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Why we invested in Boson? The trillion dollar dCommerce opportunity.

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Why we invested in Boson? The trillion dollar dCommerce opportunity

February 2021

Posted by

Jamie Burke

CEO and Founder

As an early investor in Bitcoin and Ether Jamie went ‘all in’ during 2013 founding Outlier Ventures, Europe’s 1st venture fund and platform dedicated to blockchain and Web 3....read more

30 years since the advent of The Web eCommerce has just become ‘how we buy and sell stuff’ with over 18% of all retail now online and growing. Behind its success are a handful of companies that reached the economies of scale in sales volume and buying power where they can simply do it cheaper, and with more convenience, than anyone else. In fact, in Amazon’s case to the point of actually being able to do it at a loss and still be a $1 trillion dollar company.

Many believe these platform’s scale, diversification, and increasing political power make them unassailable. New models like Shopify have shown they can be unbundled into a series of 3rd party apps but only where there is still the dependency on a single centralised platform. However rapidly maturing technologies like blockchains promise an entirely new paradigm which could radically transform ecommerce into something entirely different, something for the last 7 years, I’ve been calling dCommerce.

Posted by Jamie Burke - February 2021

February 2021

Posted by

Jamie Burke

CEO and Founder

As an early investor in Bitcoin and Ether Jamie went ‘all in’ during 2013 founding Outlier Ventures, Europe’s 1st venture fund and platform dedicated to blockchain and Web 3....read more

Boson Protocol is to dCommerce what stablecoins were to the DeFi stack – the catalyst for an ecosystem of highly specialised, yet complimentary and composable protocols.

 

On the question of what to do with Big Tech

The Web’s ecommerce platform monopolies, like Amazon in The West and Alibaba in Asia, are often referred to fittingly as ‘Big Tech’. The question of Big Tech and how it interacts with the wider economy, The State, and its citizens, as both consumers and a workforce, as well as fundamental values like privacy and anti-trust, has now become one of the defining socio-economic and political questions of our time. Even in China, the government is asking if their tech darlings like Alibaba, and its finance arm Alipay, have got too big. These platform monopolies are the defining characteristic of the last 30 years of The Web with increasing consolidation in a growing number of categories and markets.

 

Blockchain and the promise of dCommerce

Back in 2013 when we founded Outlier Ventures we began to think of the idea of a form of online commerce different, distinct and competing to that of an Amazon through a process of decentralization we called dCommerce. In early 2016 we began to experiment with how protocols like ethereum could be applied to commerce through a proof of concept we called BuyCo.

The idea being you could remove and decentralize specific functions of an ecommerce platform through smart contracts that would aggregate and move value around automatically on a blockchain. This was and still is an overly simplistic way of thinking about the complexity of the total of an ecommerce platform like Amazon and its reasons for success but offers a glimpse to a possible direction of travel to take on the trillion dollar opportunity; that is beating Amazon.

After 5 years that reality has still not come remotely to pass but much of the technical infrastructure, or stack, that could make it possible with advancements in protocols like Ethereum are sufficiently mature to be ready for prime time. Equally the political understanding and climate of this emergent stack as an antidote to platform monopolies of all varieties is growing alongside a backdrop of media coverage of breaking up Big Tech and attacking the extractive business model of Surveillance Capitalism: that is the exploitation of users and their privacy in the maximisation of data extraction to sell more products and services through ecommerce. But as the book Surveillance Capitalism lays out this is not as easy as it seems with increasing levels of state and legislative capture by Big Tech which could prove to be its last and ultimately most defensible moat and the hardest thing to simply replace with code.

 

A dCommerce Stack: learning from DeFi & Money Lego

Whilst still nascent the most promising thing to emerge from blockchain, and Ethereum in particular, is DeFi (Decentralised Finance) as a series of independent but complimentary specialised open-source protocols. Together they form a highly composable stack that allows for a range of financial applications to be built and executed on top. This includes the ability to create a new form of a programmatic digital asset such as a currency, or representation of a real world or entirely synthetic asset and then carry out increasingly complex forms of borrowing, lending, speculation or arbitrage.

This has been referred to as ‘money lego’ and has both sucked in and created entirely new forms of billions of dollars worth of value into a proto-capital-market outside the jurisdiction of any one country, and native to the internet. There is no one company or platform that dominates it but rather an ecosystem of open technologies which compound one another into something unstoppable. This forms the basis of, and inspiration for, dcommerce which will see its own composable stack of technologies emerge to unbundle parts of ecommerce platforms which we call The dCommerce Stack.

 

The dCommerce cornerstone & key to The Open Metaverse

The relatively recent rise of NFTs, non fungible tokens, has meant that we can now combine DeFi with unique digital goods and access to digital services. This is even more powerful when combined with advances in increased logic capabilities at the smart contracting layer. So we can now introduce complex machine learning and greater levels of autonomy called Autonomous Economic Agents (AEAs): agents that can move value on a blockchain around for a person, company or ad hoc collective, called Decentralized Autonomous Commerce.

However the first question anyone asks you when you talk about NFTs is how they can relate to real world physical commerce such as the millions of goods Amazon seamlessly fulfills around the world every day. How can you be sure just because you own the NFT you will get the physical good or promised experience when there is no one central company coordinating it all?

Boson Protocol is a foundational primitive that enables Decentralized Autonomous Commerce at scale and the exchange of digital value for real world products, services or things through an elegant mathematical game invisible (yet auditable) to the end user which enables minimized arbitration, cost and trust.

While oracles easily connect smart contracts to data sources, arbitrated protocols add cost and friction to the decentralized exchange of real world assets. Instead of tokenizing real world products and services themselves, Boson tokenizes the future commitments to transact, using ‘stateful NFT vouchers’, governed by a novel exchange mechanism.

 

Stateful NFT vouchers

Boson automates digital to physical redemptions by tokenizing a Buyer and Seller’s commitment to exchange digital value for a real world Thing at a later date. Commitments are made by depositing digital value into an escrow contract within a stateful non-fungible commitment token.

These commitments can be thought of as futures contracts for a Thing, programmed within NFT commitment tokens. Having custody of a commitment token grants the holder the right to redeem the token for a particular thing in an automated, reliable and secure way, as well as the right to transfer the token by transferring the commitment token from a crypto wallet just like any other NFT.

Commitment tokens are governed by Boson’s core mechanism, which is a type of sequential game in which buyer and seller commit deposits up-front. Game rules and the final deposit transfer scheme is designed in such a way that coordinates transactions and incentivizes parties to behave fairly. Or more formally, in game theoretical speak we say that: “subgame perfect equilibrium implementation corresponds to the honest behavior of both players.”

This promises to fulfill the science fiction dream of the Metaverse where the physical and digital become connected with a shared economic layer where value can seamlessly flow between the two in different states: be that physical to digital or vice versa. As more and more digital wealth and value is generated and shared within the metaverse bridges to the physical world become ever more important and its increasingly critical they aren’t monopolised by anyone central party.

 

Team and execution

Justin Banon and his team joined our Web 3 Accelerator in August 2019 to conceptually develop Boson Protocol in the depths of crypto winter, when there was little appetite and capital for token based economies let alone something as ambitious as dCommerce. Impressed by the team’s deep technical expertise and previous commercial success in the loyalty space, building a billion dollar loyalty points company, we introduced them to a number of experts in token design and game theory from across our network including Dr Zeynep Gurguc (Imperial College London), Michael Zargham (Blockscience & CAD CAD) and Trent McConaghy (Ocean Protocol & Token Engineering Global Gathering) to test and develop their hypothesis. All of these experts saw the enormous potential of Boson and have become long-term advisors and in some cases investors.

These several months of work were bootstrapped with the small amount of capital we seeded them and the team showed huge character and perseverance to survive the winter and come out with a working prototype into the 2020 Summer of DeFi as the market picked up. And as NFTs became the dominant narrative in crypto we were already ahead of the curve with the team unlocking several million in funding, and key strategic partners and investors, now finding themselves over 4000% oversubscribed in their private sale as they gear up to a TGE (token generation event) within the next two months.

 

Vision: more than just a protocol, dCommerce DAO

Our shared vision for Boson Protocol is much more than just a single protocol but a DAO to invest into and accelerate the dCommerce Stack as an ecosystem. With a team of over 25 dedicated (and growing) and increased capitalization Boson will work with DeFi protocols and the NFT community to rapidly roll out, integrate and partner to realise a complete stack of payments, fulfillment, logistics to allow for permissionless dCommerce applications.

Over the coming weeks we will release joint research with Boson to better define the dCommerce Stack and opportunity alongside their aggressive roadmap of partnerships. And through our accelerator we will actively support the emerging dCommerce ecosystem of startups and protocols to work with Boson and the DAO to unbundle ecommerce and make a more user and merchant centric web.

 

About Base Camp and Ascent

Outlier Ventures is a dedicated Web 3 fund and accelerator founded in 2014 that works with startups at various stages of their lifecycle from pre-seed / seed (via Base Camp) to later stage about to launch token networks (via Ascent) specializing in a New Data Economy, NFTs, and DeFi.

We bring together a network of 1,000 of the world’s leading Web 3 founders, protocols, VCs to mentor and invest.