By Aron van Ammers
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Opening up 4 years of work in blockchain
If you think investing in crypto is hard – investing in our Convergence Thesis, how DLT combines and converges with IoT, Big Data and AI is even harder. The technical complexity of keeping pace with multiple deep technologies and their interactions is hugely demanding and requires a dedicated team of technical analysts who can only really learn by doing. This means they must be active developers, administrators and participants of networks. We call this Outlier Labs, and it has been our commitment to the space since 2014 and includes a multitude of activity such as: building apps, hackathons, dev cons, running network nodes and applied academic research.
As Founding Partner and CTO of Outlier it has been my job since day one of the firm’s existence to lead Labs and inform the technical aspects of our investment decisioning, as well as internal learning and portfolio support. Before I go into exactly what it is we do at Labs I wanted to frame a few guiding principles that guide the ethos and spirit on how we approach the space.
1. Avoiding tech utopias
From protocol fundamentals to token engineering or token custody, being an investor in this space means the maxim ‘software is eating the world’ has never been more true. With cryptonetworks, software is eating something much more profound: the way we coordinate almost all economic activity and codify trust, in short the “organisation” itself. In fact, the danger which has been seen time and time again in crypto’s short life is often trying to build tech utopias, and trying to commit too much to code, too soon. Just because you can decentralize everything doesn’t mean you should, at least not straight away. This requires a discipline, pragmatism and a healthy dose of traditional business and startup experience.
2. Developers are THE key stakeholders
As I wrote earlier this year, as principly open source systems, the early users of tokenised protocols are often developers, and they are in limited supply. Furthermore, the ICO model has meant they are now also the financiers (or equivalent of shareholders), marketeers and governance layer in these networks. They are expected to commit capital, code, compute, storage, security, and data, and sometimes even vote on key decisions. Therefore the success of a network is inextricably linked to the ability to both win and retain the hearts and minds of a developer community – both for the core protocol and the application layer on top. Never before has developer relations been such an important activity for an organisation.
3. The chicken & the egg: Infrastructure vs DApps
To build on point two: as articulated very well by Dani Grant and Nick Grossman of USV recently, great decentralised infrastructure on its own is not enough for a protocol to succeed. Value might very well accrue in the protocols, and we believe it will. But a tokenised ecosystem needs great DApps to be useful and often will be directly informed by their requirements in a symbiotic feedback loop. Do you build downwards or upwards? That’s the golden question.
So what exactly do we do at Labs?
Now that you know where I’m coming from, I’d like to tell you about a few things we’ve been doing at Outlier Labs, and some things you can expect from us in the future.
1. Applied learning
Reading and understanding technical white papers is one thing, and once you go into complex cryptography requires high levels of competency in information security, mathematics and distributed systems. But actually understanding the quality and usefulness of code, is entirely another thing. As mentioned in the intro, all our technical analysts are coders and practitioners. In short, they are doers vs thinkers.
Historically we’ve done this on many levels from simply auditing and running code all the way to building actual DApps on top, sometimes even to MVP level and beyond. Here are some examples we did with Eris (now Monax) and Ethereum dating as far back as 2014:
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- Luxury goods provenance DApp built on Eris Industries blockchain stack (2014)
- Peer-to-peer lending DApp on an Ethereum-based blockchain (2015)
- Group buying DApp on an Ethereum-based blockchain (2016)
- Public spending data transparency DApp on BigchainDB (2017)
2. Running & building code
At Outlier we partner with teams at a very early stage. Typically pre-token, and sometimes before there is very much code at all. So we are often actively involved in running early code, testing and evaluating it.
Our engineering team submits issues as we encounter them, play with APIs and inform the developer documentation required to scale community. Increasingly we build simple apps ourselves to evaluate and demonstrate the potential of our portfolio’s tech – and are looking forward to open up this process over the coming months (so hold tight). To begin here’s our GitHub – we always welcome pull requests.
3. Operating nodes
Cryptonetworks are run by an army of volunteers, professionals, businesses, partners. And in the early days of a network that army is very small. Technical VCs are uniquely positioned to be part of that army and recruit others to make it grow. Running nodes for all our portfolio projects is one of the first steps we take at Labs as they reach testnet and mainnet stage.
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Keeping the IOTA Tangle in sync
We also help out by making onboarding new nodes easier for others (including the legal considerations), as we do it ourselves and iron out issues that come with any nascent piece of software and document the process. If you are an enterprise partner and need assistance, just shout!
4. Staking, baking & keeping
Beyond supporting the networks in a more altruistic fashion, there’s money to be made in actively participating in cryptonetworks, or worded differently, there are rewards to be missed in not participating. We are on the verge of a number of large proof-of-stake networks going live in the crypto space, or migrating to it. Network participants who stake their tokens get rewarded.
Doing that securely and with high availability isn’t easy. It requires intimate technical knowledge of the protocol, and great system engineering. This is why we are seeing new businesses being created for Tezos baking, Cosmos staking and EOS block producing. For crypto VCs, it can often make sense to take this capacity partially or wholly in-house, considering their holdings.
And simple proof-of-stake is just the start. Projects like Ocean Protocol, SEED and Fetch.AI go beyond simply holding tokens and waiting for the reward. We are working with each of our portfolio teams to support their networks and being an active participant beyond just capital.
5. Collaborating with world leading technical academia
An amazing amount of deep thinking is being done by academics to further the understanding of distributed ledger technology, machine learning and connected devices. But there is a great disparity between the academic frontier and what’s used in practice. In blockchain land we feel this disparity is even greater than in other domains. This is why we started a 3 year research programme with Imperial College London at the beginning of 2017 which has been yielding great results for us and our portfolio from IOTA to Ocean Protocol.
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We have a full-time PhD student named Dominik Harz permanently sat at South Kensington Campus to enable us to effectively interface with professors, post and undergraduate students within their Computer Science Faculty, who you can follow on Twitter on @nud3l_.
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We are now beginning to open up this partnership with a series of in-depth reports showcasing the results of the first full academic year of research projects – a mix of applied and fundamental research to advance our portfolio’s technology and that of the wider crypto space, including:
- IOTA: What’s happening in the Tangle? Visualizer and topology analysis
- Fetch.AI: A Privacy-Preserving Implementation of Learning Algorithms Applying Secure Multiparty Computation
- IOTA: Partition tolerance and consistency
- Sovrin: Using Deep Learning to Model User Profiles
This is the first of a number of academic partnerships we hope to roll out and Dominik has already begun actively collaborating with researchers from other leading institutions around the globe. An example being the joint work with Blockchain (the company) and other researchers on XCLAIM – Interoperability with Cryptocurrency-Backed Tokens, resulting in a paper and an implementation which was presented at Scaling Bitcoin Tokyo.
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6. Realising Portfolio Synergies
The benefit to having a well defined technical thesis on Web 3 is that our investments, very deliberately, have natural synergies with one another. So whilst they will often organically collaborate with one another without our direct involvement, as was seen with IOTA and Sovrin, we try to both educate and promote the benefits of each technology across the portfolio and also help them collaborate in a structured way.
Often this is best done through finding tangible use-cases with enterprise partners from our network. It is no surprise therefore that everyone from Bosch to T-Systems are often working with several combinations of our portfolio at any one time.
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7. Combined Hackathons & Dev Cons
Now many of the projects we have been working with for anything from 1 to 2 years are opening up testnets and code before their network launch in 2019, we are about to begin organising a series of highly technical events that bring them together to explore synergies in interesting ways. Starting off next month with chainhack::24 in London, hosted by Imperial College which will showcase Fetch.ai, Sovrin, Ocean Protocol and Haja Networks.
This will be followed by a series of hackathons all over the globe from Berlin, to Toronto and Chicago as well as some focused Smart Cities Hubs. Each of them bringing together combinations of our portfolio technology with the explicit goal of getting talented people inside and outside of enterprise to build usable real world stuff.
We are also very excited to announce we are in the middle of planning a regular annual developer conference in Berlin (Spring 2019) bringing together all our portfolio, their combined developer communities and enterprise partners into one space. It will have a steering committee staffed by innovation leaders from some of the largest enterprise companies in the world from across related verticals such as: Mobility, Smart Cities and Industry 4.0 to help us decide on the format, work streams and speakers.
8. Sourcing Talent & Ecosystem Funds
Obviously, we hope the hackathons, developer conference and relationships with places like Imperial College act as a recruitment pool for technical talent for our portfolio. But we have gone one step further and creating a job opening aggregator from across our portfolio on https://jobs.outlierventures.io.
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Beyond that, somewhat less visibly we also regularly pass through top talent we meet at events as well as whole teams to be acqui-hired to portfolio on an ongoing basis. In fact, we have been championing something called Community Token Economies since 2017 which promotes teams working in the same space to join forces and build ‘token gravity’ rather than compete over scarce resources. As our portfolio have begun to build out ecosystems, we actively help them source projects within the CTE approach from the 90+ startups we speak to every month.
Closing Thought: Why we should be “eating our own dog food” in Web 3.0
As a closing thought we think it is important we walk the talk in Web 3. Sure everyone likes the idea of blockchains, your t-shirt says “decentralise everything”, but you’re still using Slack, Gmail and Zoom daily. And don’t get me started about GitHub – yes, git is a decentralised tool, but GitHub is absolutely not. There is no shame in using best in class Web 2.0 apps. But (in their current form) they’re not part of the future that we envision and are helping to build. So we’re increasingly using decentralised apps in our day-to-day work streams at Outlier. Are there any (somewhat) usable DApps we should give a go? I would love to hear from you @aronvanammers on Twitter.