gm! Welcome to Variant’s final newsletter of the year. 

It’s hard to succinctly summarize 2023. A year that began with such negative media attention on crypto is ending with renewed enthusiasm for web3. It’s also ending with buzz and debate over the use of points in crypto apps, and Li has some new thoughts on that topic below.

Crypto startups spent the year building, independent of external noise. And we spent it working to support them. 

Here is what we wrote, read, and invested in this year.

—Dan Roberts, Editor in Chief

Lessons on Points Programs for Crypto Apps

Li Jin

Li riffs on the sudden topic du jour in crypto: points. They have the power to build an engaged user base, but beware of what kind of users you’re attracting with the promise of points.

Our 5 most-read Variant posts from 2023

1. Li Jin & Jesse Walden: Progressive Ownership: A Model for Application Tokens

The application layer doesn’t yet have a proven model for using tokens to grow networks. So, Li and Jesse created a new framework for token distribution that builds on progressive decentralization while hopefully avoiding many of its drawbacks. 

2. Mason Nystrom: DePIN and DeREN: Toward a Better Classification of Decentralized Infrastructure Networks

There’s not one type of decentralized infrastructure network, Mason wrote in July, but two: physical infrastructure networks and resource networks. Read this piece to understand where wireless, storage, compute, and other networks fit on this spectrum.

3. Alana Levin: App-Specific Rollups: A Trade-Off Between Connectivity and Control

Ethereum app teams face multiple decisions when determining whether to launch their own rollups. Alana looked at where gaming, social, marketplace, and other apps sit on the continuum between connectivity and control.

4. Li Jin: Web3 Social Networks: The Case For and Against Financialized Approaches

When thinking about how to build crypto-powered social networks, Li sees two main paths: asset-first or ideology-first. In this piece, she explained and explored both.

5. Jesse Walden: The Interplay Between AI Abundance + Crypto Scarcity

Robbie Barrat produced one of the first-ever onchain AI-generated artworks. Jesse wrote about its significance to web3 and the broader excitement around generative art NFTs.

7 essays we loved from industry peers

We welcome your input and replies on Twitter.

1. Eugene Wei: How to Blow Up a Timeline

Li said: “Great dissection of why Twitter feels meaningfully different now -- down to the mechanics of its algo changes (from a follower graph that proxied interest, to a more TikTok-like feed that emphasizes virality).”

2. Jacob Phillips at Perennial Protocol: A deep-dive on fees in DeFi derivatives

Geoff said: “Good read on DeFi derivatives from the @perenniallabs team. Traders and LPs take note!”

3. Trace at Figment Capital: Revisiting the Application Layer

Alana says: “One of the best pieces I read all year.”

4. Dcbuilder.eth at Worldcoin: The Future of Digital Identity

Jesse said: “Great map of the digital identity space and enabling technologies.”

5. Morgan Housel at Collab Fund: Everything Is Cyclical

Mason says: “Sometimes crypto seems uniquely cyclical. But if you look deeply enough, everything is cyclical.”

6. Paul Frambot at Morpho: The Two Paths Ahead For DeFi: Decentralized Brokers vs. Protocols

Derek says: “Great framework for a trend toward lower-level modular DeFi protocols.”

7. Joel John and Saurabh at Decentralised.co, On Airdrops

Jack says: “One of my favorite reads this year. Explains why airdrop farming is the way it is and what the future of airdrops may look like.”

5 new investments we announced this year

Modulus: Zero-Knowledge Machine Learning for Decentralized Protocols

Doubling Down on Botto: Because Everyone’s a Critic

Blockaid: Protecting Users Onchain

Alluvial: Liquid Staking for Institutions

Turnkey: Removing Barriers for Crypto Developers

See you in the new year.

Disclaimer: This post is for general information purposes only. It does not constitute investment advice or a recommendation or solicitation to buy or sell any investment and should not be used in the evaluation of the merits of making any investment decision. It should not be relied upon for accounting, legal or tax advice or investment recommendations. You should consult your own advisers as to legal, business, tax, and other related matters concerning any investment. Certain information contained in here has been obtained from third-party sources, including from portfolio companies of funds managed by Variant. While taken from sources believed to be reliable, Variant has not independently verified such information. Variant makes no representations about the enduring accuracy of the information or its appropriateness for a given situation. This post reflects the current opinions of the authors and is not made on behalf of Variant or its Clients and does not necessarily reflect the opinions of Variant, its General Partners, its affiliates, advisors or individuals associated with Variant. The opinions reflected herein are subject to change without being updated.