Three Truths

I have three truths that I lean on, which guide the direction we’re building Grove and shape my perspective on POKT Network.

The three truths are as follows:

  1. Most of the world’s digital commerce will be coordinated by or settled on blockchains.
  2. The future is multi-chain across both L1’s and L2’s.
  3. The proliferation of middleware protocols is inevitable.

While they may seem obvious, these truths ground me in an increasingly dynamic environment. They may evolve, but they have held steady for the last 6 years and I believe will continue to do so. 

#1: Commerce will be coordinated by blockchains 

Economic opportunity will live primarily in the digital realm. Not the physical one.

It started with the emergence of the internet in the last 30 years, to the invention of bitcoin in 2009 and the way Web3 that evolved from there, through to more recent accelerants like AI. The increasing dominance of the digital realm is inevitable.

Most new jobs will be digital and the infrastructure to enable them will settle on Web3. From the World Economic Forum:

‘Over 85% of organizations surveyed identify increased adoption of new and frontier technologies and broadening digital access as the trends most likely to drive transformation in their organization.’

Cryptocurrency represents a step-change over traditional financial infrastructure and coordination technology but is only 1.4% of the global economy (taking the aggregated cryptocurrency market cap as a proxy for the value coordinated by blockchains). To reach more than 1% of the global economy in 14 years, blockchains may be the fastest growing asset class in human history.

#2: The future is multichain

A multichain future begins with human nature. We want to be creative, iterate, and bring new, better things to the world. As the world continues to change, there will inevitably be new opportunities for people to build new protocols and products that iterate on what was done previously.

Technological advancement will continue to provide new opportunities with better tooling for people to launch new protocols. What is possible today was not possible five years ago. We see this with iterative improvements on Bitcoin forks, Ethereum killers, and now the explosion of rollups.

People will continue to use existing protocols and find ways to make them better. We are incentivized to do so through the financial primitive that blockchains are.

There is a proliferation of frameworks, tooling, and products that are accelerating people’s ability to launch their own application-specific blockchain or rollup. Launching these will only get easier as governance and economic playbooks continue to standardize.

In addition, decentralized applications will choose to build their own protocols and rollups over time.

There will always be a tension between building an application via smart contract versus rolling your own protocol or rollup. It will always be quicker and easier to write a smart contract, but as applications scale, the security, cost, latency and other trade offs of running on a generalized system versus a specific protocol will become more painful.

Composability will continue to be challenging in the future. The network effects of defi legos are clear, and it takes reaching a certain scale to begin seeing diminishing returns on composability, such that applications at scale can create their own ecosystems while bridging into others. The question will be when the benefits of the efficiencies outweigh the benefits of composability. At some point, scale enables applications to have the economic gravity to bring users across bridges so they benefit from their specialization. 

#3: A proliferation of middleware DePIN protocols

If all the above is true, this leads to an increasing need for protocols to have native, web3 solutions to tie everything together. There has been an explosion of middleware protocols coming into the marketplace and as a result the “DePIN” (Decentralized Physical Infrastructure Networks) narrative is starting to take hold across the zeitgeist. More data will flow through infrastructure protocols, more data will need to be stored, and we will see more dependencies between middleware protocols and other generalized L1’s and rollups as the space scales in usage. For example, you cannot have a centralized company act as the middle man for light client headers. The connection across thousands of rollups and ecosystems can only happen in trust-minimized fashion through protocols. 

Protocols are becoming increasingly modular. As protocols scale, free market economics will lead to rollups and application specific blockchains to become more specialized and focused on the problem they are solving. This will create opportunities for web3 native middleware to integrate at the protocol level that don’t exist today. These integrations will make our ecosystem more resilient as we have more options to provide the critical infrastructure to operate these protocols and give developers more options. 

How important will Web3 be?

The question becomes, how much coordination of commerce can we drive through web3. This will dictate the scale of incentives and space for specialization of individual protocols. The rapid pace of abstraction, improving user experience, and modular protocols will accelerate. 

As web3 protocols become institutions through their economic might, global influence of these systems will continue to increase. While regulatory bottlenecks will continue to be a challenge, a competitive, global landscape will provide antidotes to jurisdictions that fall behind. Regardless, I expect the percentage of global GDP as reflected by the aggregate cryptocurrency market cap to increase to double digit percentages over the coming decades. 

Thank you to Olshansky, Adz and Gabi for editing this piece.