By Marco Manoppo, Chian Catalyst column, Chain Venturer; Compilation: Golden Finance 0xxz
Mads Mathiesen, aka rain &coffee, is the Head of Research on the Maven 11 Ventures team. Maven 11, a leading cryptocurrency investment firm based in Amsterdam, the Netherlands, was one of the first entrants in the cryptocurrency investment space in Europe.
He joined the Maven 11 team in early 2022 and is currently responsible for Maven 11 technical infrastructure research and public-facing papers.
Rain has lived in Asia for five years and is fluent in Chinese and Korean. He has conducted extensive research on various blockchain technologies, with a particular focus on Rollups, zero-knowledge proofs, and MEV.
His academic journey includes studying Chinese at the University of Copenhagen in 2016 and an exchange program at Tsinghua University in 2018, exploring topics such as sociology, microeconomics, and international development.
He has also written a newsletter called “The Depths” that delves into emerging trends and developments in cryptocurrency and blockchain technology.
Key Points of the Article:
The one-size-fits-all nature of the overall blockchain imposes limitations, while the modular system provides flexibility, allowing for specialization and customization for specific applications.
For larger applications with specific tuning and optimization needs for a mature user base, they will see opportunities and reasons to adopt modular solutions.
dApps should take a phased approach, starting with the monolithic chain and gradually moving to more modular solutions as they grow and their needs change.
Moving to an appchain can lead to a more equitable distribution of value and better alignment of the interests of each participant.
Despite the importance of technological innovation, the impact of marketing and community engagement in the cryptocurrency space on a project’s success is often underestimated.
What was the defining moment that drew you into the world of cryptocurrency?
In 2013, Rain stumbled upon Bitcoin while casually browsing on Reddit in high school. The cypherpunk nature and active community on Bitcoin forums caught his attention, but it wasn’t until 2014-2015 that he plunged headlong into the cryptocurrency space.
Over time, Rain found himself immersed in cryptocurrency, so much so that he almost gave up his college education and embarked on a self-learning journey. Unlike many of his contemporaries at prestigious universities with backgrounds in economics or computer science, Rain blazed a unique trail that gave birth to a unique view of cryptocurrency.
Rain places a high value on inclusivity in the crypto industry, valuing public work output over formal qualifications. His active online engagement and writing have become key qualifications for him.
A defining moment: Around 2013-2014, Rain used Bitcoin for real-world transactions on the Just Eat food delivery app in Denmark. The practical use of cryptocurrencies during his high school years was one of the defining moments that drew him into the crypto world.
What is Maven 11 Capital?
Founded in 2015, Maven 11 is one of the most experienced funds in the cryptocurrency space. Initially, the fund was similar to a hedge fund, bringing investments into Bitcoin, Ethereum, early L1 solutions, and Bitcoin mining ventures (as there were very few venture-backed industries at the time). The fund is also primarily aimed at wealthy individuals in the Netherlands and across Europe.
Overall, Maven 11 covers a variety of business lines, including a credit team that specializes in underwriting fractional mortgages, a liquid investment division, and a quantitative team that engages in market making in DeFi portfolios.
Fast forward to 2019 and the venture capital scene in the crypto space began to flourish, opening up a plethora of investment opportunities for emerging technologies such as Solana, Vax, and Celestia. Maven 11 seized the moment to articulate a clear investment theme, emphasizing a belief in modular architecture. Their early investment in Celestia in 2019 exemplifies this philosophy, laying the groundwork for their subsequent focus.
What areas of investment are Maven 11 particularly interested in?
Rain serves as the head of research on the venture capital team, contributing through in-depth technology infrastructure research and public-facing papers.
In terms of venture capital, Maven 11 focuses on infrastructure investments, but the company retains DeFi and RWA activity within the broader Maven 11 team, particularly under the credit and liquidity teams.
Maven 11 VCs have a robust modular theme that ranges from rollups and dedicated tiers for data availability (e.g., Celestia) to settlement solutions (e.g., Astria) and rollup SDKs (e.g., Sovereign Labs). Maven 11 ventures also explore unique applications of modularity, such as off-chain computing solutions.
Maven 11 places a lot of emphasis on true modularity, ensuring that the term is not just a buzzword, but an important aspect of project development. The team sought projects that utilized modular architecture to enhance functionality, not just those that claimed to have modular components.
The aim is to look for innovations that take advantage of modularity where necessary, resulting in customizable, specialized solutions. For Maven 11, it’s this thoughtful and effective modular application that makes the project truly compelling and worth the investment.
What are your thoughts on the modularity vs. blockchain debate as a whole?
Rain highlighted the advantages of taking a modular blockchain approach and contrasted it with the overall structure of Ethereum and Solana.
He emphasized that while Ethereum and Solana have unique qualities, their one-size-fits-all nature brings limitations.
On the other hand, the modular system provides flexibility, allowing for specialization and customization for specific applications, such as decentralized exchanges.
He illustrates these benefits by mentioning Rollup, a 2-tier scaling solution, emphasizing its ability to improve execution and fair trade sequencing. He noted that the modular architecture allows for innovations, such as verifiable collations, that ensure favorable trading conditions within the block.
Our conversation also touched on evolving blockchain architectures, specifically the concept of PBS and shared ordering in Ethereum.
He compared a well-functioning blockchain ecosystem to a well-managed company, emphasizing the importance of optimizing the authorization and verification process.
Rain further highlighted the scalability and decentralization potential of the modular architecture, specifically mentioning data availability sampling in the Celestia blockchain. He emphasized that this approach supports adding more nodes to the system, scaling while remaining decentralized.
How do you see the impact of this on the fragmentation of liquidity between different blockchains?
Rain highlighted several challenges related to state, liquidity, and fee fragmentation in modular blockchains, where functionality is distributed across different layers or chains.
He highlighted the benefits of holistic blockchains such as Ethereum and Solana, which offer atomic composability and global state settlement, providing a clear and consistent view of the current state for all participants.
However, he also acknowledges the potential of modular solutions such as proof-of-storage, off-chain computation, and shared ordering to address these challenges, albeit with trade-offs in terms of operational complexity and dependence on infrastructure providers.
Rain also recommends a phased approach to applications, starting with the overall chain and moving to more modular solutions as applications evolve and requirements evolve.
He warns that most current chains, especially those within the Cosmos ecosystem, may not be large or mature enough to operate as standalone appchains, highlighting the significant cost and security challenges associated with this model.
He concludes by suggesting that as the user base and application ecosystem mature, there will be more opportunities and reasons to adopt modular solutions, especially for large applications with specific tuning and optimization needs.
Should new blockchain projects first build on existing chains that align with their goals and gradually transition to their application chains as they scale and grow?
When a new blockchain project starts, it’s important to consider what it needs to be successful.
For example, a gaming application with a large number of on-chain operations may find Ethereum too expensive and not scalable enough. On the other hand, DeFi applications that require a specific liquidity pool or financial instrument will perform well on Ethereum because everything they need is there.
It’s crucial to help some applications, especially those in the DeFi space, run quickly and securely on Ethereum. However, as the project grows, it may make more sense to migrate to its application chain. This gives the project more control and the ability to capture more value, especially in terms of fees.
Take Uniswap, for example. It has a lot of liquidity and trading volume, but Ethereum validators capture a significant portion of the value of MEV. This situation may not be the best for Uniswap or its liquidity providers.
Moving to an appchain can lead to a more equitable distribution of value and better alignment of the interests of each participant.
In conclusion, starting with an established chain like Ethereum provides immediate access to resources, but as the project grows, migrating to an application chain can provide more control and benefits.
Quick questions and quick answers
Which book should aspiring investment professionals read?
To delve deeper into blockchain and gain technical understanding, Tim Roughgarden from a16z provided valuable insights through his extensive lectures and writings.
What was your biggest investment mistake?
(Regarding his personal investment) is biased towards technological innovation rather than the power of memes or the important role of marketing and community engagement in cryptocurrency.
What are the most undervalued use cases for cryptocurrency?
Provenance is a very powerful aspect of blockchain, but it’s often forgotten that zero-knowledge proofs (ZKPs) have the power to change not only what we do in crypto, but even things within traditional companies and industries.
What is your most unusual view of crypto right now?
The merger of modularity and overall infrastructure can be very powerful.
What are the biggest risks facing the cryptocurrency space?
Attacks from regulators and governments.
