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A few crypto thesis papers

A few crypto thesis papers
Photo by Aaron Burden / Unsplash

It's the end of the year and Crypto theses are everywhere!

By the way, there's only a few more days left in 2022. I highly recommend you spend some time reflecting and extracting lessons from 2022. Try writing your own "crypto thesis" for next year.

Here’s what we’ve got today:

  • State of crypto. A short summary of Messari Crypto Thesis 2023 + link to a few others.
  • The FTX saga continues. Sam gets out on a $250 million bail 🙁.
  • Hackers are at it again. A Bitcoin mining company and multi-chain wallet is hacked.

Let’s dive in!

📉 The Markets

weekly crypto charts
“Yesterday’s home runs don’t win today’s games.” – Babe Ruth

Highlights of Messari Crypto Thesis

Messari founder Ryan Selkis has released Crypto Thesis 2023.

Not familiar with it? It’s an annual report summarizing the past year in crypto. It also makes a few predictions for the upcoming year.

It's 160'ish pages. Don’t have several hours to read it? Well, we do! Here’s a high-level summary if you’re short on time:


The OG chain is facing many challenges. The Maxi cult is hostile. There's a high carbon footprint. Miners are financially unstable. Economic security concerns are rising.​

Still, according to Ryan, BTC has a huge role as a single-purpose commodity money & settlement system. He says that BTC is in a long-term stable position.

He uses an indicator, Market Value to Realized Value, to say that "we are in a sell-a-kidney-to-buy-more territory."​


In 2022, Ethereum had a pretty good run. The Merge was successful. Layer 2s are gaining market share. $ETH is a disinflationary yield-bearing asset. Now, it is milking three narratives simultaneously:

  • Monetary asset
  • Computing platform
  • Yield-generator

Ethereum’s not perfect by a long shot.

Vitalik recently posted a diagram of the Ethereum roadmap.​

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November 5th 2022

Maximum Extractible Value (MEV) is an issue tackled in “The Scourge” phase. MEV is the economic value that can be extracted by those who order the transactions. A healthy MEV ecosystem will distribute MEV rewards to all stakeholders, including stakers. An unhealthy ecosystem would centralize MEV rewards among the miners.

​To foster a healthy MEV ecosystem, Ethereum is implementing proposer-builder separation (PBS). This will create a healthy distribution of MEV rewards. The following diagram illustrates this process.

Value Distribution and Redistribution Accross the MEV Supply Chain

OFAC sanctions are the next major challenge for Ethereum. When the U.S. Department of Treasury sanctioned Tornado Cash, many post-merge validators began to exclude addresses and transactions related to Tornado Cash. At its height, OFAC-compliant transactions nearly hit 80% of network validation. These issues are addressed in "The Scourge" part of the Ethereum roadmap.​

Other Layer 1s

The biggest debate in L1 wars is between monolithic blockchains vs modular blockchains. The modular blockchain architecture separates execution, consensus, settlement, and data availability. Monolithic architecture doesn't separate them.

Solana is the best proponent of the monolithic thesis. 2022 was not a good year for Solana. Their prices are down over 90% from ATH. The chain was also down several times. And their Kingmaker, SBF, is gone.​

However, Ryan claims, Solana has improved its speed and node decentralization. For Solana to win, hardware-level innovations are needed. But for modular systems, software-level innovations are required.

Cosmos is the top ecosystem for "sovereign" appchains. Compared to L2, Cosmos chains afford more flexibility, interoperability, and control. We have previously written about Cosmos here. The migration of dYdx into the Cosmos supports the Cosmos thesis.​

One major discovery of 2022 was that cross-L1 bridges are not reliable. They are easily exploited. Ronin's $600 million hack, Wormhole's $320 million hack, and Nomad's $200 million hack are a few examples.


This year was a horror show for centralized financial services in crypto. Here's a partial list of those who went bankrupt or lost nine figures: FTX, Alameda, Celsius, Three Arrows Capital, BlockFi, and Voyager.

How and why those institutions went bankrupt has been covered extensively elsewhere. According to Ryan, these were classic examples of credit boom and bust. Over-reliance on unsustainable DeFi yields and synthetic trades was the source of many problems.​

The core problem with crypto lending is the following: crypto assets are volatile, and many of them are illiquid. It makes them bad collateral.

Centralized lending is mostly dead, and it will be for a while. It is probably a good thing. Those who survive will behave more like Anchorage and the old banks. They'll take full custody of collateral and set market-rate terms.

However, CeFi still has a role to play. Fiat-backed stablecoins are here to stay. The on- and off-ramps are another one. The exchanges need to be there for the crypto markets to run. Ryan included Brian Armstrong and Changpeng Zhao among the top 10 people to watch. They'll have a big role to play in recovering the CeFi market.​


The current numbers for DeFi kinda suck. The market cap of DeFi tokens is less than $15 billion. It doesn't even cross the top 100 banks by market cap. DeFi's share of global financial services is 0.2%. Still, Ryan is bullish on DeFi. We are in the building season now.

​A major trend in DeFi is the value captured by dApps relative to L1. The combined monthly fees of the three largest Ethereum-based apps (Uniswap, Lido, and OpenSea) are more than the entire L1. More and more activities are being shifted off Ethereum to its scaling solutions, such as Polygon and rollups.

Undercollateralized lending is an untapped gem in DeFi. In the short term, we don't know if we have the right building blocks to make this sector viable. Whether we can use smart contracts, on-chain data, soulbound NFTs, and decentralized identities to create this sector is an open question.

MapleFinance and Goldfinch are examples of projects that are working in this space. (Although MapleFinance is facing a ton of bad debt issues)


​Ryan spent a lot of time discussing crypto policy and regulation in the US. He believes that 2023 might be a transformational year for permanent law.

​Here’s the basic gist:

We now have several lobbying groups in Washington, D.C. The Blockchain Association, the Crypto Council for Innovation, and CoinCenter are leading examples. Outrage and drama on Twitter are not particularly helpful in passing favorable legislation. The FTX implosion is a good thing in the long term - we now have people in Congress who support crypto. We still need to fight hard on the regulatory front. It is an existential concern.

Where are we going?

Our fate mostly depends on macroeconomic conditions. The current consensus is that we will have a recession in 2023. So, there won't be much light in the coming year.​

However, this isn't the time to leave. It is time to build.

Why should we continue building? The answer to this question is a major theme of the book. TLDR: We are building exit technologies for a world of freedom.

A big hurdle to creating that world is regulatory uncertainty.

​Those were some high level highlights - I encourage you to read it and form your conclusions.

Read it here.

​Here are several other annual theses we found.

🍿 DeFi Bites

Sam Bankman-Fried is out of jail on a $250 million bond. The catch is that his parents only put up $4 million in collateral. If Sam flees, his parents will have to pay $250 million.

Meme saying he can't keep getting away with this!!

Avraham Eisenberg, the Mango Markets hacker, got arrested in Puerto Rico. He was charged with commodities fraud and commodities manipulation.

BIT Mining LTD, the parent company of BTC.com, was hacked for $3 million. While the cyberattack happened on December 3, the investigation only started on December 23.

Paxos reclaimed around $20 million in PAXG tokens from FTX hackers. Paxos did this by quickly freezing and burning 11,184 PAXG that were hacked. The same amount was then minted to another wallet.

DeGods and Y00ts, two of the top Solana NFT projects, decided to leave the SOL ecosystem. DeGods will be moving to Ethereum and Y00ts will move to Polygon.

Bitkeep wallets were hacked for around $8 million. APK package downloads of the app were hijacked by the attackers.

🧠 Twitter Alph

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December 21st 2022
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December 24th 2022
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charliemarketplace.eth (🧊, 🧊) - truefreeze.xyz
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December 24th 2022
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December 24th 2022

😂 Meme

ftx meme