audience what if if you're just going to take away one thing away from everything we've talked about what is it that you want them to take away I mean for me it's simple it's it's it's build things people want build things um like everything else pales into comparison to that so chain abstraction

51. 23:12

    is is useful but it's useful when paired with something that people really really want to do yeah don't forget the web through values openness composability I think it's yeah as I said it's easy to build a w w garden with an app um but the general space grows together um if they they are composable so um I think that's like the key value proposition OB 3 versus 2 really um and I think we may be in danger for getting

52. 23:53

    that yeah yeah I think um you know we've maybe just to kind of wrap up a lot of the things that we that at least I've talked about is like um follow follow the path of least resistance in terms of the pro in terms of like the product Market fit um you know I think we've we've built so much infrastructure and it's time to really like figure out where you know where the puck is headed in terms of adoption um I think we're you know we're taking we're we're we've

53. 24:24

    got some good uh Traction in certain verticals um s you know like I said Emerging Markets uh as a you know kind of as a narrative I think is something that that we're super interested in um and you know because there's just not the same resistance and that's like I said it's like a Proving Ground kind of maybe for for where where things should go so well thank you guys for your time

54. 24:49

    tonight did you have one more thing you wanted to say yeah well I mean I I opened my Fest La by saying you ask a VC you know for three you ask three VCS a question you get four answers so it feels only fair to add a add a fourth answer to your question and that is that like there's um there's also like there's an enormous open space out there so you know we've seen really great product Market fit in the kind of trading area and a lot of those things are built but then people have buildt an enormous amount of infrastructure to

55. 25:12

    allow you to do all sorts of things and you know areas like payments areas like gaming these remain wide open and a lot of that infrastructure already exists both on the you know kind of on the blockchain side and the scaling side but also on the increasingly on the on the user experience side and so there's there's space to build great stuff I'm really glad you brought that up because I have something kind of cool that I'm going to totally throw out there and see

56. 25:35

    if it works so if this doesn't work everyone forget this part um do you have your phone on you yeah can you pull it out real quick can you tap my nail that's cool it should pull up an NFC chip that now connects you to me that yeah so if you open that that's a website that my team and I are your wallet gets trained working on it's pretty cool so now you've craft now you've I have that the fact that we've

57. 26:01

    connected so there's the world is wide open to do all sorts of things where we connect with actual people wow it's called chip social you should check it out wow that's awesome yeah anyway thanks for your time guys sorry I need to I need to add a fifth answer because I I also um I also want to encourage people to tokenize new things yeah um like I think the the parts of web that have

58. 26:26

    found product Market fit is when they've tokenized things and crypto native things um I think LP tokens were great great pmf um nfts were great pmf um and I think the Space is really open for new things to be so to be tokenized from uh social groups to um new new assets I think it's easier to build like tokenized Crypt native assets rather than like real world assets because of regul regulat reasons um but yeah I

59. 26:57

    think that's we create fun ciz everything else on that note thank you guys we are out of time and I really appreciate you all bearing with me thank you very much okay thank you